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In the continuing saga of what is a "regulatory taking" of real estate by local environmental rules, the Massachusetts Supreme Judicial Court on November 28, 2006 decided the case of Giovanella v. Conservation Commission of Ashland (SJC-09678). The Court told us how the "relevant parcel" will be determined in "taking" lawsuits under the Constitution, that is, how to define the unit of property on which the impact is to be measured. This allows comparing the value of that property before and after the alleged unconstitutional taking. This comparison is the heart of both the so-called Lucas test (for a per se taking) and Penn Central test (for a multi-factor trial).

In the continuing saga of what is a "regulatory taking" of real estate by local environmental rules, the Massachusetts Supreme Judicial Court on November 28, 2006 decided the case of Giovanella v. Conservation Commission of Ashland (SJC-09678). The Court told us how the "relevant parcel" will be determined in "taking" lawsuits under the Constitution, that is, how to define the unit of property on which the impact is to be measured. This allows comparing the value of that property before and after the alleged unconstitutional taking.

This comparison is the heart of both the so-called Lucas test (for a per se taking) and Penn Central test (for a multi-factor trial).

The "relevant parcel" is important, as the Court explained: "When a court considers a large piece of land of which only a small portion has lost value due to regulation, it is less likely to conclude that a taking has occurred. If a court considers a smaller parcel of land, most of which has been affected by a regulation, then the economic impact is more likely to appear large enough to constitute a taking."

Mr. Giovanella had bought two contiguous lots, one containing a house. On the other he sought to build a new house. The case arose when the Ashland Conservation Commission disapproved an application to that build this house near wetlands under a local Home Rule wetlands bylaw containing a 25-foot provisional prohibition around any wetland.

The Court declined to draw a bright line, instead describing how the legal system is to go about defining the "relevant parcel," specifically holding: "The intuitive starting point for determining the boundary of the property under a takings clause analysis is to consider as one unit all contiguous property held by the same owner at the time the taking occurred." This is very much a factual inquiry during trial. The Court listed many federal and state cases throughout the United States dealing with contiguous or separate parcels, combined or severed parcels, submerged or upland parcels, parcels in common or separate ownership, parcels purchased at different times, parcels with common or different financing, parcels in physical proximity or remote, and common or distinct development schemes. Then the Court added:

We conclude that the extent of contiguous commonly-owned property gives rise to a rebuttable presumption to finding the relevant parcel. Common sense suggests that a person owns neighboring parcels of land in order to treat them as one unit of property.

Here Mr. Giovanella had two contiguous lots presumed to be one unit of property for purposes of the "takings" analysis. This presumption was not rebutted by him, as he did not present "some affirmative evidence of his separate treatment of the two lots." They were purchased at the same time, for a lump sum, as part of one transaction, with no evidence of separate financing. Their separate addresses, tax treatment, and lot lines, said the Court, were of minimal significance. The lots are not separated by a road; both were intended for single-family residential use; and, the Court added most importantly: "He has not shown that he planned to or actually did treat them as separate economic units.

On the merits of the takings claim, the Court first noted that the Superior Court below was correct in granting summary judgment for the Town because there was no "per se" taking under Lucas v. South Carolina Coastal Council (1992). Mr. Giovanella bought both lots for $130,000 and sold one of them for $319,900. "Because the land was not rendered economically valueless, there can be no categorical taking."

Moving to the Penn Central (multi-factor) analysis, the Court considered each of the three key factors and ruled for the Town. First the wetlands bylaw did not interfere with Giovanella's "reasonable investment-backed expectations" because he failed to show any substantial personal financial investment in the development of the wetland lot.

Secondly, the "economic impact" of the bylaw did not rise to the level of a taking. Making assumptions in favor of the landowner that the pre-denial value of both lots was $452,700, and that the value of the wetland lot was reduced to $0 after the denial, then the value of the entire property was reduced to $319,900, a decrease of 29%, not significant enough to rise to the level of a taking.

Thirdly, the "character of the government action" did not support that the bylaw as applied was a taking. The limitations imposed were not like a physical invasion and the bylaw did not unfairly single out Mr. Giovanella: "As a result, neither justice nor fairness entitle him to compensation for the impositions of the bylaw."

The facts were so clear here, the SJC ruled, that it upheld the Superior Court granting summary judgment for Ashland.

This case is a concise look at a critical initial step in regulatory taking suits seeking money, often determinative of the result which is so affected by residual value. The SJC gave us a workable approach to what is the "relevant parcel," which depends appropriately on the relevant facts, rather than a bright line rule which no doubt would be hard to fit to thousands of land use regulations and permit decisions which might come under attack for regulatory takings. A rebuttable presumption from contiguous ownership provides a sensible starting point.

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