The Georgia Condominium Act's Authorization of Private Takings: Revisiting Kelo and "bitter With the Sweet"

• Publication year: 2020

The Georgia Condominium Act's Authorization of Private Takings: Revisiting Kelo and "Bitter with the Sweet"

Tyler Gaines
University of Georgia School of Law

THE GEORGIA CONDOMINIUM ACT'S AUTHORIZATION OF PRIVATE TAKINGS: REVISITING KELO AND "BITTER WITH THE SWEET"

Tyler Gaines^*

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Homeownership provides owners with certain property rights and a sense of security. One of the most important property rights is the Takings Clause of the U.S. Constitution, which prohibits the government from taking private property without just compensation. The Clause has been incorporated against the states and is interpreted as prohibiting any taking that does not serve a public use. Despite these constitutional protections, numerous condominium owners face the threat of private investors taking their units for no public use, without just compensation, and without the owners' consent.
Many state condominium laws allow private investors who obtain a specified percentage of a condominium's units to force the minority unit owners to sell their units. Although the U.S. Supreme Court has written many opinions interpreting the Takings Clause, the Court has not addressed whether states may permit the forcible transfer of condominiums—or other forms of common-interest homeownership—without the unanimous consent of the owners. Although takings for economic development are permitted, no scholarship has considered whether the Court's reasoning behind its rejection of the "bitter with the sweet" doctrine can be applied to the Court's Takings Clause analysis to prohibit states from statutorily conditioning condominium ownership upon waiver of constitutional protections. This Note suggests that the Georgia Condominium Act—and other state condominium termination statutes—may unconstitutionally permit investors to effectuate private takings by forcing dissenting minority owners to sell their fee simple interests in their units.

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Table of Contents

I. Introduction....................................................................397

II. Background....................................................................400

III. Analysis.........................................................................402

A. THE U.S. CONSTITUTION'S CONTRACTS CLAUSE.........402
B. THE U.S. AND GEORGIA CONSTITUTIONS' TAKINGS CLAUSES..................................................................403

1. Private Property................................................404
2. Taking...............................................................404
3. Public Use.........................................................409
4. Just Compensation...........................................415
5. Government Actor.............................................416
6. Consent and the "Bitter with the Sweet" Doctrine ..........................................................................418

IV. Suggested Solutions...................................................426

V. Conclusion......................................................................429

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I. Introduction

Property rights are often considered essential for self-government and political liberty.¹ Real property ownership carries with it certain rights that many consider to be fundamental.² Generally, state law creates and defines property rights,³ but the U.S. Constitution provides several key property protections by prohibiting the following: quartering of soldiers without an owner's consent;⁴ unreasonable searches and seizures;⁵ deprivations of property without due process of law;⁶ and takings of private property for public use without just compensation.⁷ The Fourteenth Amendment has been interpreted to incorporate most of these protections against the states.⁸

Of the property rights that the Constitution affords, the Fifth Amendment's Takings Clause is likely the most significant to homeowners. The Takings Clause provides that "private property [shall not] be taken for public use, without just compensation."⁹ The American Dream purportedly encourages all individuals to become homeowners, but homeownership would be meaningless if the

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government could take one's property without a legitimate purpose and without justly compensating the deprived owner.¹⁰

One form of homeownership—common interest communities—presents a unique Takings Clause question. Common interest communities, such as condominiums, permit some individuals to own homes when they otherwise could not afford to do so, because they can live on smaller properties and share amenities.¹¹ These communities are uniquely structured because, while the individuals own their properties, a central document and association govern their communities in a manner similar to corporations.¹² Because of this unique real property structure, many states have adopted condominium termination statutes that permit a condominium to be terminated and sold if a specified percentage of unit owners desire it to be.¹³ Such termination statutes have produced some seemingly unintended consequences.¹⁴ For example, termination statutes often permit investors to become "bulk owner[s]" by purchasing the requisite percentage of units and then allowing

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them to force the remaining owners to sell their units.¹⁵ Currently, some condominium unit owners in Athens, Georgia are fighting an investor's attempt to terminate their condominium and force the sale of their units under the Georgia Condominium Act's termination statute, O.C.G.A. section 44-3-98.¹⁶

Although the U.S. Supreme Court has written numerous opinions applying and interpreting the Takings Clause, the Court has not directly addressed whether states may permit the termination of condominiums without the unanimous consent of the owners. Some have argued that these statutes are unconstitutional.¹⁷ But this literature overlooks U.S. Supreme Court decisions which permit takings and transfers of property to other private parties for economic development.¹⁸ Further, no scholarship considers whether the Court's reasoning behind its rejection of the "bitter with the sweet" doctrine can be applied to a Takings Clause inquiry to prohibit states from statutorily conditioning ownership in condominiums upon waiver of constitutional protections.¹⁹

This Note suggests that the Georgia Condominium Act (the GCA)—and other state condominium termination statutes—may be unconstitutional as it permits investors to effectuate private takings by forcing minority owners to sell their fee simple interests

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in their units.²⁰ Part II reviews the background of the GCA and explains how it permits bulk owners to terminate condominiums and force the sale of non-consenting owners' units. Part III examines the U.S. Supreme Court's Takings Clause doctrine and the Georgia Constitution. This Part then discusses whether unit owners consent to termination statutes by purchasing units in states with such statutes. Or does the U.S. Supreme Court's rejection of the "bitter with the sweet" doctrine prohibit states from limiting unit owners' Fifth Amendment rights by conditioning unit ownership upon consent to termination statutes? While the GCA may be unconstitutional, modern courts are not likely to find a taking when bulk owners force minority owners to sell their units pursuant to a previously enacted statutory scheme.

Nevertheless, Part IV suggests that the Georgia General Assembly should consider taking at least two steps to protect the state's homeowners. First, the General Assembly should amend the termination statute to require bulk owners to submit a termination plan that affirms that a non-consensual termination would result in a recognized public benefit. Second, the General Assembly should amend the GCA to require condominium declarations to specify a percentage of unit votes necessary for termination. This would require the unit owners to contractually waive takings claims, as the state would not be authorizing the taking by prescribing its own statutory default percentage.

II. Background

Common interest communities are "creatures" of state law.²¹ The Apartment Ownership Act (the AOA) originally governed common interest communities in Georgia, but the state General Assembly passed the GCA in 1975 to replace the AOA.²² The GCA was

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originally drafted by the State Bar of Georgia's Section of Real Property Law's Condominium Statute Review Committee.²³ The GCA governs condominiums created after its effective date, while the AOA generally continues to govern condominiums that were created prior to the GCA's enactment.²⁴

The GCA permits unit owners who own four-fifths of the condominium association's votes to terminate the condominium.²⁵ Thus, a single investor or bulk owner can terminate a condominium by obtaining eighty percent of the condominium's units. Once an investor terminates the condominium, the property that once constituted the condominium becomes owned by all of the unit owners as tenants in common in proportion to their prior ownership interests.²⁶ As a tenant in common, the investor can then petition a superior court for a partition for sale.²⁷ The minority unit owners would have an opportunity to buy the investor's condominiums at fair market value;²⁸ however, if the minority owners cannot afford

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the investor's units, the entire property would be subjected to a public sale, where the investor or bulk owner can bid on the property.²⁹ If the investor wins the bid, it has completed a hostile takeover, forcing the minority owners to transfer their titles to it.³⁰ No reported cases in Georgia state courts examine the constitutionality of the hostile takeovers of condominiums that the GCA authorizes.

III. Analysis

The GCA permits condominium unit owners with "four-fifths" of a condominium's units to terminate the condominium³¹ and seek a partition for sale, forcing the transfer of title from the minority unit owners.³² This Part reviews the GCA under both the U.S. and...