To Establish that a Land Use Regulation Represents a de facto Taking of Property, a Property Owner Must Show that Virtually the Entire Economic Value of the Property has been Destroyed by the Contested Regulations

Land Use

The Appellate Division, Second Department, recently reaffirmed the principal that to establish that a land use regulation represents a de facto taking of property, the property owner must show that the regulation destroys virtually all of the economic value of the property.  Joseph M. Adrin v. Town of Yorktown, 920 N.Y.S.2d 411 (2d Dep’t 2011).  In this case, the plaintiffs had acquired property that they sold for $3,600,000.00.  The plaintiffs alleged they were forced to sell at a loss because of the Town’s actions that effectively prevented them from developing the property in a manner they originally contemplated due to the imposition of onerous environmental regulations and the Town’s refusal to allow the property to be included in a sewer district.  The plaintiffs argued that the $3,600,000.00 price was a fraction of the value of the land which the plaintiffs’ appraiser had calculated to be $10,000,000.00.  The Court ruled that the difference between $10 million, even assuming that this was an appropriate value, and the sale price of $3,600,000.00 did not constitute a diminishing value sufficient to demonstrate a de facto taking.  As the Court pointed out, to be successful in a “takings” argument, the plaintiff must demonstrate that under no permissible use would a parcel be capable of producing a reasonable return.  The property owner must also show that the destruction of economic value is all but “one step short of complete.”  To put this another way, a property owner must show that all but a bare residue of the economic value has been destroyed as a result of the municipal land use regulations.  Clearly, this is an extremely heavy burden.  It is unlikely that a plaintiff can prove a de facto taking case under this standard except in very rare circumstances.  While landowners very often complain that newly enacted municipal regulations have taken the value of their property without due process, sufficient proof to sustain a claim due to such regulations is hard to come by.  The lesson really comes down to this:  When it comes to owning real property, the buyer and owner must beware.  The municipality has great latitude in imposing regulations on future development.  Absent a building permit, and substantial construction to sustain a vested rights argument, a property owner is always subject to new and different regulations which rarely rise to the level of constituting a deprivation of constitutional rights without due process of law.

 

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