High Court Ruling Eases ‘Takings’ Claims

In a case closely watched by home builders and property rights advocates, the U.S. Supreme Court late last month narrowly ruled in favor of a Rhode Islander who was repeatedly barred by authorities from building a beach club and 74 homes on 18 acres of marshland.

At issue in Palazzolo v. Rhode Island et al. was whether these repeated denials going back more than 20 years amounted to a violation of the Fifth Amendment’s “takings” clause, which requires governments to provide “just compensation” for any property it takes either directly or in the form of land-use regulation.

In a 5-4 decision, the court said Rhode Island’s Supreme Court had erred in dismissing the case on the basis that the landowner, Anthony Palazzolo, had not explored all allowable options before suing local officials for $3.1 million in compensation.

“What the court said was that there is a limit to the number of times you have to keep on going back before your case is ripe,” says Mary Di Crescenzo, the NAHB’s senior staff vice president for legal affairs. The NAHB, along with the American Farm Bureau Federation, filed “friend of the court” briefs on Palazzolo’s behalf.

“Very often courts have been avoiding hearing these cases because the developer did not go back often enough to find out what the city would allow,” Di Crescenzo notes. “This decision gives developers certainty that they can go to court sooner rather than later.”

The victory is not assurance that Palazzolo will win compensation for the land, just that a lower court must hear a case on the matter and make a determination.

This case is also significant in that it forms a positive backdrop to a more important case involving building moratoria that the Supreme Court will hear this fall. That case, Tahoe Sierra Preservation Inc. v. Tahoe Regional Planning Council, involves the validity of temporary building moratoria and whether they amount to “takings” requiring landowner compensation.

In recent years local planning authorities have increasingly turned to temporary moratoria as a “timeout” for refining their comprehensive land plans, in some cases idling builders.