U.S. Supreme Court moves the goalposts on property takings, and there may be local repercussions for renters and landlords

This morning the U.S. Supreme Court issued a ruling on a case involving a California regulation that granted union representatives access to private employers’ work sites for up to 3 hours a day, 120 days per year, in order to recruit and organize. The Court ruled that the government-granted access is a “taking” of property, and thus was subject to the Takings Clause of the U.S. Constitution.

In clarifying the rules around a grey area of property rights jurisprudence — and arguably moving the goalposts in favor of property owners — the Court may have also shifted the balance of power toward landlords and against jurisdictions such as Seattle that are trying to enact stronger protections for tenants.

The Fifth and Fourteenth Amendments prohibit government “taking” of property without “just compensation.” Up through the 19th century, this was interpreted by the courts literally, applying only to when the government took physical possession of a person’s property. But since then the courts have recognized other forms of “takings” that still deserved compensation under the Constitution. The rules, however, have been vague.

Generally speaking, takings are split into three types:

  • the government appropriates property for itself or a third party;
  • the government allows for an “invasion” of private property;
  • the government regulates the use of the property in a manner that constrains some or all of the owner’s property rights.

The first type — appropriation of property — is considered by the courts a per se taking. The third — regulation of use, such as when a property is rented out — is governed by a set of test questions defined in Penn Central Transportation Co. vs. New York City, generally referred to as the “Penn Central tests,” that determine when a regulation “goes too far” and becomes a taking.

The second case, “invasion,” has been a tricky one. Lawyers often try to push these cases into either the first or third bucket: an appropriation if the “invasion” is permanent and/or constant, or a regulation if it’s temporary and/or intermittent. The Supreme court has previously ruled that a construction permit requiring an easement for the public to cross through a property was a taking; it has also ruled that a regulation requiring building inspectors or utility meter-readers access to a property is not.  But there is a lot of grey area in between — and today’s ruling drew a much sharper line.

The Court ruled today that an “invasion” doesn’t need to be permanent to be a taking, nor does it need to be constant. Rather, it said that a regulation that “grants a formal entitlement to physically invade” is also a per se taking. In the instance of today’s case, “rather than restraining the [owners’] use of their own property, the regulation appropriates for the enjoyment of third parties the owners’ right to exclude.”

While today’s ruling was in a different context, the new rules it sets in place for deciding what constitutes a “taking” hit at the heart of landlord-tenant regulation, including many of the renter-protection ordinances passed (and those still pending) by the Seattle City Council. Government “takings” was a key issue in the “first in time” renter-rights case, in which landlords argued that forcing a landlord to accept the first qualified applicant to apply was a government-mandated “invasion” of their property that violated their right to exclude, while the City argued that it was merely a regulation governed by the Penn Central tests (the State Supreme Court sided with the city). Currently it is the central issue in the legal fights over the ongoing eviction moratoriums, with landlords again arguing that they are an “invasion” and the city and state asserting that the moratoriums are COVID-related emergency health and safety regulations, and at any rate are temporary. The same argument will no doubt be made by landlords in court to try to defeat the recently-passed ban on school-year evictions and the “right of first refusal” for fixed-length lease renewals. The latter case in many ways is similar to the “first in time” case: if the government can tell a landlord that they must accept the first applicant, it’s not much of a leap to argue that it can tell them they must offer a first right of refusal to an existing tenant at the end of a lease.  But an interesting question is whether the state Supreme Court would have ruled the other way in the “first in time” case if it were required to follow today’s ruling as a controlling precedent, which much more clearly says that a “government-granted entitlement to invade” is a taking. Perhaps not, but it would be a closer call — and there is nothing preventing a landlord challenging the “right of first refusal” ordinance from trying to make that case.

Some of the recent crop of Seattle tenant-protection ordinances were already headed toward tough battles in court for potential violations of state law; The Mayor has acknowledged that, even if the City Council has not. After today, those battles might be even tougher.

Click to access 20-107_ihdj.pdf

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