By William W. Abbott and Nathan Jones
While much is written about takings claims in the field of land use practice, the reality has been that for a number of reasons, it is extremely difficult for a California property owner to make a successful legal claim. In the context of a regulatory (as opposed to a physical) taking, the fact pattern to support a regulatory taking has to be extreme. The recent case of Monks v. City of Rancho Palos Verdes (2008) 167 Cal.App.4th 263, vividly illustrates the types of extraordinary facts that must exist for a property owner to cross the finish line first.
The City of Rancho Palos Verdes (“City”) sits upon ancient landslide formations that are slowly moving towards the sea. In 1978, the threat of continued landslides motivated the City to pass a temporary moratorium on the construction of single-family homes in Zone 2, a landslide area which contained the plaintiffs’ properties. Zone 2 is approximately 80 acres and contains a patchwork of pre-existing homes and the plaintiffs’ undeveloped properties. The slide occurring in Zone 2 is considered a “block” slide, in which the entire zone is moving at approximately the same speed, albeit very slowly. Rainy years exacerbate the speed of the slide. All experts throughout the litigation agreed that the slide did not pose a serious risk of catastrophic injury.
Following the passage of the temporary moratorium in 1978, 18 lot owners attempted to develop their lots through a moratorium exclusion process the City developed. None of the lots were approved for construction. Simultaneously, the City passed a series of ordinance exemptions allowing existing homeowners located in Zone 2 to make significant improvements and additions to their properties. No new homes were permitted to be built.
After another nearby slide occurred in 2002, the City passed a more burdensome ordinance that effectively banned new residential construction in Zone 2. Under the original 1978 ordinance, lot owners were required to show that their individual home construction or improvements would not increase the chance of unacceptable slide risk in Zone 2 for their own home sites. After the 2002 ordinance, lot owners were required to show that their individual homes would not increase the risk of slide occurrence to the entire Zone 2 area. The approximate cost to each landowner was estimated to be in the range of $500,000 to $1 million dollars for individual geologic studies required.
The owners filed an inverse condemnation action, claiming that, under Lucas v. South Carolina Coastal Commission (1992) 505 U.S. 1003, a permanent regulatory taking of their property had occurred under the California Constitution. The City’s initial defense was that the plaintiffs failed to pursue administrative relief. The appellate court had primarily held that the plaintiff’s burden of exempting their residential construction under the ordinance was futile. Plaintiffs did not need to exhaust their administrative remedies before filing an inverse condemnation action, which is generally required under state law. The appellate court remanded to the trial court to factually determine if a taking had occurred. At trial on the merits of these contentions, the City prevailed. Monks promptly appealed.
The City Committed a Regulatory Taking
The court noted that in regulatory taking cases the California Constitution has been analyzed under the same standards used by the U.S. Supreme Court. The appellate court reviewed three general categories of takings claims:
- Physical takings involving the actual invasion of property, found in Loretto v. Teleprompter Manhattan CATV Corp. (1982) 458 U.S. 419.
- Categorical regulatory takings that deprive property owners of all economically beneficial use of property, pronounced in Lucas v. South Carolina Coastal Commission (1992) 505 U.S. 1003.
- Incremental takings analyzed under a multi-factored test enunciated in Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104.
After recognizing that the fundamental issue in all these analyses is the severity of the burden that government imposes upon private property rights, the court determined that this case factually aligned with the takings analysis contained in Lucas.
Under the Lucas takings analysis, the government, to avoid liability when it denies all use, has the burden of proving that the property owner’s intended use is prohibited under state law. The Supreme Court summed up the burden on the City: “In essence, the city must show that, under common law nuisance principals, it could obtain an injunction against the construction of homes on plaintiffs’ lots.”
After independently reviewing the evidence presented at the trial court, the court reached two ultimate conclusions: that the 2002 moratorium made it effectively impossible to build, and that the City could not have prohibited the owners from building under state nuisance law.
The Resolution Effectively Stripped The Property Of All Economically Beneficial Use
Plaintiffs claimed that because the City’s 2002 ordinance imposed a stricter and more prohibitive risk standard than previously imposed in 1976, the ordinance effectively deprived plaintiffs of all economic use of their land. The City argued that plaintiffs still could attempt to build if they could qualify for an exemption upon proof that individual construction would not increase the risk of another slide in Zone 2. Moreover, the City countered that it still allowed temporary structures to be placed on the properties and that it was not prohibiting recreational uses. The Court rejected these arguments in turn.
First, the cost of compliance with the exemption would have been prohibitive and stood little chance of changing the City’s position regarding approval of new construction. In underlying litigation, the appellate court had already ruled that “Plaintiffs should not have been required to spend between $500,000 and $1 million to conduct a study in an attempt to prove what the city would not believe…The use of the administrative process was pointless.” Second, the City’s contention that plaintiffs could still build nonresidential structures on their property and use the property for recreational purposes also failed. Drawing similarities to Lucas, the Court analogized that an owner’s ability to use recreational beachfront lots for camping and picnicking did not sufficiently qualify as economically beneficial use.
The Residential Construction Here Was Not a Nuisance Under State Law
The court then determined that the construction of homes on the plaintiffs’ lots was not a nuisance: “The construction of homes on plaintiffs’ lots must pose a significant harm to persons or property to constitute…a nuisance. (People ex rel .Gallo, 14 Cal.4th 1090, 1105). According to the trial testimony of a variety of geology experts, there was no immediate threat of harm, the use of the land to build homes was not inherently harmful, and there remained only uncertainty with respect to the anticipated risk in Zone 2. Since the condition of Zone 2 was not proven to be inherently dangerous by the City, the threshold public nuisance test could not be satisfied. The court was quick to point out the disparate treatment the lot holders suffered compared to existing homeowners in Zone 2, in which the City had granted construction to pools, building expansions, and general lot improvements without requiring such an inordinate cost to prove the geologic safety of the construction. After ruling that a taking had occurred, the appellate court remanded the case back to the trial court.
The Legal Significance of Monks
Public agencies should consider this case whenever passing a building moratorium or placing severe restrictions on construction. The broad analysis of this case suggests an impact on takings law jurisprudence in the following ways:
- A regulatory taking can occur when a public agency makes it exceedingly difficult or costly to build residential construction.
- Recreational use of property alone is not a sufficient remaining beneficial use in a categorical takings case.
- A permanent moratorium on building should only occur when an agency can establish that it could have prevented the construction with a nuisance injunction.
- The agency bears the burden of proof when proving that the construction would constitute a nuisance.
- A permanent ban in relatively safe construction areas will most likely be a regulatory taking.
The Practical Significance of Monks
First: The facts of Monks involve a period of extraordinary delay. As a general proposition, Monks does not jeopardize the more typical practice of local governments enacting a moratorium for up to 24 months. (Gov. Code § 65858.) Once a legal lot has been created, Monks sends a signal that local government has to proceed carefully and with justification to deny the owner the ability to develop the land. Second: The other side of the Monks holding is that as to future applications for tentative maps and rezoning involving slide prone land and other geological infirmities, expect the city or county to develop a higher level of geologic information as part of the application process. Discretionary authority for projects with debatable geologic information are more likely to be abused.
Undoubtedly, there will be pressure for the California Supreme Court to hear this case or in the alternative, to de-publish the appellate court decision.
Bill Abbott is a partner at Abbott & Kindermann, LLP, and Nathan Jones is a law clerk for the firm. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.