By Cori M. Badgley

In order to avoid having your takings claim dismissed, your timing has to be just right. Unfortunately for Colony Cove Properties, LLC (“Colony Cove”), the timing was off, and its takings claim was dismissed by the court for being both too late (facial challenge) and too early (as-applied challenge).

In Colony Cove Properties, LLC v. City of Carson (9th Cir. 2011, Case No. 09-57039), the City of Carson (“city”) passed the Mobilehome Space Rent Control Ordinance in 1979. The ordinance established a Rental Review Board that makes determinations regarding rent increases. In addition to adopting the ordinance, the city also adopted guidelines for implementing the ordinance. Although the ordinance has not been amended recently, the guidelines were amended as recently as 2006. Prior to the city amending the guidelines in 2006, Colony Cove purchased a mobilehome park within the city. After the city approved the amendment, Colony Cove filed an application which requested a 136% to 179% increase in rent. The Rental Review Board granted a 8% to 10% increase. Colony Cove subsequently filed suit claiming a regulatory, physical and private taking as well as violations of substantive due process. The district court dismissed Colony Cove’s claims and Colony Cove appealed.

The Ninth Circuit began by addressing the takings claims and separated these claims into two categories: facial challenges and as-applied challenges. In relation to the facial challenges, the court found that the statute of limitations had long since run on these claims. Colony Cove argued that the statute of limitations started anew when the guidelines were amended in 2006, but the court disagreed. Unlike the ordinance, the guidelines do not have the force and effect of law, and therefore, the facial challenge to the ordinance was untimely filed.

Addressing the as-applied challenge, the court found that Colony Cove’s claim was untimely for the opposite reason – it was too early. Pursuant to federal takings law, a claimant must first attempt to obtain relief through state inverse condemnation proceedings, which Colony Cove did not do. Therefore, the Ninth Circuit held that the claim was unripe.

Lastly, the Ninth Circuit evaluated whether the city’s decision on the application for rent increase was “arbitrary, irrational, or lacking any reasonable justification in the service of a legitimate government interest.” Using this low threshold, the court found that the city acted reasonably in deciding to increase the rent by only 8% to 10%, instead of 179%, and there was no violation of substantive due process.

This case reminds us that timing is crucial, especially with takings claim. You have to jump through all the hoops at the proper time in order to have a cognizable claim.

Cori M. Badgley is an attorney at Abbott & Kindermann, LLP.  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, or 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.