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California Supreme Court Grants Review Of Regulatory Taking Issues

Regulations can functionally destroy the value of a property.  Limiting buildings to a certain size or for certain uses, or denying permits to operate certain types of businesses or build buildings of a particular size in a given locale can render an otherwise promising plot of land worthless.  When the actions of regulators destroy the fair market value of a property, the government may be required to compensate the landowner if the government’s activity amounts to a “taking” under the state and federal constitutions.  The Supreme Court of California has accepted review of a case involving the application of the California Environmental Quality Act (CEQA) to determine whether the government’s actions related to a home construction permit application amounted to a regulatory taking.

San Diego Agency Misapplies CEQA Determination

CEQA requires state and local agencies to identify the environmental impacts of proposed real estate developments and to act to mitigate those impacts.  Real estate developers know that CEQA can be an onerous law that can complicate, delay, increase the cost of, or even preclude building projects.  A case titled Bottini v. City of San Diego concerned San Diego’s application of CEQA that many legal scholars considered draconian and inappropriate. 

The matter involved a landowner attempting to construct one single-family home on a vacant lot in La Jolla.  The City Council determined to apply CEQA review to the landowner’s application for a coastal development permit.  After the City denied the permit, the landowner sued.  The court found that the City had inappropriately applied CEQA in failing to recognize the exemption for a single-family residence project and for attempting to retroactively review the environmental impact of the owner’s demolition action that had already been authorized and completed.  However, the court found that the City’s improper action did not amount to a “regulatory taking.”  The California Supreme Court accepted review of the case, but only on the issue of the proper method to evaluate whether a regulatory taking had taken place.      

CA Supreme Court to Address the Parameters of Regulatory Takings

If the government takes your property, for example to build a freeway through your living room, they owe you just compensation.  If the application of a new regulation effectively deprives you of any economically reasonable use of or value to your property, to the point of rendering your property worthless, then the government may still owe you compensation even if they did not formally take title from you.  In some situations, delaying the use of your property can amount to a “temporary taking.” 

In Bottini, the landowner argued that the government’s improper denial of the permit application unreasonably delayed their use of the property, amounted to “reverse condemnation” and constituted a temporary taking deserving compensation.  If so, the government should pay them back for its improper delay in their enjoyment of their property.  The argument is a tough one to make, and it was rejected by the lower courts in Bottini.  The court made its determination using a test laid out by the U.S. Supreme Court in 1978.  The California Supreme Court has taken review of the case to determine whether the court should have instead applied a different test laid out by a California court that is more favorable to landowners.  The Court’s decision could have a substantial impact on future takings claims brought by landowners and make local government agencies more wary of denying use permits without cause.    

If you’re a real estate investor in Southern California facing legal issues surrounding real estate purchase or sale, title, or contractor disputes, contact the seasoned and professional San Diego real estate attorney Jon Alan Enochs for a consultation on your case at 619-421-3956.

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