The U.S. Supreme Court recently issued its opinion in an important case for landowners,
Murr v. Wisconsin, 582 U.S. ___ (2017) (No. 15-214). The issue before the Court was whether two contiguous parcels owned by the same landowner can be treated as one single property for purposes of the regulatory takings analysis. While the concept may seem a bit arcane at first glance, the answer is actually quite important for how governments can treat the owners of contiguous parcels of land.
Background
In 1960, the parents of the Murr siblings purchased Lot F in the St. Croix Cove Subdivision and titled the lot in the name of their plumbing company. They subsequently built a cabin on the lot. Three years later, they purchased adjacent Lot E with the intent to develop that property separately. In the 1990s, the parents transferred Lots E and F to their children (the "Murrs").
Later, the Murrs planned to sell Lot E and use the sale proceeds to improve Lot F. Upon speaking to St. Croix County, Wisconsin planning officials, the Murrs learned of a zoning regulation that prohibited the use or sale of adjacent properties under the same ownership as separate building sites unless each lot had at least one acre suitable for development. Neither Lot E nor Lot F met the minimum developable lot size. Therefore, the County prohibited the Murrs from selling or building on Lot E alone.
Procedure
The Murrs sued in state court for a regulatory taking of Lot E. Notably, they did not include Lot F in their claim because they contended it was a separate property that should not be considered. The lower court considered both Lot E and Lot F as if they were a single property, and concluded that the zoning regulation did not take property because the Murrs' land was not deprived of all economic value. The Murrs appealed, but the Wisconsin intermediate appellate court held that the two lots were considered one for the purposes of a takings analysis, citing the "parcel as a whole" rule from
Penn Central Transportation Co. v. New York City, 438 U.S. 104, 130 (1978). The Wisconsin Supreme Court denied review, and in 2016 the U.S. Supreme Court granted certiorari.
Ruling
Justice Kennedy's opinion for the Court characterized regulatory takings jurisprudence as flexible in order to reconcile an "individual's right to retain the interests and exercise the freedoms at the core of property ownership" with the "government's well-established power to 'adjust[] rights for the public good.'" The Court then examined whether "reasonable expectations about property ownership would lead a landowner to anticipate" that his parcels would be treated as one or as separate under these factors:
- treatment of the land under state and local law;
- the physical characteristics of the land; and
- the prospective value of the regulated land.
Under this multifactor test, the Court concluded that the Murrs' parcels should be considered as one, single property. The Court found no regulatory taking of any of the Murrs' land because the land had not been deprived of all of its economically beneficial use or its economic value. Lots E and F still had economically beneficial use because, as a whole, the lots could be used for residential purposes. They still had value because the market value of the unified lots was not even ten percent less than the combined value of the lots as separate parcels.
Practical Effects
As a result of this decision, landowners and developers may find it difficult to assert takings claims when regulations adversely affect only one, or only a portion of, contiguous parcels. Landowners would be well advised to document their plans and investments for their contiguous properties separately and meticulously. In some circumstances, they may decide that it would be better to hold their contiguous parcels in the names of separate entities.
The members of our Land Development, Zoning & Environmental Practice Group have extensive experience in advising resolving and litigating private property rights disputes, with experience in these matters including appeals before the U.S. Supreme Court. We will continue to monitor how local and state governments respond to this decision.
