Yes, You Can Fight City Hall – When Zoning Is a “Regulatory Taking” Published by Properties Magazine in the June Edition By John P. Slagter, Esq. Property owners and governments have struggled for years to balance the government’s need to regulate property with the property owners’ constitutionally protected rights. Most people understand that if the government physically takes possession of your property, in an eminent domain or appropriation proceeding, you are guaranteed fair and just compensation. What has caused the most confusion is when property is not physically taken but is regulated to such an extent that there is no effective way for the owner to use it. There has also been confusion over temporary takings – that is, when property is taken only temporarily or when its beneficial use is temporarily diminished. After years of uncertainty in this area, the Ohio Supreme Court has created a standard to determine when regulation rises to the level of a regulatory taking and entitles the property owner to just compensation. In a landmark decision on April 10, 2002, the Ohio Supreme Court clearly established the right of Ohio property owners to be compensated for improper regulatory action. The Supreme Court’s decision in State ex rel. Shemo v. Mayfield Hts. (2002), 95 Ohio St. 3d 59, paved the way for a takings claim against the City of Mayfield Heights. This case found Mayfield Heights zoning was unconstitutional and therefore represented a temporary regulatory taking. Shemo v. Mayfield Hts. involved a series of lawsuits relating to a 22.6-acre parcel of vacant land located in Mayfield Heights, Ohio. The property owner purchased the property in January of 1992 and just three months later filed a complaint requesting that the court declare the current U-1 Single-Family zoning of the property unconstitutional. That case was dismissed in June of 1995 and then refiled. The owner claimed that the U-1 Single-Family zoning was unconstitutional and requested that the property be rezoned to U-4 Local Retail and Wholesale District. Mayfield Heights stipulated that the U-1 zoning classification was invalid and then rezoned the property to U-2-A Planned Unit Development even though the owner objected to this classification. The trial court found that the U-2-A zoning was unconstitutional as it applied to the owner’s property because it did not substantially advance a legitimate health, safety or welfare concern of Mayfield Heights and that the U-2-A zoning rendered the property economically nonviable. Facts supporting the court’s determination that the property was not properly zoned as residential were that this property was adjacent to Interstate 271 and Mayfield Road, that it was adjacent to commercially developed property, and that there were high-tension wires impacting upon the property. Under Ohio law, for zoning to be unconstitutional it must either result in the property not having an economically viable use or not substantially advance a legitimate interest in the health, safety or welfare of the government. In 2000, the Supreme Court found in Shemo that the zoning was unconstitutional because the owners had shown “that the City lacks any legitimate governmental health, safety, and welfare concerns in support of the U-2-A zoning classification.” The Supreme Court also found that there was competent and credible evidence that the property was not suitable for residential use and that the proposed commercial use was reasonable. After the Supreme Court’s 2000 Shemo decision, Mayfield Heights took certain actions that appeared to be attempts to block the development of the property. The City claimed an interest in the property through “paper streets” (streets that were dedicated in 1927 but never used or constructed). Mayfield Heights also refused the owner’s application for a permit because the owner had not obtained a wetlands permit for the property, despite the fact that the city had no ordinance authorizing the denial of permits based on environmental regulations. In addition, the City limited the point of access for the property to use by emergency vehicles only. The City’s actions resulted in the owner filing another lawsuit to compel the City to grant final approval of their road improvement plans, including unrestricted, nonemergency access to the property and to commence appropriation proceedings to determine the amount of the City’s alleged regulatory taking of the property. In granting the requested relief, the Court also clarified that a regulatory taking will occur if the property owners can prove that the zoning, as applied to the property, does not substantially advance a legitimate state interest or denies an owner economically viable use of his land. If a property owner proves either one of these elements, the owner is entitled to claim a taking. The Shemo decision also followed a recent United States Supreme Court decision concerning the significance of an owner’s knowledge of zoning restrictions when the property was purchased. Historically, this prior knowledge would bar a challenge of the zoning. Shemo states that this prior knowledge is not an absolute bar to challenging the constitutionality of the zoning. This decision allowed the owner in Shemo to pursue its claims despite purchasing the property with knowledge of its residential zoning. The ultimate cost of the Shemo decision to Mayfield Heights is uncertain. I have already seen that this decision has caught the eye of both governments and property owners. It seems to be on the minds of both in their approach to obtaining regulatory approval or regulating the use of property. What is certain is that Shemo provides a roadmap to challenging the constitutionality of zoning and, if successful, to obtaining compensation for the resulting regulatory taking. John Slagter is a shareholder and member of the Real Estate & Construction and Litigtion Practice Groups. He can be reached at jslagter@bdblaw.com or 216.615.7331. The material appearing in this article is meant to provide general information only and not as a substitute for legal advice. With regard to specific law issues, readers of this article should seek specific advice from legal counsel of their choice. This article may not be reprinted without the express permission of Buckingham, Doolittle & Burroughs, LLP.
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