Can Government Manipulate Property Rights Out of Existence?

Date: September 21, 2015

It’s quite common for a small business property owner to purchase adjoining lots of land. For example, you might purchase adjacent lots at the same time, with plans to develop them separately or to use them together as part of your business operations. Or you might to seek to purchase a neighboring lot once it becomes clear that it’s time to expand your operations, or simply because you see an adjacent property as a lucrative investment opportunity. But what if the government told you that you couldn’t do anything whatsoever with one of those parcels because you owned another property already?

This is exactly what happened to one Wisconsin family recently in the case of Murr v. State of Wisconsin and St. Croix County. Despite the fact that the family purchased the adjoining lot with the intention of developing it—and ultimately turning a profit on their investment—they were told that they could not build anything with the land because they already owned another lot with an existing development. In other words, they were allowed to build on only one of the two lots—despite the fact that they were legally separate parcels, acquired at separate times, and for different purposes.

Of course in such a case, NFIB Legal Center maintains that the landowner deserves compensation for the taking of property rights. Indeed, the U.S. Supreme Court has definitively ruled that government owes just compensation for the taking of your property if it denies you the right to put your property to any economically beneficial use. So clearly if government restrictions prevent you from developing, you are entitled to compensation.

But in this case the authorities argued that no compensation was required because they were choosing to view the two separate properties as a single unit. And, in accepting that view, the Wisconsin courts held that there was no taking because—when viewed together—it could not be said that the owners were denied all economically beneficial uses for the land. Of course, this unfairly allowed the government to manipulate their property rights out of existence. And unfortunately this is a recurring problem in takings law for property owners who have invested in separate and distinct properties; the government almost inevitably invokes the so-called “parcel as a whole doctrine,” to combine the properties for the purpose of immunizing the government from takings liability.

Because this is a recurrent issue for small business landowners, NFIB Legal Center has joined with several other groups in asking the U.S. Supreme Court to take up this issue. As we argued in our amicus brief to the Supreme Court, it’s important that the Court provide guidance as to how and when the “parcel as a whole doctrine” should be applied so that landowners will not be blindsided after investing in adjoining parcels. Ultimately this is an important issue for the development of our takings jurisprudence and for the protection of property rights.

Our friends at Pacific Legal Foundation offers further commentary here.

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