Welcome back to the Deep Dive. It is great to have you with us
again today. We are.
We're effectively crossing a border.
We're leaving the world. We've spent the last few
sessions in the world of private property disputes.
You know the vibe, right? The the neighbor with the noisy
rooster, the spite fence, the contract between just two
people, the adverse possessor creeping across the property
line, all of that is well, it's a world of private ordering.
It's the cozy world of Stay off my lawn and you breached our
contract. It's intimate.
It's person to person. Exactly.
But today we are stepping into the arena of the state.
We're talking about Chapter 5 in the property law journey, land
use controls. And honestly, this marks a a
fundamental psychological shift in how we have to think about
ownership because suddenly it's not just about what you want to
do with your land, it's about what the government allows you
to do. That is the perfect way to frame
it. I mean, up until now, property
law feels very individualistic. It's all about rights between
people. But land use is where we meet
the police power. The police power.
And just to be clear for everyone listening, when we say
police power, we aren't talking about officers with badges and
sirens and handcuffs. No, not at all.
It's a legal term of art in constitutional and property law.
The police power is this, this massive inherent authority of
the state to regulate for the public health, safety, morals
and and general welfare. It is the engine that drives
civilization. I mean, it's the power that
allows the government to say no, you can't build a dynamite
factory next to a kindergarten. Or you have to wear a seat belt.
Exactly. And the dramatic arc of this
entire deep dive is the conflict, the tension between
that police power and the Constitution.
Right, Because generally speaking, when the government
regulates under the police power to stop you from hurting others,
they don't have to pay you. That's just regulation.
It's the price of admission. It's the price of living in a
civilized society. But.
The 5th Amendment has a takings clause.
Right. Nor shall private property be
taken for public use without just compensation.
And that is the fiction point. That's the whole ball game.
If the government regulates too much, does it cross a line?
Does it stop being a regulation and start being a taking?
And do they have to write a check?
Do they have to write a check? That is the question that haunts
this entire field of law. So to keep us from getting lost
in the weeds, because this is a massive topic, we have
structured this deep dive into three, let's call them massive
buckets. We're calling it the Big Three
Road map for your exam. OK, let's map it out.
Bucket number one is zoning. Zoning.
This is the proactive stuff. It's the legislature drawing
lines on a map and saying houses go here, factories go there.
It's regulation and usually no money changes hands.
OK, so that's the day-to-day planning bucket #2?
Eminent domain. The nuclear option.
That's it. The government isn't just
regulating, they're actually seizing the title to your land
to build a highway or a school they admit they are taking.
It and they pay you. And they pay you.
And then there's bucket #3. And bucket #3 the one that keeps
law students awake at night is regulatory takings.
The Gray zone. This is the Gray zone where the
two concepts collide. It's when the government claims
they were just zoning or regulating, but the court looks
at the result and says no, you went too far, you broke the
property, you have to pay. And this is, I mean, it's a
goldmine for analysis because it merges property law with
constitutional law. We're dealing with the 5th
Amendment, the 14th Amendment, due process.
It's all in the mix here. Which is why it's so heavily
tested you to put on both your property hat and your con law
hat. So let's start with Section 1.
Then let's start with zoning the police power in action.
Let's do it. Now, I think most people you
know have a misconception here. They assume their local City
Council just naturally has the power to zone.
Like we are a city, therefore we can tell you where to build.
But legally, that's not true, is it?
No, it's not inherent at the local level at all.
In the American legal system, cities and municipalities are
considered creatures of the state.
Creatures of the state. Yeah, they don't have sovereign
power on their own. They only have the power the
state legislature decides to give them.
So the power to zone has to what?
Trickle down. Exactly.
Zoning authority is delegated from the state legislature down
to the local City Council via something called an enabling
act. An enabling act.
You'll often see references to the Standard State Zoning
Enabling Act. That was a Model Law from the
1920s that basically said, OK cities, we grant you the police
power to zone for the health, safety and morals of the
community. Permission.
Slip. It's a permission slip from the
state capital. Without that, a city can't zone
a single lot. OK, so the power flows from the
state. Now let's imagine a scenario.
A city passes a zoning ordinance.
I own a plot of land and I hate the new rule.
I mean, I despise it. Stops me from building the
skyscraper I've always dreamed of.
So, being a good American, I sue.
Of course. What is the standard of review?
Is the court going to look at this strictly?
Generally, no, and this is a huge take away for anyone
looking at a fact pattern. Courts grant extreme deference
to legislative judgments in zoning.
Extreme deference. We apply the rational basis
test. The rational basis test now in
the hierarchy of legal hurdles, that is a very low bar.
Is the lowest bar in constitutional law.
It's barely a bar at all. If the city can show that the
regulation is not arbitrary and that it has any conceivable
rational basis related to public health, safety or welfare, the
city wins. Any conceivable basis?
I mean, that sounds almost impossible to be.
It basically is. As the challenger you have the
burden of proof and it is heavy. You have to prove the law is
totally irrational or purely arbitrary.
So if the city just comes up with any reason.
Any reason if the city says we are limiting building height to
preserve sunlight on the sidewalk?
The court says that sounds rational.
Case closed. We want to reduce traffic.
Rational. Case closed.
It's an incredibly deferential standard.
So unless I can prove they singled me out specifically out
of spite, or that the law is completely unhinged from
reality, the zoning sticks. That's long and short of it.
OK, now we can't talk about zoning without talking about the
origin story. We have to go back to 1926.
The case is Village of Euclid V Ambler Realty Co.
The granddaddy of them all. This is why traditional zoning
is called Euclidean zoning. And a fun fact for the exam,
it's not named after the Greek mathematician.
Right, it's named after the village of Euclid.
OH, exactly. So set the scene for us.
Why was this case so pivotal? I mean, what was the world like
before Euclid? Well, before Euclid, it wasn't
entirely clear if zoning was even constitutional.
It was kind of a new idea. Ambler Realty owned 68 acres of
land in Euclid. OH, it was beautiful, valuable
land right on the edge of Cleveland, and Ambler expected
to sell it for industrial use. Factories.
That's where the money was.
The Industrial Revolution was still in full swing.
And then the village of Euclid stepped in.
Right. They passed a comprehensive
zoning ordinance that sliced up Ambler's land.
They drew lines on the map and zoned a huge chunk of it for
residential use only. So Ambler Realty did the math.
They did the math and realized this regulation slashed the
value of their land by about 75%.
They sued, arguing this was an unconstitutional deprivation of
liberty and property without due process.
They said you can't just tell me I can't use my land for
industry. I mean, that's a massive loss.
You can see why they fought it all the way to the Supreme
Court. Of course.
But the Supreme Court sided with the village.
And the reasoning is fascinating, isn't it?
They didn't invent some brand new legal theory.
No, they analogized it to something very old nuisance law.
They use the famous maxim. A nuisance may be merely a right
thing in the wrong place, like a pig in the parlor instead of the
barnyard. A pig in the parlor.
That's the classic property law analogy.
I feel like I've heard that 1000 times.
Exactly. And the court said, look,
factories are great. We need them just like we need
pigs. But we don't need them next to a
kindergarten or a quiet home. The police power allows the
state to separate incompatible uses to protect the quiet and
safety of residential neighborhoods.
So is basically preventative nuisance law.
That's a great way to put it instead of waiting for the
factory to spew smoke on the houses and then suing for
nuisance. Zoning prevents the conflict
from ever happening, and that decision, Euclid legitimize
zoning across America. It caused a boom in zoning
ordinances. And the structure of Euclidian
zoning, the system that the court approved, is based on a
specific hierarchy. We often visualize it as a
pyramid. Let's walk the listener through
that pyramid. Sure, a pyramid is the perfect
visualization for traditional zoning.
At the very top of the pyramid, the pointy end, you have the
most protected use the crown jewel of American property
policy, Single family residential or SFR.
The white picket fence stream. Precisely.
In an SFR zone, you can only build a single family home,
nothing else. No apartments, no stores,
certainly no factories. It is exclusive.
OK, so that's the highest and best use according to this model
and then below that. Below that you might have multi
family residential apartments, duplexes now in a traditional
cumulative zoning system and that's a key term cumulative.
The lower zones allow the lower use plus the higher uses.
So you can go down the pyramid, but not up.
Exactly. So in an apartment zone, you
could build an apartment building, or you could build a
single family home. Why?
Because the single family home is seen as less offensive than
the apartment. Exactly.
It's less dense, less traffic and so on.
Then you go down another level to commercial.
There you can have stores, but you could also have apartments
or homes. And at the very bottom of the
pyramid. Industrial.
In a purely cumulative system, the industrial zone is the
anything go zone. You could build a factory, a
store or a house. Though practically speaking,
living in a single family home inside an industrial park sounds
terrible. It is.
It's loud, it's smelly, and it's dangerous.
And that's why modern codes often break this cumulative
nature. They might say industrial zones
are exclusive to industry because having homes there is
bad for everyone. But the core Euclidean concept
is this separation of uses. You put the pigs in the barnyard
and the parlors in the suburbs. But Euclidean zoning has had a
century to play out, and it has its critics, right?
I mean, it's very rigid. By separating everything so
strictly, it essentially mandates that you have to drive
everywhere. That's the modern critique in a
nutshell. Your house is miles away from
the grocery store, which is miles away from your office.
It creates sprawl, traffic and car dependency.
It kills the walkability of a town.
Some argue it also leads to socio economic segregation.
It isolates people. So if you're looking at modern
exam topics or you know, real world planning, you need to be
aware of the modern zoning trends that try to fix the
rigidity of Euclid. Yes, these are the fixes the
patches on the system. Let's one through the big ones.
First up, mixed-use zoning. This is the direct antidote to
Euclidian separation. It allows residential and
commercial uses in the same building or on the same block.
Think of a building with a coffee shop or a bodega on the
ground floor and apartments upstairs.
Which is how cities were built for thousands of years before
1926. Exactly.
It's really returned to a more traditional urban form.
Euclidean zoning made that illegal in many places.
Modern zoning is trying to bring it back to create walkable,
vibrant neighborhoods where you don't need a car for a quart of
milk. OK.
Second trend PU DS, planned unit developments.
What are those? PU DS are all about flexibility.
In a standard zone, every lot has strict rules.
You must be 20 feet from the street.
You must have 1/4 acre lot. It results in that cookie cutter
subdivision look where everything is a uniform grid.
Right, I can picture it perfectly.
APU allows a developer to take a large tract of land, say 100
acres, and propose a master plan.
They might go to the city and say, hey, let us cluster.
The house is really close together in one corner,
violating your density rules. But in exchange, we'll leave the
other 50 acres as a permanent nature preserve and walking
trails for the whole community. So it's a trade off.
Strict compliance is traded for site plan flexibility and
community amenities. Exactly.
It allows for more creative and often more environmentally
friendly design. OK.
Third trend, and this is politically very hot right now,
inclusionary zoning. This is where zoning meets
social justice. The city mandates that a
developer must set aside a certain percentage of new units,
say 15%, as affordable housing for lower income residents.
So they are using the police power not just to separate uses
but to shape the socio economic mix of the population.
Yes, it's using zoning to achieve social policy goals.
It's controversial because developers argue it acts like a
tax on building, driving up costs for everyone else.
But courts have generally upheld it.
They have as part of the general welfare prong of the police
power. And finally, a quick one,
environmental overlays. Think of this as a transparency
sheet laid over the main zoning map.
You might be zoned for residential, but if there is a
floodplain overlay or a wetlands overlay, that adds extra
restrictions. So you have to check both maps.
Right. You can't just build because the
zoning says residential. You have to respect the
environmental constraints first. OK, so that's the macro view of
zoning the map, making the big picture.
But let's zoom into the administrative side, Section 2.
Because maps change, rules change.
What happens when the ground shifts beneath your feet?
This is where the rubber meets the road and where the lawsuits
happen. It's a very testable area.
So let's set up a hypo. I have a factory.
I've been making widgets for 20 years.
It's totally legal. I'm in an industrial zone.
Then the City Council decides my neighborhood is up and coming
gentrification. They rezone my district to
residential only. Suddenly my factory is illegal.
Do I have to shut down the next day?
This is the doctrine of the non conforming use and the general
rule is no, you do not have to shut down immediately if your
use was lawful at its inception is grandfathered in.
Grandfathered. You have a vested right to
continue that existing use. Why is the government just being
nice? Not really.
It's constitutional self preservation.
If they forced you to shut down a lawful multimillion dollar
business overnight, that would almost certainly be a taking.
They would have to pay you millions.
So to avoid paying you, they let you stay.
But. I'm sensing a but.
Here there's always a but the courts in the cities hate non
conforming uses. The goal of zoning is
uniformity. You are a blemish on their
perfect residential math. You are a pig in their parlor.
So they tolerate me, but they don't like me.
They tolerate you and they hope you die a natural death.
So while they let you stay, they try to strangle the use slowly.
OK, So what does that mean? I can't expand.
Generally absolutely not. You are frozen in time.
You cannot build a new wing on the factory.
You usually cannot switch from a factory to a nightclub even if
they are both non conforming. If your factory burns down, many
statues say you cannot rebuild it.
Wow, you lost your grandfather status in the fire.
So it's a very fragile protection.
And what if I take a break, say OK, business is slow so I closed
the factory for 18 months? That brings up the doctrine of
abandonment. This is a classic exam trap.
If you stop the use for a specific statutory period off in
a year and the city can show an intent to abandon, you lose the
protection. Yeah.
So it's two parts, non use plus intent.
Correct. And once it's gone, it's gone
forever. You have to conform to the new
residential zoning. You can't just restart the
factory five years later. Now, I've heard of something
called amortization. That sounds like a financial
term, but in zoning it sounds like a ticking clock.
It is a death sentence with a delay.
Amortization is a clause where the city says, OK, factory
owner, you are non conforming, we won't shut you down today,
OK, But we have calculated your initial investment and we think
you need 10 years to make your money back.
So you have 10 years to operate. On day one of year 11, you must
close and. They don't pay you a dime.
No check. The theory is that the time was
your payment. You got a monopoly for 10 years
to recoup your costs and transition your business.
That sounds aggressive. It's very aggressive.
It's a way for the city to terminate non conforming uses
without using eminent domain. It's controversial and some
states don't allow it, but many jurisdictions do if the time
frame is deemed reasonable. That is a tough pill to swallow
for a business owner. OK, let's look at the flip side.
That was the city changing the rules on me.
What if I want to change the rule?
You want an exception. Yeah, what if I own a weird
piece of land and the strict zoning rules just don't work for
me? It's not my fault.
The lot is just shaped funny. I need an exception.
I need a variance. Right.
A variance is an administrative safety valve.
It's meant to prevent the zoning law from being tyrannical or
absurd in specific unique cases. But you can't just get one
because you want one. I can't just say I'd make more
money if I could build closer to the street.
No, no, the standard is hardship.
You have to show that your land is unique.
Maybe it's triangular or it has a ravine running through the
middle and that's strictly complying with the setbacks
would cause you undo hardship. Meaning I literally can't build
a house here if I follow the rules.
It's not just, it's inconvenient.
Exactly. And critically, the hardship
cannot be self-imposed. Explain that.
That seems important. It's a huge bar if you build a
massive swimming pool in your backyard and then run to the
zoning board saying help I don't have room for a garage now give
me a variance to build on the property line.
They will laugh you out of the room.
Because you created the problem. You created the problem.
You don't get a variance for your own bad planning.
Now there are two types of variances and the distinction is
crucial for the exam area variances versus use variances.
Yes, and area variance is about math and dimensions.
It's about size, setbacks, frontage.
I need to be 5 feet from the curb, but the code says 10 feet.
Courts are relatively lenient with these, you just need to
show practical difficulties. It's easier to get.
Much easier, but a use variance. What's that?
That is a different beast. That is, I want to open a bodega
in a strictly residential zone. You are asking to change the use
itself. Not just the dimensions.
Right, you're trying to put a pig in the parlor yourself.
Courts and zoning boards hate this because it borders on
rezoning. If you change the use you are
effectively rewriting the law for your lot.
It's spot zoning. So the standard is higher.
Much higher. You usually have to show that
the land cannot yield a reasonable return with any of
the permitted uses. Basically you have to prove if
you don't let me build a store, this land is worthless.
It's a very tough standard to meet.
That brings us to a distinction that students mix up constantly
on exams. What is the difference between
getting a variance and getting a rezoning?
They sound similar. Great question and it's a vital
distinction. A variance is administrative.
It's a quasi judicial decision by a board of adjustment for one
specific plot due to unique hardship.
It's a Band-Aid. It doesn't change the underlying
law. OK, so it's an exception for one
person. Yes, a rezoning is legislative.
It's the City Council changing the actual law or the map for a
whole district. If you're arguing about policy.
This neighborhood needs more retail.
You want to rezoning. If you are arguing about your
specific weird lot, my lot has a Cliff on it.
You want a variance. Legislative versus
administrative, big picture versus small picture.
Perfect, crystal clear. OK, let's move to the second
bucket of our road map. We are leaving the world of
regulation and entering the world of seizure.
Eminent Domain. Section 3.
The sovereign's ultimate power. It sounds medieval.
It is, in a way. It stems from the idea that the
state originally owns all the land and it reserves the right
to take it back. The government has the power to
compel you to sell your land to them.
You cannot say no. You cannot say no.
If they follow the rules, they get the title.
But the Fifth Amendment puts up two hurdles.
We call them the constitutional limitations.
Right hurdle one, public use hurdle 2 just compensation.
They have to clear both. Let's look at public use first.
I think most people understand this.
If the government takes land to build a road, a school, or a
fire station that is clearly public use.
The public will actually use it, right?
Public work projects. No one disputes those.
But it gets murky and politically explosive when we
talk about economic development. This is the shadow of Kilo V
City of New London. This 2005 case is probably the
most headed property law decision of the last 50 years.
So let's tell the story of Kilo. What happened there?
New London, Connecticut, was a city that was struggling
economically. Pfizer, the pharmaceutical
giant, wanted to build a massive new research facility there.
The city thought great jobs, tax revenue, this will save us.
The Golden Ticket. They thought so.
So the city decided to use eminent domain to seize an
entire neighborhood of private homes, perfectly nice well kept
homes in a working class area, including Suzette Kilo's famous
pink house, and transfer that land to a private developer to
build things to support the Pfizer project.
Wait. They took land from private
citizen A and gave it to private Company B.
Yes. That's the heart of the issue,
and the homeowners sued. They said that's not public use.
Pfizer isn't a park. It's a private company.
You can't take my house for their benefit.
And the Supreme Court. The Supreme Court sided with the
city in A5 four decision, a very narrow and controversial
decision. They define public use broadly
to mean public purpose. They said that economic
rejuvenation, creating jobs and tax base is a valid public
purpose. So federal constitutional law
allows taking from A to give to B if it benefits the public
economy. People went nuts.
Absolute fury. It united the left and the
right. Everyone hated it.
The backlash was so intense that many states, something like 43
or 44 states, pass their own laws or amended their state
constitutions to ban kilo style takings.
So that's the big practice tip here.
That's the tip. While Kilo allows it under the
federal constitution, you always have to check state law.
It might be banned locally. OK.
So public use is extremely broad, at least at the federal
level. What about hurdle to just
compensation? What does that mean?
The standard is fair market value.
FMV The court asks what would a willing buyer pay a willing
seller in cash at the time of the taking?
That sounds fair on paper, but there is a massive trap here for
students and for real people. What is not included in FMV?
This is where it feels tragic and where the just and just
compensation feels hollow. FMV does not include sentimental
value. It's not part of the equation.
It doesn't matter if your grandmother was born in that
house and you promised her on her deathbed, you'd never sell.
The government pays you for the bricks and dirt, not the
memories. Wow.
What about business? It usually doesn't include the
loss of goodwill. If you run a local diner and
everyone knows you and the government moves you across
town, you lose your customer base.
That loss of business, that goodwill, is generally not
compensated unless a specific statute adds it.
So constitutionally, the government gets a discount on
your pain. That's a harsh but accurate way
to put it. What about a partial taking?
Say the government just widens the road and takes 10 feet of my
front yard. They pay me for the 10 feet,
obviously, but now my house is right up against a highway.
It's loud, it's dangerous, and the value of my house drops by
$50,000. That's where severance damages
come in. This is a key concept.
You get paid for the slice of land they took.
TLS. You get paid for the diminution
in value to the remainder of the part you kept.
So I get the value of the strip of land plus the 50 grand my
house lost in value. Correct, if your house is now
worth $50,000 less because of the proximity to the road, they
owe you that 50,000 as severance damages.
OK, we've covered zoning, which is regulation, and eminent
domain, which is taking title. Now we arrive at the Beast, the
area where students get lost and lawyers get rich.
Regulatory takings. Section 4.
This is the heart of the exam. This is the Gray area.
The government says we aren't taking your land, we're just
passing a regulation. But the regulation is so
restrictive that the landowner says you might as well have
taken it. You kill the value.
And it all starts with Justice Holmes in 1922, a case called
Pennsylvania Cole Covey Mahon. Right.
And he wrote the famous quote that launched 1000 lawsuits.
The general rule is that while property may be regulated to a
certain extent, if regulation goes too far, it will be
recognized as a taking. Too far?
That is incredibly vague. What does that even mean?
It is the Goldilocks standard. Not too hot, not too cold.
And because it's so vague, the Supreme Court has spent the last
century trying to build a framework, a series of tests to
measure too far. And for the listener, the
strategy here is all about sequencing.
You can't just wing it. Do not just jump into a vibe
check. You have to follow a checklist.
You have to ask the questions in the right order.
OK, let's build that checklist. Step one.
What's the first question I asked?
Step one is the Loretto rule. The question is, is there a
permanent physical occupation? The case is Loretto V
Teleprompter. I love this case because the
stakes were so low, but the principal was so high.
New York law required landlords to let cable companies bolt a
small silver box and some wires onto their apartment buildings
for cable access. Misses, Loretto sued.
How big was this box? Was it a huge intrusion?
Tiny. It took up almost no space.
The descent in the case laughed at it, called it trivial.
But the Supreme Court said it doesn't matter how small it is.
Size doesn't matter. Not here.
Doesn't matter if it's a cable box, a mailbox, or a single toe
crossing the line. If the government mandates a
permanent physical invasion of your property, it is a per SE
taking. A per SE taking meaning
automatic. Automatic, you get paid.
End of analysis. And this is all about the right
to exclude, isn't it? That fundamental stick in the
bundle? Exactly.
The right to exclude is the most essential stick in the bundle of
property rights. If the government puts a
stranger or a stranger's box on your land terminally, they have
destroyed your right to exclude. It's an automatic win for the
owner. And we have a modern update to
this in our sources, Cedar Point Nursery V Hassid from 2021.
This was a big deal. Huge.
It really expanded our understanding of Loretto.
In that case, California had a law allowing union organizers to
enter agricultural farms for up to three hours a day, 120 days a
year to talk to workers. So it wasn't permanent.
That was the argument. The farm owner said this was a
taking. The lower court said no, it's
not permanent. They go home at night.
It's just a regulation of your business.
But the Supreme Court disagreed. Violently, the Supreme Court
ruled that even though it was intermittent, not 24/7, it was
still an appropriation of a right of access.
It's like the government took an easement across the farm.
An easement for the union organizers.
Exactly, and an easement is a property interest so they said
it was a physical taking. So Loretto has expanded any
government mandated physical intrusion.
Even a part time 1 is highly suspect and likely a taking.
Correct. So that's step one on your
checklist. Is there a physical invasion?
If yes, pay the man OK? If no, if it's just a
restriction on use, not an invasion, we move to Step 2.
Step 2 is the Lucas rule, and the question is, is there a
total economic wipeout? The case is Lucas V South
Carolina Coastal Council. This is the sad story of David
Lucas. Yeah, you have to feel for this
guy. He bought 2 beachfront lots on
an island, South Carolina for nearly $1,000,000.
He planned to build 2 luxury homes, one for him, one to sell.
The dream, the dream. Then two years later, the state
passed a Coastal zone management act to stop erosion.
They drew a line in the sand and said no Building C Word of this
line and his lots were on the wrong side of the line.
So his $1,000,000 lots were now effectively worthless.
The trial court found the value had dropped to 0.
He could picnic on them, but he couldn't build.
He couldn't do anything economically productive.
So the Supreme Court created a new per SE rule.
What's the rule? If a regulation denies all
economically beneficial or productive use of the land it is
a taking the government must pay.
It's like a constructive confiscation.
They left him the title but took 100% of the value.
Right. But and listen closely because
this is the trick. There is a massive exception,
the Background Principles exception.
The government's Get out of jail free card.
Yes, the court said. The government doesn't have to
pay if the use they are banning was already prohibited by
background principles of nuisance and property law.
Explain that with an example that's a little abstract.
OK, suppose I buy a lake and my business plan is to fill it with
toxic waste. The government passes a law
saying no toxic waste in lakes. That law destroys 100% of the
value of my toxic waste dump business.
Do I get paid under Lucas? No.
Why not? Because you never had the right
to poison your neighbors to begin with.
Exactly. Under common law nuisance, I
never had the right to do that. You can't take a right I never
had. So if the regulation just
codifies existing nuisance law, no compensation is due.
Got it. Now there's a math trap in Lucas
that you see on exams. What if the regulation reduces
my value by 95%? I lost $950,000 out of a
million. You lose.
Just like that. Just like that, Lucas applies
only to a 100% wipeout, a total deprivation.
If your property retains even a sliver of value, 5 percent, 10%,
you are not in Lucas territory. You have flunked Step 2 of the
analysis. That feels incredibly cruel.
So if I'm not physically invaded under Step 1 and I'm not 100%
wiped out under Step 2, where do I go?
I've lost 95% of my value. You go to the default setting.
You go to the big murky balancing test.
Step 3. The Penn Central Balancing test.
To catch all. This is where 90% of cases end
up and, frankly, where most plaintiffs lose.
This comes from Penn Central Transportation Company V New
York City. The owners of Grand Central
Station wanted to build a massive office tower on top of
the historic terminal, the city's Landmarks Preservation
Commission said. No, you can't mess up the
architecture. Penn Central sued.
And the court established A3 factor balancing test.
There is no clear formula. It's an ad hoc inquiry.
You just weigh these three things in the hopper.
OK. What's factor 1?
Factor 1. The economic impact of the
regulation on the claimant. How much value did you lose?
10%, Fifty percent? 95%?
The more you lose, the stronger your argument.
But remember, the court has repeatedly said mere diminution
and value isn't enough to win. So my 95% loss goes here and
it's a strong point in my favor, but it's not a winner by itself.
Correct, it's just one factor. What's factor 2?
Factor 2. The extent to which the
regulation is interfered with Distinct investment backed
expectations, or IBES. IBES.
What does that mean in plain English?
It's crucial. It means did the regulation
surprise you? Did you buy the land reasonably
expecting to build a skyscraper based on the law at the time?
Or did you buy a swamp knowing it was in a highly regulated
wetland area? So if you bought purely on
speculation, knowing the risks, the court has less sympathy.
Exactly. You need a distinct expectation
that the government thwarted. It's not just a vague hope.
And factor 3. Factor 3.
The character of the government action Is the government
physically invading, which we know from Loretta was bad, or is
it just a general public program adjusting the benefits and
burdens of economic life for the common good?
So a broad program to save landmarks or protect the
environment is viewed more favorably.
Much more favorably than an action that singles out one
person. And the reality check here.
What's the bottom line on Penn Central?
The government almost always wins Penn Central cases unless
the economic impact is massive and the expectations were
crystal clear and reasonable, Courts are reluctant to find a
taking here. They don't want to turn every
zoning change into a federal lawsuit.
So to recap the strategy, check Loretto for a physical
occupation. If no, check Lucas for 100%
wipeout. If no, you're in the Penn
Central balancing test. Perfect.
That is the Holy Trinity of regulatory takings analysis.
But of course, law school isn't that simple.
We have to talk about some advanced takings issues.
Section 5. Let's start with a brain teaser.
The denominator problem. Oh, the denominator problem.
This sounds like math, but it's really about how we define the
parcel. Remember how I said Lucas
requires a 100% value loss? Right, it has to be total.
Imagine I own 100 acres. The government passes a law
protecting wetlands that covers just 10 of my acres.
I can't build anything on those specific 10 acres.
If I define my parcel as just those 10 acres, then I have
suffered a 100% wipe out of that parcel.
That's a Lucas taking I get paid.
But if I define the parcel as the full 100 acres.
Then you've only lost 10% of your total utility.
That's a Penn Central case, and you probably lose.
So the game becomes, what is the denominator in the fraction?
Is it the sliver or is it the whole pie?
And the Supreme Court gave us an answer, or at least a test, in
Mervie, Wisconsin. They did in Myrrh, the court
said. We have to look at the parcel as
a whole. We don't let the owner
gerrymander the property lines for litigation.
We look at factors like how is the land treated under state
law? Are the lots contiguous?
Are they owned by the same person?
What is the economic synergy between them?
So they basically stopped land owners from artificially slicing
up their land just to manufacture a Lucas claim?
That's the take away. The court looks at the big
picture. OK, next advanced topic
exactions. This is where I go to the city
for a permit and they say sure we will give you the permit, but
you have to give us something first.
The unconstitutional conditions doctrine.
The government can't hold your permit hostage to extort things
from you that are unrelated to your project, but they can ask
for things if those things mitigate the impact of your
development. And we have a two-part test here
from 2 cases, Nolan and Dolan. Let's take them 1 by 1.
Part 1. Essential Nexus from the Nolan
case in Dolan, a guy wanted to rebuild a beachfront house, the
California Coastal Commission said.
OK, but you have to give us a public easement for people to
walk across your private beach between the high and low tide
lines. And their justification.
The Commission argued the new, bigger house would block the
view of the ocean from the street, creating a psychological
barrier to the beach. Wait, how does letting people
walk on the beach fix the view from the street?
It doesn't. That's why the Supreme Court
called it an out and out plan of extortion.
There was no logical connection, no Nexus between the permit
condition, which was beach access, and the harm the
development supposedly caused, which was view blockage.
So the solution didn't match the problem.
Not even close. If the problem is view blockage,
you ask for a viewing deck or height limits, not a beach path.
OK, so there must be a Nexus. That's step one.
Part 2 comes from Dolan. It's called rough
proportionality. Right in Dolan, a hardware store
owner, wanted to expand her store and pay for parking lot.
So he said OK, but you have to dedicate a portion of your
property for a public bike path and a massive Greenway for flood
control. No, wait, expanding a parking
lot does increase traffic and water runoff, So there was a
Nexus there, right? Yes, unlike in Nolan, there was
a connection, but the court said the demand was disproportionate.
You can't demand a massive public park just for a small
store expansion. The city has to make some sort
of individualized determination that the cost to the developer
is roughly proportional to the impact of the project.
It can't be a wild overreach. Exactly.
And does this apply to money if they ask for impact fees?
Yes, thanks to a later case called Koontz.
It used to be just about dedicating land.
Now, if the city says give us $50,000 for a park fund in
exchange for your permit, that monetary demand also has to
satisfy Nolan Dolan. There must be a Nexus and rough
proportionality. One last advanced tool mentioned
in our sources Transferable Development Rights, or TDRS.
This is a clever workaround, isn't it?
Very clever. It's a market based solution to
a regulatory problem. Let's go back to Penn Central.
They couldn't build their tower. That feels like a big economic
loss. But the city said don't worry,
you have all these air rights above Grand Central that you
aren't using. We will let you sell those
rights to a developer of a nearby property.
So a developer across the street could buy them.
Exactly. And that developer across the
street gets to build 20 stories higher than the zoning normally
allows because he bought Penn Central's development credits.
I get paid by the developer, the city gets its landmark
preserved, and the developer gets more density.
And does that defeat a takings claim?
It helps a lot. And the Penn Central case
itself. The court mentioned that these
TDRS gave the owner some value, which helped the city win the
argument that they hadn't wiped out the property's worth.
It mitigates the economic impact, which is factor one of
the balancing test. It's like a cap and trade system
for concrete. That's a perfect analogy.
All right, we have covered a massive amount of ground from
the origin of zoning in Euclid to the intricacies of regulatory
takings. Let's head to the outro and
bring it all together. If I'm walking into an exam or a
client meeting, what is my mental checklist?
Give me the flow chart. OK, here's the drill, the step
by step analysis. First ask is it zoning?
If yes, apply rational basis. The city usually wins unless
it's arbitrary. Check for non conformities.
Are they grandfathered or is there a need for a variance
because of a unique hardship step?
2. Is it eminent domain?
Is the government taking title? If yes, check public use, which
is broad and includes economic development.
And check just compensation, which is fair market value.
But remember, no sentimental value.
And then the big one. Then the big one, is it a
regulatory taking? And here you run the sequence.
First, is there a physical occupation that's Loretto and
Cedar Point. If yes, they pay.
It's a taking. Second, if not, is there a total
economic wipeout? That's Lucas.
If yes, they pay unless it was already a common law nuisance.
3rd If it's neither of those, you balance the three Penn
Central factors, the economic impact, the investment backed
expectations, and the character of the government action.
And remember, the government usually wins here.
And one final. Check.
One final check. Is it an exaction?
Is the government demanding something for a permit?
If so, apply the Nolan Dolan test.
Is the demand logically connect to the projects, harm the Nexus?
And is it roughly proportional in scale?
And before we sign off, I want to leave our listeners with a
provocative thought from the source material we touched on
Tyler V Hennepin County. This is a fascinating recent
development. It really is.
It's about home equity. The government foreclosed on a
94 year old woman's condo for unpaid taxes.
She owed about $15,000 in taxes, penalties and fees.
They sold the condo for $40,000. Historically, in many states,
the government kept the surplus. They kept the whole $40,000.
So they made a $25,000 profit. A huge profit.
And the Supreme Court, in a unanimous decision, said no.
That equity, that surplus $25,000 is private property
protected by the takings clause. You can take what you are owed,
but you can't take the rest. The court basically called it
home equity theft. This suggests the definition of
property is evolving, or at least being reaffirmed.
It's not just land, it's value, it's equity.
And as cities get more aggressive with regulations and
four fighters, the court seems to be signaling it will look
closely at the line between public interest and private
theft. It connects back to Kilo.
The pendulum swings. We went very pro government with
Kilo and Penn Central in the last half century.
Cases like Cedar Point and Tyler suggest the pendulum might be
swinging back just a little toward the property owner.
And that is where it gets really interesting.
Law is not static. It's a living struggle over who
owns the ground we stand on and the value we create.
A constant negotiation. Thank you for joining us on this
deep dive into land use controls.
Good luck with your studies and we will see you on the next one.
Happy studying. All right, class, welcome.
Today we're doing a deep dive into land use controls.
Now, I know what you might be thinking, but trust me, this is
an absolutely critical topic not just for your property exam, but
for the bar exam as well. So let's get into it.
Let's just start with the big central question that really
animates this entire area of law.
You own property, you have rights.
But can the government step in and say, Nope, you can't build
that apartment building here? Can they limit your use of your
own land? Well, the answer, as with so
many things in the law, is a resounding It depends.
And what it depends on is this fundamental tension, this
constant tug of war. On one side, you've got the
state's police power. This is its inherent authority
to pass laws to protect the public health, safety and
welfare. On the other side, you've got
the 5th Amendment's takings clause, which acts as a check,
saying, hey, if you're going to take private property for public
use, you've got to pay for it. The whole game here is figuring
out where regulation ends and a taking begins.
OK, so let's see how this conflict actually plays out on
the ground. We're going to start with
zoning, which is far and away the most common form of land use
regulation. Then we'll talk about the escape
valves, the ways property owners can get some relief.
So what is zoning? Well, it's pretty simple really.
A city or town carves itself up into different districts, you
know, residential over here, commercial over there,
industrial way over there, and sets rules for each.
Now, for your exam, you need to remember that zoning is a
legislative act, an exercise of that police power we just talked
about. And because of that, courts give
it huge deference. They apply what's called a
rational basis review, which frankly, is a very low bar for
the government to meet. As long as the zoning plan is
even arguably related to a legitimate public purpose, it's
going to be upheld. But what happens when the rules
change, right? Imagine you've been running a
little corner store for 30 years.
It's totally legal. Then one day the city rezones
your entire neighborhood to be residential only.
Suddenly your store is what we call a non conforming use.
Now the good news is you generally get to keep it.
The law protects this because you have what are called vested
rights. But, and this is a very
important but that protection isn't unlimited.
And here are those limits for an exam.
These are your key analytical points.
First, the use had to be legal when it started.
Seems obvious, but you'd be surprised.
Second, you can lose that protection if you voluntarily
abandoned the use. You can't just close up shop for
five years and then decide to reopen.
And 3rd, and this is a big one, you can't expand or
substantially change the use. You can repair the roof of your
corner store for sure, but you can't tear it down and build a
Walmart. That's a no go.
OK, so that's for uses that were there before the new zoning.
But what if you want a piece of land and the existing zoning
rules make it almost impossible to do anything with it?
This is where the variance comes in.
Think of it as an administrative safety valve, a way to get an
exception to the rules. Now they don't just hand these
out like candy. To get a variance, the owner has
to pass a pretty tough two-part test.
First you have to show undue hardship.
This can't just be oh I can make more money if I could build a
duplex. No, it has to be a hardship
that's unique to your specific property.
Like a bizarrely shaped lot where the normal set back rules
just don't work. And critically, it can't be a
hardship you created yourself. Second, you have to prove that
giving you the variance won't hurt the public or undermine the
overall zoning plan. OK everyone listen up because
this is a classic exam trap. Do not confuse A variance with
rezoning. A variance is administrative
relief. It's a zoning board granting a
special exception to 1 property owner based on their individual
hardship. Rezoning is a legislative act.
That's the City Council actually changing the law itself for a
whole area. They are two completely
different things, and you've got to keep them straight.
All right, let's shift gears. So far, we've been talking about
the government regulating how you use your land, but what
about when they want to take it outright?
Well, that brings us to the ultimate government power,
eminent domain. The power of eminent domain is
baked right into the 5th Amendment, but it comes with two
very important strings attached. First, the taking has to be for
a public use. And as we'll see in a second,
courts have defined this very, very broadly.
Second, the government has to pay just compensation.
And what that means is fair market value, what a willing
buyer would pay a willing seller for the property.
And here's where that public use requirement gets interesting.
For a long time, people thought it meant something like a road
or a post office. But in the landmark case Kilo V
City of New London, the Supreme Court said public use really
just means a public purpose, and that can include economic
development. So, yes, the government can take
your house, give it to a private developer to build a shopping
mall, all because it might create jobs and boost the tax
base. This is a very low bar for the
government to clear. OK, everybody take a deep
breath. We are now entering the most
complex, the most litigated and frankly the most heavily tested
part of land use controls, regulatory takings.
This is when the government doesn't physically take your
land, but a new regulation is so restrictive, it's the functional
equivalent of a taking. And our entire modern framework
for this comes from the single famous line from Justice Holmes
back in 1922. He said if regulation goes too
far, it will be recognized as a taking.
So for the last 100 years, the whole challenge has been to
figure out what what exactly is too far.
So on an exam, when you spot a potential regulatory taking, you
can't just jump straight to balancing things.
There is a precise analytical framework you have to follow,
and your very first step always is to check for one of two
bright line or per SE rules. Here they are.
You must know these two cold. The 1st is a permanent physical
occupation from the Loretto case.
If the government authorizes a permanent physical invasion of
your property, no matter how small, like a cable box on the
roof, it's a taking. End of story.
The second is a total economic wipeout from the Lucas case.
If a regulation denies you all economically beneficial use of
your land, making it worthless, it's a taking.
If your fact pattern fits either of these two, your analysis
stops. It's a taking and compensation
is due. But what if it's not that clear?
What if it's not a physical invasion and the regulation
doesn't destroy all the value, just most of it?
Well, only if neither of the per SE rules applies do you move on
to the next step of the analysis.
And that next step is the famous Penn Central ad hoc balancing
test. If you get here on an exam, you
have to analyze all three of these factors.
One, the economic impact of the regulation on the owner.
Just how bad was the financial hit?
2, the extent to which the regulation interferes with the
owner's distinct investment backed expectations.
Basically, did the owner buy the property with a reasonable plan
in mind that the government has now thwarted?
And three, the character of the government action, is it more
like a general rule that benefits everybody, or does it
feel more like a physical invasion targeting one person?
You weigh all three to decide if the regulation has gone too far.
All right, we're on the homestretch.
We have one more special category to cover called
exactions, and then we're going to pull all of this together
into a final strategy you can use on exam day.
So what's an exaction? This is when a developer goes to
the city for a building permit and the city says, OK, we'll
give you the permit if you give us something in return, maybe
they want you to dedicate some of your land for a new public
park or build an access Rd. Because the government has so
much leverage here, there's a real potential for coercion.
So the court scrutinized these deals very closely.
And that heightened scrutiny comes in the form of the Nolan
slash Dolan test. It's a two-part test you need to
know. First, there must be an
essential Nexus, a logical connection between what the
government is demanding and the impact of the project.
Second, there has to be rough proportionality.
This means the size and scope of the demand can't be way out of
whack with the size and scope of the project's impact.
The government has to show that its demand is a fair response to
the burdens the new development will create.
OK, here it is. This table is your road map.
This is how you issue, spot, and structure your answer on the
exam. When you see a land use problem,
you walk through this checklist. Is it a general zoning law?
That's rational basis. Is someone asking for an
exception? That's a variance in the undue
hardship test. Is the government taking title
to the land? That's eminent domain.
Is it just a regulation? Then you have to run through the
regulatory takings tree, check Loretto, check Lucas, and if
neither applies, then do the Penn Central balancing test.
Finally, is the government demanding something for a
permit? That's an exaction, and you use
Nolan slash Dolan. Follow the structure.
And in the end, that's what all these doctrines are about.
They're all trying to answer this one fundamental policy
question. As we as a society move forward,
how do we make sure that the cost of progress isn't unfairly
forced under the shoulders of just one or a few property
owners? It's a question courts and
communities grapple with every single day, and it's what makes
this area of law so important. All right, that's it for today.
Good luck with your studies.