A Systematic Approach to Colorado Takings Law

• Publication year: 2004
• Pages: 75

33 Colo.Law. 75 Colorado Lawyer 2004.

2004, April, Pg. 75. A Systematic Approach to Colorado Takings Law

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75

Vol. 33, No. 4, Pg. 75

The Colorado Lawyer
April 2004
Vol. 33, No. 4 [Page 75]

Specialty Law Columns
Real Estate Law Newsletter
A Systematic Approach to Colorado Takings Law
by Chad G. Asarch, Jonathon S. Asarch

This column is sponsored by the CBA Real Estate Law Section.
Articles in this column cover a broad range of real estate land use, and related topics, and focus on the practical aspects of matters of interest to real estate lawyers

Column Editors

Steve Sommers, Denver, Brownstein Hyatt & Farber PC - (303) 223-1100, ssommers@bhflaw.com; Pat Barney, Steamboat Springs, TIC - (970) 879-2561, barneyp@ticus.com

About The Authors:

Chad G. Asarch Jonathon S. Asarch

This month's article was written by Chad G. Asarch, Denver, Vice President and Assistant General Counsel at Apartment Investment and Management Company - chad.asarch@ aimco.com; and Jonathan S. Asarch, a third-year law student at Northwestern University School of Law, who has accepted a position as an associate at Faegre & Benson LLP, Denver, following his graduation - J-Asarch@law.northwestern.edu.

This article presents a comprehensive, analytical overview of Colorado takings jurisprudence by outlining, in step-by-step fashion, the various issues involved in this area of law.

Localities generally have the power to regulate the use of private property to protect the public health, safety, and welfare of their residents pursuant to their inherent police powers.1 However, this power is limited by the Fifth Amendment to the U.S. Constitution, which provides that private property may not "be taken for public use without just compensation."2 The provision is designed "to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."3 The Fifth Amendment prohibition against uncompensated takings is applied to the states through the Fourteenth Amendment.4

Although the language of the Colorado Constitution5 differs slightly from the corresponding language of the U.S. Constitution, Colorado courts consider U.S. Supreme Court decisions "construing the federal takings clause as a guide in determining what constitutes a taking under the comparable provision of the Colorado Constitution."6

This article summarizes the current state of takings law. It provides a basic and systematic approach to analyzing takings questions under Colorado law.

Introduction to
Takings Law

Governments can initiate the taking of private land by commencing a condemnation action under their eminent domain power and payment of adequate compensation to the landowner as part of such action. On the flip side, a landowner has a right to bring a claim for
inverse condemnation against the government and obtain compensation for a taking of its property, even though the governmental entity has not initiated formal condemnation proceedings.7 Landowners have used the inverse condemnation mechanism to challenge land use decisions by government authorities that adversely impact their property, but which do not involve the commencement of a condemnation.8

Historically, courts have not established a "set formula" for determining whether a land use decision amounts to a taking prohibited by the Fifth Amendment.9 Instead, the question of whether a taking has occurred typically depended on an ad hoc, factual inquiry based on three factors: "the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action."10 As famously phrased by U.S. Supreme Court Justice Holmes, "[W]hile property may be regulated to a certain extent, if a regulation goes too far it will be recognized as a taking."11 Courts have been wrestling with the question of how far is "too far" ever since.

In a 1992 landmark case, Lucas v. South Carolina Coastal Council,12 the U.S. Supreme Court expanded its analysis in this area by identifying a new category of per se takings where government action deprives a landowner of all economic use of the property. The Lucas decision, however, created a significant amount of confusion in takings jurisprudence as lower courts attempted to square the decision with a more traditional fact-based approach to takings questions.

In particular, prior to Lucas, many Colorado cases formulated the regulatory takings issue as a question of whether a government regulation resulted in the loss of "all" or "substantially all" of the value of property.13 In light of Lucas, this formulation of the issue intertwined and confused the per se type of regulatory takings identified by Lucas with the more general ad hoc three-part takings test.14

Further, other critical elements of takings jurisprudence remained ambiguous in light of Lucas. In particular, the U.S. Supreme Court left open questions about: (1) whether government action that interfered with only a portion of an owner's land or rights therein resulted in a taking; and (2) the relationship between other types of per se takings previously identified by the Court, including physical takings and takings resulting from improper governmental purposes.15 Subsequent court decisions, including Colorado Supreme Court opinions, have sought to bring clarity to these issues.

Relevant Portions
Of the Property

Before a court can evaluate the impact of a government action on a property, the court must determine the portion of the property relevant to the inquiry. Specifically, the court must establish whether it should consider the property and ownership rights as a whole or according to its smaller component parcels and separate rights. The relevant portion issue has two component parts.

1. Should a court consider the impact of government only on that portion of land affected by such action or must the impact on the landowner's entire parcel be considered instead?

2. Should a court consider the impact of a government action on the separate rights a landowner may hold in land, such as mineral rights, air rights, or other distinct rights, or must the collective impact on all of those rights be considered instead?

Relevant "Part" of Land

In Central Colorado Water Conservatory District v. Simpson,16 the Colorado Supreme Court held:

"Taking" jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular government action has effected a taking, this Court focuses rather both on the character of the action and on the nature of the interference rights in the parcel as a whole.17 (Emphasis in original.)

Specifically, as articulated by the Colorado Supreme Court in a 2001 case, in Colorado "a court must look at the contiguous parcel of land owned by the [landowner], not merely the portion most drastically affected by the regulation."18

Courts in other jurisdictions have held there may be special circumstances where the impact of the regulation can be analyzed in terms of its effect on just a portion of the owner's land. For example, this might involve the previous settlement of a lawsuit that treats a portion of the land as a distinct parcel.19 Further, although contrary to most case law, in discussing Clean Water Act restrictions, the Federal Circuit Court in Florida Rock Industries, Inc. v. U.S.20 suggested that where a government regulation has the impact of destroying the economic value of a portion of land while leaving the remainder of the parcel open for development, the regulation might constitute a taking of the restricted portion.21 However, that court added that such a concern generally does not apply in zoning cases because "there is reciprocity of advantage" to the landowner as a result of the common good.22

In Palazzolo v. Rhode Island,23 commenting on the difficult, persistent nature of the "question of what is the proper denominator in the takings fraction" to determine economic impact, the U.S. Supreme Court noted that its own precedent did not always present a consistent position.24 Nonetheless, the Court refused to resolve the issue in that opinion.25

However, in Animas Valley Sand and Gravel, Inc. v. Board of County Commissioners,26 the Colorado Supreme Court held that under Colorado law "a court must look to the regulation's effect on the entire parcel owned by the landowner. Thus, it is inappropriate to limit a takings inquiry solely to one particular right in land, or to a particular part of land."27 The approach adopted by the Colorado Supreme Court in Central Colorado Water and affirmed in Animas Valley clearly does not follow the Federal Circuit Court's reasoning in Florida Rock.28 Thus, although the issue was not fully resolved at the federal level in Palazzolo, for purposes of Colorado takings law, "the impact of the challenged action on the property as a whole must be considered."29

Relevant "Rights" in Land

In Animas Valley,30 a sand and gravel company initiated an inverse condemnation action against La Plata County, alleging that restrictions placed on its property, pursuant to a county land use plan, resulted in a compensable taking because the county effectively prohibited the mining of sand, gravel, and heavy minerals. The Colorado Supreme Court stated that "the appropriate focus of a takings inquiry is the property rights as an aggregate rather than merely a specific right."31

In positing that "a court must determine the regulation's effect on the full rights in the land,"32 the Colorado Supreme Court...