Under the Federal (and most state) constitutions, the government cannot “take” private property for public use without just compensation. Historically, this meant physically seizing or intruding upon all or part of your property and is often referred to as “eminent domain”. But takings are not necessarily physical. They can result from government regulations restricting the use of your property. It can be difficult to determine when the regulations go so far that they constitute a taking and require compensation.

With “regulatory takings” (also called “inverse condemnation”), a government restriction on your land in some way prohibits uses of your property. The most frequently litigated takings claims involve restrictions imposed by wetlands regulations or municipal zoning codes.

In order to prove that land use restrictions rise to the level of a “taking,” the following requirements must be met:

1. The restriction must have been imposed after you acquired your property. For example, you buy a property which is subsequently designated a “wetland.” Or, you buy a vacant lot where you plan to build a residence, which is allowed by zoning laws. Subsequently, the municipality rezones the area so only recreational uses, like parks and playgrounds, are permitted.
2. You have to “exhaust” your other remedies. There is a process involved in challenging regulations. First you have to apply for a permit and be denied. You then apply to the Zoning Board of Appeals (ZBA) for a use variance to allow a particular use of your land, or an area variance to allow changes to the dimensional requirements in the regulation. The ZBA may grant you a variance from the restriction, allowing you to build as if the restriction does not apply to your lot. You may also have a prior nonconforming use, which would allow you to keep using the property even if the regulations have changed. However, if the variance is denied, then you have exhausted your remedies and can claim a taking in a court of law.
3. There is no economically viable use of your property. For example, you buy a vacant 7,500 square foot lot and plan to build a home. The lot is only zoned for a residence. Later, the municipality rezones that area such that the lot must be at least 10,000 square feet in order to build on it. Your lot is now too small and you cannot obtain a building permit and your application to the zoning board for an area variance to build on a smaller-than-required lot is denied. There are no other uses you can make of your land. Accordingly, there is a good chance you can succeed on a takings claim.

Note that it is not enough that the value of your property has been reduced. Even a significant reduction in value is not sufficient. For instance, say you buy a vacant lot and want to build a retail mall on it, which is a permitted use. Then, the municipality re-zones to prohibit commercial uses. Your land was worth $40 million zoned for commercial use, but only $10 million if you can only build residences. Although the property is worth only a quarter of what it was worth before the rezone, there is no taking because you can still reasonably utilize your property in a manner that is economically viable (notwithstanding that you may face a monetary loss on your initial investment).

Generally, in any situation where a building permit has been denied, it is good practice to consult an attorney for advice on applying for a variance and challenging the restrictions. In situations where a takings, or other constitutional challenge will likely not be successful, the variance application is your only opportunity to preserve your desired use of the property. It is important to present your best and most thorough case to the ZBA. Generally, arguments and evidence in support of granting the variance must be raised before the ZBA so you are not precluded from raising them in a court on appeal if your variance is denied.

Read more about our zoning and land use practice.

This post does not constitute legal advice or establish an attorney-client relationship.