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Regulatory Takings Law: Exceptions to the Penn Central Approach

When is a landowner most likely to prevail over the government in a regulatory takings dispute? Professor Eric Claeys, Professor of Law at Antonin Scalia Law School at George Mason University, discusses the two cases that carve out exceptions to the Penn Central approach, which in general construes regulatory takings cases in a way that gives government activity the benefit of the doubt. The first exception is “touching,” when a land use restriction orders the owner to allow a physical thing or person to come onto the property, the lead case for which is Loretto v. Teleprompter Manhattan CATV Corp (1982). The second exception is “preventing any use” as determined by the case Lucas v. South Carolina Coastal Council (1992). https://youtube.com/watch?v=8Zkcd6hjhN0


Ever since Penn Central, regulatory takings law is construed in a way that gives state and local governments some deference or some benefit of the doubt. Penn Central is the dominant approach, and the Penn Central test instructs courts to balance three factors. The first factor is to look at the impact of the economic effect of the restriction on the owner and his use of his property. The second factor looks at the effect of the regulation on the reasonable investment-backed expectation the owner has, and the third factor looks at the justification of the government action. In most cases, courts construe the first factor and the second factor, telling the owner, “Be happy with what you can do. Don’t complain too much about the things you can’t do.” But in two limited situations, courts take those two same factors and say those factors work in favor of the owner. If a regulation has the effect of ordering a touching of the property, then the person who suffers the touching can claim that he suffered a taking automatically. Loretto v. Teleprompter Cable arose after New York City enacted an ordinance that allowed for cable line to be laid down throughout all of New York City. The New York ordinance ordered all apartment owners in New York City to let cable companies come in and install cable boxes in every single apartment, everywhere in the building. Loretto said, “I would have liked the opportunity to bargain for myself with the cable company, and if I could have bargained with the cable company, I would have asked for a share of the royalties the cable company is going to get.” The cable company wanted to say no taking occurred. “You still have title to your apartment building, and you have property in every single one of the apartment units in it, and we’re doing you a favor.” The court held that even a small cable box is inflicting a physical touching on the property, and that’s a taking. Lucas was a developer and he bought a beachfront lot on the South Carolina coast, and a few years after he bought that lot, South Carolina’s legislature enacted a Beachfront Management Act. The Beachfront Management Act declared that it was the policy of South Carolina to be worried that big storms in the Atlantic were going to erode the coastline, and to stop erosion, the South Carolina legislature ordered no further, no new construction on the Atlantic Coast. Lucas was expecting to build the beachfront house on that property, and after the act was enacted, he can’t build anything on the property. The court held that under Penn Central’s first prong, the landowner had suffered 100% loss of all interest, because he couldn’t build anything, and under the Penn Central second prong, the owner had an investment-backed expectation in building something, and his investment-backed expectations were frustrated. The two situations in which the owner wins are, first, a situation in which a land use restriction orders the owner to allow a physical thing or person to come onto the property that she doesn’t want. And the second situation arises when the land use restriction orders the person to stop doing anything beneficial with the land.

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