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Has A California Landslide Decision Muddied the Ground that Supports Land Use Development Moratoriums?

In 1992, while many of today’s associates were preparing for a future of the Bluebook and Shepardizing by rooting for Emilio Estevez, as lawyer Gordon Bombay, to lead the Mighty Ducks to victory, the United States Supreme Court issued what was then thought to be the definitive statement on regulatory takings of land. In Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 120 L. Ed. 2d 798, the Supreme Court held that South Carolina’s restrictions on beachfront development violated the Takings Clause of the Fifth Amendment of the United States Constitution because it deprived the owner of two barrier island beachfront lots of any economic use of his land.
The facts of Lucas were straightforward. Mr. Lucas bought two lots on the Isle of Palms outside of Charleston and planned to erect two houses. Several years later the South Carolina legislature amended the state’s Beachfront Management Act, with the goal of decreasing the erosion of the state’s beaches from the Grand Strand to Hilton Head. The setback requirements of the amended Act, though, prevented Mr. Lucas from building anything larger than a deck or a small walkway on his lots. He filed suit, claiming that the enforcement of the Act constituted a compensable regulatory taking under the Fifth Amendment, and Justice Scalia, writing for the majority, agreed and held that Mr. Lucas was entitled to compensation.
A decade later, the Supreme Court limited the application of Lucas when it found that two moratoriums on development in the Lake Tahoe Basin of Nevada and California did not constitute a compensable Fifth Amendment taking. The Supreme Court held in Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, 535 U.S. 302, 152 L. Ed. 2d 517, that the TRPA had constitutionally imposed consecutive moratoriums of 24 months and 8 months on virtually all residential development in the basin during the time period in which the TRPA was adopting a new and comprehensive land-use plan. Local and regional governments breathed a sigh of relief and reduced their expenditures for outside legal counsel.
In what might at first glance appear to be a *** in the armor of Tahoe, the Court of Appeal of California, Second Appellate District, ruled this past October in Monks v. City of Rancho Palos Verdes, 167 Cal. App. 4th 263, that a city’s moratorium on residential development because of possible landslides was a compensable regulatory taking under the Takings Clause, art. I, § 19, of the California Constitution. The plaintiffs, who owned 16 lots on which development had been prohibited as a result of the moratorium, argued at the trial court that the moratorium constituted a permanent ban on development of their lots. The City of Rancho Palos Verdes argued that the moratorium was not a permanent taking because the city council had established an administrative process that permitted the owners of undeveloped lots to seek an exclusion from the moratorium by demonstrating that a proposed development would not increase the risk of landslides. The trial court found that Rancho Palos Verdes had acted with proper authority in imposing the moratorium and that a permanent taking of the plaintiffs’ lots had not occurred.
The Court of Appeal reversed, holding that the reasoning of Lucas, as opposed to Tahoe, was applicable to the plaintiffs’ claims. The Court of Appeal found that it would have been futile for the plaintiffs to have sought exclusions to the moratorium through Rancho Palos Verdes’s administrative process, and thus the moratorium was not of a temporary nature that fell within the dictates of Tahoe. Instead, the plaintiffs had been deprived of all economically beneficial uses of their lots, which created compensable permanent takings under Lucas.
As a result of the combination of the present economic climate, local government efforts in many areas to curtail urban sprawl, concerns about the effects of longer commutes on global warming, and the political focus of a new administration in Washington, we may see more local and regional governments enact development moratoriums in the near future. But legal counsel for real estate developers and property owners should not expect to successfully rely upon the Monks decision in challenging such moratoriums. Although Rancho Palos Verdes and the trial court saw the dispute as a Tahoe moratorium issue, it is clear that the Court of Appeal found the dispute to be a traditional Lucas permanent takings case. Thus, Tahoe still reigns and temporary moratoriums on real estate development will likely be upheld.