The U.S. Supreme Court has agreed to review a regulatory takings case involving the debate of what is the relevant parcel for purposes of determining a regulatory taking. After a ruling by the state of Wisconsin in Murr v. Wisconsin, 359 Wisc. 2d 675 (Wis. App. 2014), rev. denied, 862 N.W.2d 899 (Wis. 2015), Joseph, Michael and Donna Murr are appealing the judgement.

A regulatory taking occurs when the government causes the value or usefulness of private property to be eliminated or greatly lowered by a regulatory action without physical occupation of the property. Eminent domain lawyers often seek compensation for regulatory takings through “inverse condemnation” actions. Defining the relevant parcel for assessing a takings analysis is often debated. The Supreme Court will now hear the debate, and hopefully put the issue to bed once and for all.

By way of an overly simplistic example, suppose an ordinance precludes an owner from doing anything with their property within a certain distance from the street. The landowner may be able to build on the other 85 percent of his or her parcel, but the 15 percent is essentially useless. The outcome of a takings claim would be dependent on whether the court views the 15 percent by itself (relevant parcel) or as a larger part of the entire parcel (parcel-as-a-whole).

Generally speaking, the larger the scope of the property to be considered, the less severe the economic impact. Conversely, the smaller the parcel to be considered, the more severe as the concentration of economic impact is higher. Using the example above, if the ordinance precludes any improvements within 25 feet of the street, if the parcel at issue is only 30 feet deep, the owner would effectively be precluded from doing anything at all with his or her property. If, on the other hand, the parcel is 250 feet deep, the impact of a 25 foot setback would be relatively nominal.

Historically, courts have held that the relevant parcel is not the affected portion of the property, but rather is the parcel as a whole. This could change if the ruling favors Murr. Property owners will benefit from a ruling in Murr that could lead courts to define the relevant parcel narrowly, thus making regulatory impacts more severe and concentrated.

The regulatory ordinance issued by the St. Croix County prevents the Murrs from developing one of two contiguous lots that they own (lots E and F). The Wisconsin Court applied a per se rule, under which two contiguous lots must be considered together when assessing takings claims. Therefore, the court concluded that the Murrs were not deprived of all or substantially all practical use of their property.

If lot E was owned by anyone other than the Murrs, it could be developed. If lot E could be considered separate, then it would be held as a takings since the development prohibition limits the development of lot E. So the Supreme Court has to decide whether or not lot E should be considered separate in assessing takings claims.

Lower courts have been inconsistent in their rulings of how to deal with contiguous parcels in assessing a takings claim. In the Murr case, the Wisconsin Court ruled they should be considered together – other courts have ruled that the lots must be considered separately.

Whether the Supreme Court will come down with its own test for determining whether parcels should be considered separate or together is yet to be seen. Either way, the Court’s ruling on this case could have important implications for many regulatory takings cases.

If you are the subject of an eminent domain proceeding, or you believe that government action has effectively caused a regulatory taking of your property, give us a call at (866) EM – DOMAIN.