The DEC denied Petitioner's application for to allow him to build a single-family home on the parcel. Petitioner now argues that the DEC's decision constitutes a taking without just compensation of petitioner's real property. The New York Supreme Court found that no taking had occurred, and the Appellate Division affirmed.
The Lucas court held first that regulations that prohibit all economically beneficial use of land constitute a compensable taking unless the regulation prohibits a use that was already unlawful. Second, the court held that a land owner must have a reasonable investment-backed expectation that was denied by application of the regulation.
A landowner must have a property interest to assert when claiming a taking. United States v. Willow River Power Co., 324 U.S. 499 (1945); Bennett v. Long Island R.R. Co., 181 N.Y. 431 (N.Y. 1905). A subsequent purchaser may challenge a previously enacted regulation that affects the purchased land by arguing the regulation is an invalid exercise of the state's police power. Gazza at para. 22. See Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) (interested parties may contend that the legislature has gone beyond its constitutional power); Vernon Park Realty v. City of Mount Vernon, 307 N.Y. 493 (N.Y. 1954) (subsequent purchaser with knowledge of previous restriction may challenge the validity of the restriction). In takings cases, regulations have a presumption of constitutionality, and the claimant bears the burden of showing the unconstitutional taking. de St. Aubin v. Flacke, 68 N.Y.2d 66 (N.Y. 1986).
The court gave two independent reasons for denying the variance. Gazza at para. 27. First, there was no taking because Gazza never owned an absolute right to build without a variance. Id. Second, the court applied the federal Lucas analysis. Under this alternative analysis, the test is (1) whether there is a substantial state interest and close nexus, and (2) whether the regulations result in a substantial decrease in the value of the property. Gazza at para. 29. See Andrus v. Allard, 444 U.S. 51 (1979). Applying the test, the court found a significant interest in the state's purpose in preserving wetlands. Gazza at para. 30. Second, the economic value of the land was not extinguished. The court noted that the parcel, as restricted, had a value of approximately $80,000, which was close to petitioner's purchase price.
The second question, raised by Judge Wesley's concurring opinion, is whether opportunities for takings compensation should be forfeited simply because title to the land was transferred. Judge Wesley takes exception with the majority's assertion that property interests are defined at the time title is passed. He explains that a prior owner may choose not to assert his rights to compensation for a taking for a variety of reasons, including a lack of financial resources to pursue such a claim. "If, as the majority reaffirms, 'a subsequent purchaser may attack previously enacted regulations that affect the purchased property as beyond government's legitimate police power,' then a subsequent purchaser should also be able to challenge an otherwise valid regulation if it results in a taking without compensation." Gazza at para. 42 (Wesley, J., concurring) (internal citations omitted) (citing Gazza at para. 22). It remains to be seen whether future Court of Appeals decisions will adopt Judge Wesley's opinion.
The court set a high standard to meet in order to find a compensable taking. An example of a compensable taking is Vatalaro v. Department of Envtl. Regulation, 601 So. 2d 1223 (Fla. 1992), in which the complainant purchased property for $125,000 and the only remaining viable use was the construction of an elevated wooden boardwalk through a portion of the property.
The acquisition of property already subject to a limiting restriction often bars a takings claim. Two basic approaches dominate the takings cases: a property rights analysis, and a knowledge approach. Under the first approach, the court reasons that the complainant never acquired a full bundle of property rights. Majestic Heights Co. v. Board of County Comm'rs of Jefferson County, 476 P.2d 745 (Colo. 1970) (en banc); Leonard v. Town of Brimfield, 666 N.E.2d 1300 (Mass. 1996). Under the second approach, the complainant's knowledge of the restriction at the time of purchase is a factor against the complainant. See, e.g., Westbrook v. Board of Adjustment, 262 S.E.2d 785 (Ga. 1980); County of Ada v. Henry, 668 P.2d 994 (Idaho 1983).
Courts often assume that the purchase price and expected use reflect the constraint. Some courts go so far as to bar any challenge based upon a denial of a permit if the complainant acquired the property with knowledge. See Mintz v. Village of Pepper Pike, 386 N.E.2d 849 (Ohio App. 1978).
Special thanks to Peter W. Martin, Professor of Law, Cornell Law School, for his assistance in the preparation of this commentary.