INVERSE CONDEMNATION: THE SEARCH FOR THE RELEVANT PARCEL

By Kevin J. Coakley
Real Estate Partner

In Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), the Supreme Court set forth a categorical formulation that when an owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good he has suffered a taking, except when the common good reflects governmental rights which were not part of the owner's title. In announcing this rule, the Court acknowledged:

Regrettably, the rhetorical force of our "deprivation of all economically feasible use" rule is greater than its precision, since the rule does not make clear the "property interest" against which the loss of value is to be measured. When, for example, a regulation requires a developer to leave 90% of a rural tract in its natural state, it is unclear whether we would analyze the situation as one in which the owner has been deprived of all economically beneficial use of the burdened portion of the tract, or as one in which the owner has suffered a mere diminution in value of the tract as a whole.

[Id. at 1016 n.7.]

The Supreme Court also acknowledged that the uncertainty of the "denominator" in its depreciation fraction has led to inconsistent results. Id. (citing Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) and Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470 (1987)). Other than to label as "unsupportable" the New York Court of Appeals' reference to diminution in value in light of the claimant's other holdings in the area in Penn Central Transportation Co. v. New York City, 42 N.Y.2d 324, 333-34, 366 N.E.2d 1271, 1276-77 (1977), aff'd, 438 U.S. 104 (1978), and to speculate that the answer to the relevant parcel question might lie in whether and to what degree a state's property law has recognized and protected the affected property interest, the court did not clarify the issue. Lucas, 505 U.S. at 1016 n.7. Rather, the court avoided the relevant parcel difficulty in Lucas because Lucas had been deprived of a fee simple interest and because the lower court had found that each of Lucas' lots was left without economic value. Id.

A review of relevant parcel cases decided shortly before and after Lucas demonstrates that despite the urging of litigants and commentators, see, e.g., Fee, Unearthing the Denominator in Regulatory Takings Claims, 61 U. Chi. L. Rev. 1535 (1994), no "bright-line" test for the relevant parcel has emerged, particularly with respect to the difficult cases where horizontal interests in land have been regulated so as to prohibit any alteration of the natural condition of the land.

Judge Jay Plager of the Federal Circuit, the author of the opinion in Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (Fed. Cir. 1994), recently described the denominator factor as follows:

If you make it one-to-one and the restriction is total, the government will lose. If, on the other hand you say it is 250 acres that the owner has and we are only here talking about what turns out to be a restriction on 12.5 acres, then you either get into the partial taking problem, or you say it is no taking at all. So that is a key question: Whether you look at these cases as a total big picture, look at the whole situation--or whether you parse it down to specific interests or parts. The answer to that may vary from case to case--and yet there are no bright-line rules.

[Plager, Takings Law and Appellate Decision Making, 25 Envtl. L. 161 (Winter 1995).]

The absence of "bright-line" rules for determining the relevant parcel diminishes the significance of the categorical formulation described in Lucas. Several of the recent "parcel" cases have focused on the investment-backed expectations of the owner -- one part of the traditional three-part, non-categorical test referred to in Lucas. See 505 U.S. at 1091. In the case of restrictions prohibiting any use or alteration of significant land areas, focusing on investment-backed expectations tends to diminish the analytical importance of the nature of the government action, i.e., that the land has been subject to a blanket restriction against use. It also has the potential for encouraging decisions which come to different conclusions based primarily on whether the landowner knew of or should have known of the regulations at the time of acquisition. In many ways, the search for the relevant parcel remains an ad hoc effort "ultimately call[ing] as much for the exercise of judgment as for the application of logic." Andrus v. Allard, 444 U.S. 51, 65 (1979).

Relevant Parcel as an Analytical Tool

The relevant parcel is an analytical construction used by judges in deciding whether a non-physical interference with the use and enjoyment of property is of such a magnitude as to constitute a compensable taking. The relevant parcel analysis comes into play whenever a categorical or non-categorical taking is alleged. As stated in Ciampitti v. United States, 22 Cl. Ct. 310, 318-19 (1991):

The effect of a taking can obviously be disguised if the property at issue is too broadly defined. Conversely, a taking can appear to emerge if the property is viewed too narrowly. The effort should be to identify the parcel as realistically and fairly as possible, given the entire factual and regulatory environment.

Early Parcel Cases

The parcel issue was central to the Supreme Court's earliest recognition that property can be taken through excessive regulation. In Pennsylvania Coal Co. v. Mahon, the majority implicitly recognized the affected coal as the denominator parcel. The court relied on the Takings Clause to enjoin enforcement of a statute which would have made it "commercially impracticable to mine certain coal." 260 U.S. at 414. Although the reference to "certain coal" is by no means clear, the majority recognized that the coal owners had sold off the surface estates to others, but had specifically reserved the support estate, an estate in land recognized by state law. The dissenting opinion by Justice Brandeis was more pointed:

If we are to consider the value of the coal kept in place by the restriction, we should compare it with the value of all other parts of the land.

* * * * *

For aught that appears the value of the coal kept in place by the restriction may be negligible as compared with the value of the whole property, or even as compared with that part of it which is represented by the coal remaining in place, and which may be extracted despite the statute.

The narrow definition of the relevant parcel implicit in Pennsylvania Coal did not carry over to early taking cases involving restrictions based upon traditional zoning laws. The court easily sustained buffer requirements, Gorieb v. Fox, 274 U.S. 603 (1927) and height limitations, Welch v. Swasey, 214 U.S. 91 (1909). Normal zoning limitations do not have takings ramifications given the court's longstanding recognition that there is a mutual reciprocal advantage derived from such zoning ordinances. See Penn Central, 438 U.S. at 140 (Rehnquist, J., dissenting). There is a fundamental difference between typical zoning restrictions which limit the placement of structures yet permit removal of vegetation and placement of fill, and active non-structural use and environmental rules which require land to remain undisturbed. Thus, decisions regarding typical zoning limitations are not helpful in analyzing the relevant parcel as it relates to natural-condition environmental regulations.

Physical Occupation Takings

The Supreme Court has not hesitated to find a taking whenever physical occupations or intrusions have occurred. For example, in 1927 the court determined that a municipal ordinance which required that part of a railway station's driveway be used as a taxi stand was unconstitutional. Delaware, Lackawanna & Western R.R. Co. v. Morristown, 276 U.S. 523 (1927). In United States v. Causby, 328 U.S. 256, 265 (1945), the court held continuous low-altitude air flights which affected the use of the surface to be the equivalent of physical invasions. The court's approach to physical invasions has not changed over time, with de minimis invasions consistently held to be takings. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982); Kaiser Aetna v. United States, 444 U.S. 164 (1979). As stated in Dolan v. City of Tigard, 114 S. Ct. 2309, 2316 (1994), "had the City simply required petitioner to dedicate a strip of land . . . for public use, rather than conditioning the grant of her permit on such a dedication, a taking would have occurred." Similarly, in Keystone Bituminous, the court stated: "We do not suggest that the State may physically appropriate relatively small amounts of private property for its own use without paying just compensation." 480 U.S. at 499 n.27. The relevant parcel analysis has no role when a physical taking has occurred.

Penn Central/Keystone Bituminous: Separate Estates Not Recognized

In Penn Central the court was faced with the owner's effort to develop an office tower over Grand Central Station. Penn Central had owned the station for many years, but in 1967 the station was designated for preservation under New York's Landmarks Preservation Law. Rejecting the owner's attempt to define the relevant parcel as the air space above the terminal, and the City's attempt to include in the parcel the owner's other holdings in Manhattan, the 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 governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole -- here, the city tax block designated as the "landmark site."

[438 U.S. at 130-31.]

In reaching this conclusion, the court relied on zoning cases such as Gorieb, (lot buffer zone), Welch, (height restriction) and Goldblatt v. Town of Hempstead, 369 U.S. 90 (1962) (city ordinance barring sand and gravel mining below water table). The court gave short shrift to Penn Central's argument that landmark laws are fundamentally different from typical zoning laws. Penn Central, 438 U.S. at 132. The dissent, per Justice Rehnquist, was not too concerned with the "relevant parcel," but was more concerned with pointing out that there is a difference between zoning laws which provide reciprocal advantages and landmark preservation ordinances which single out a very few properties. According to the dissent, neighbors of the terminal could freely build office towers while the owner of the station was singled out at great expense to preserve a benefit for sightseeing New Yorkers and tourists. The dissent would have remanded for a factual hearing to determine whether transfer development rights provided a "full and perfect equivalent for the property taken." Id. at 152.

The Penn Central majority, relying on zoning cases, reached the unremarkable conclusion that the owner's surface and air rights in the particular city block should be considered in defining the relevant parcel. The dissent, on the other hand, would have defined the parcel based upon the particular effect of the regulatory program on the property. Said another way, the dissent would take as a given the existence of the terminal in its configuration prior to the enactment of the 1967 landmark preservation ordinance. Recent takings cases have tended to define the parcel by looking at whether the owner purchased before or after changes in the regulatory environment. Judge Plager articulated this approach in discussing Loveladies:

Do property rights transmogrify over time? That is, as the regulatory environment changes in response to changes in public policy, do the rights of property owners change along with the public policy? What is the role of owners' expectations? Are reasonable expectations necessarily limited to what the regulatory environment permits at the time one acquires the property? One of the issues that obviously troubled the court in Loveladies was that the developer purchased his 250 acres and started developing his property after investing a lot of money in it when suddenly the regulatory environment changed. Even though he had a design plat for the whole development and had been working on it for years, getting permits regularly, suddenly the government said, "wetlands," you cannot develop. The question was: is he caught in the changing public policy? The New Jersey Natural Resources Department said, no, you can have your permits. But then the state agency went to the federal government and whispered "we didn't mean it, don't give them a federal permit." And the federal government walked right into that sandbag. Loveladies Harbor says that individuals caught in that situation need not lose their property rights as our knowledge of society's needs grow.

[Plager, 25 Envtl. L. at 168-69 (footnotes omitted).]

In Keystone Bituminous, the court faced the takings consequences of the Pennsylvania Subsidience Act, which limited the right to mine coal in order to protect surface property rights. In ruling that the Act did not constitute a taking, the majority first distinguished Pennsylvania Coal on the basis that the present statute substantially advanced legitimate governmental interests. In contrast, Pennsylvania Coal was characterized as relating to an essentially private affair involving little in the way of public interest.

As to the parcel as a whole issue, relying on Penn Central and analogizing to zoning cases which restrict building coverage or create buffer zones, the Keystone Bituminous court reasoned that because only about 2% of the plaintiff's coal was affected and at least 25% of the overall coal deposits could not have been mined for other reasons, no taking had occurred. Keystone Bituminous, 480 U.S. at 499. Although in Pennsylvania Coal the court had referred to Justice Holmes' statement that the Kohler Act made the mining of "certain coal" commercially impracticable, this now was construed to mean that Justice Holmes was under the belief that the Kohler Act had rendered the business of mining unprofitable. Keystone Bituminous, 480 U.S. at 498. The Court relied on Penn Central as it dismissed the claimant's argument that because the support estate affected by the Subsidience Act was an estate in real property recognized by state law, a taking had occurred: "It is clear, however, that our takings jurisprudence forecloses reliance on such legalistic distinctions within a bundle of property rights. Id. at 500.

Justice Rehnquist, writing for four members of the court, dissented. In addition to disagreeing with the majority's treatment of the public purpose issue in Pennsylvania Coal and its discussion of the nuisance exception, Justice Rehnquist maintained that the relevant parcel consisted of the seams of coal which the Act required to remain in the ground. He compared the Act's effect on the property owner, i.e., loss of coal, to the effect of a physical appropriation of the coal. Nonetheless, the dissent acknowledged that the decision of the majority was supported by Penn Central, and noted that "taking jurisprudence does not divide a single parcel into discrete segments." Keystone Bituminous, 480 U.S. at 517 n.5.

In contrast to Penn Central and Keystone Bituminous stand cases where a single estate in land is so overwhelmingly important and completely affected that a court focuses on nothing else. One such case is Whitney Benefits, Inc. v. United States, 926 F.2d 1169 (Fed. Cir. 1991). There, Congress enacted legislation which expressly prohibited issuance of a permit for surface mining of coal under conditions precisely descriptive of the claimant's property. Id. at 1171. The Federal Circuit rejected the government's argument that the claimant's ownership of farm lands purchased to facilitate the mining militates should preclude a finding of loss of all economic value. The court's analysis suggests that trifling, unaffected interests will not defeat an otherwise strong takings claim:

First, as the Claims Court correctly found, the only property here involved is the right to surface mine a particular deposit of coal. The only possible use of that right is to surface mine that coal.

* * *

PKS bought a parcel of a little less than 600 of the 1327 acres overlying Whitney coal. Continuing to disregard inconvenient findings, the government ignores the Claims Court's finding that the purchase was to facilitate PKS' intended mining of the Whitney coal beneath the parcel and then goes on to speculate, without reference to the record, that PKS might have been able to farm that parcel. On that speculative premise, the government says SMCRA did not deprive Benefits of all economic value. The purchase of the parcel to facilitate mining was clearly a part of the investment backing for Benefits' expectations, not unlike a purchase of mining equipment. We fully agree with the Claims Court's evaluation of the argument as "completely off the mark". SMCRA took Benefits' coal rights. That is what, and only what, this suit is all about.

[Id. at 1172, 1174.]

See also Florida Rock Indus. v. United States, 18 F.3d 1560, 1571-72 (Fed. Cir. 1994) (Judge Plager raising the possibility of partial compensation where a particular element of property is taken).

Federal Wetland Permit Denial Cases

1. Unregulated Uplands often Included in Parcel

In early wetland taking cases, the United States Court of Claims (now Court of Federal Claims) was concerned with the parcel as a whole, but did not clearly label its analysis as an attempt to define the "parcel." For example, in Jentgen v. United States, 657 F.2d 1210 (Cl. Ct. 1981), the property owner purchased 100 acres of land for $150,000 in 1971, just prior to the passage of the Clean Water Act. Twenty acres were uplands not regulated by the United States. The United States was willing to grant a Section 404 permit for twenty of the eighty wetland acres. Because the post- denial value was between $80,000 and $150,000, the court concluded that there was no taking. Seemingly, and without explanation, the court included in its discussion the twenty acres of uplands which could be filled without federal authorization. However, the court also noted that the twenty acres of wetlands which could be filled were "[o]f crucial importance." Id. at 1212. It is unclear whether the Court included the uplands in the relevant parcel or to what extent the "after" value was derived from the upland area.

The plaintiff in Deltona Corp. v. United States, 657 F.2d 1184 (Cl. Ct. 1981), cert. denied, 455 U.S. 1017 (1982), purchased Marco Island, Florida, in 1964. Between 1964 and 1969 Deltona obtained Rivers and Harbors Act permits for two of five development areas. By 1973, when Deltona sought permits for the balance of the Island, the Clean Water Act had been enacted and the regulatory focus had shifted from navigation to the environment. In 1976 the Corps of Engineers granted permits for one of the last three development areas, but denied permits for the other two. The Claims Court denied Deltona's taking claim, asserting that diminution of value does not establish a taking. The court's approach to the relevant parcel was not precise. It cited various "statistics", including Deltona's loss of only 33% of the overall project; the wetland permits granted for 25% of the lots for which approvals were sought after passage of the Clean Water Act; and the extensive developable uplands in the two areas for which permits were denied. Id. at 1192.

More recently, in Tabb Lakes, Ltd. v. United States, 10 F.3d 796 (Fed. Cir. 1993), the plaintiff was temporarily restricted from utilizing 38 wetland acres out of a 167-acre tract. The Federal Circuit cited Penn Central and rejected the concept that the relevant parcel constitutes only those lands designated as jurisdictional wetlands. Id. at 802. Although ripeness concerns obviated the need to resolve the relevant parcel issue, the court nonetheless stated:

While in some cases it may be difficult to determine whether all economic viable use of the "property" has been destroyed, that is not a serious problem here. Clearly, the quantum of land to be considered is not each individual lot containing wetlands or even the combined area of wetlands. If that were true, the Corps' protection of wetlands via a permit system would, ipso facto, constitute a taking in every case where it exercises its statutory authority.

[Id.]

In Broadwater Farms Joint Venture v. United States, 35 Fed. Cl. 232 (1996), the property owner owned two "phases" of a Maryland development. Phase II was sold in 1988. Phase III, containing twenty-seven proposed lots, was under development when the United States Corps of Engineers issued a Cease and Desist Order in 1989. Ultimately, the owner was unable to build on twelve of the twenty-seven proposed lots. The court excluded Phase II from the relevant parcel because it was sold prior to the Cease and Desist Order. However, as to Phase III, the court found that fifteen upland lots had sufficient value so that the owner's overall loss constituted a mere diminution in value, not a taking.

In the context of natural state regulatory programs which bear a heightened risk that property is being pressed into public service (see Lucas, 505 U.S. 1017), an interesting question is presented as to the relationship between lands subject to the regulatory program and other lands of the owner not subject to the regulation. Tabb Lakes and Broadwater indicate that the value of unregulated uplands may be considered in the parcel analysis if owned at the time that use of the wetlands was prohibited. Contrary to the ipso facto language of Tabb Lakes, another approach to this problem would be to look at whether the wetlands provide some value as related to the development of uplands. For example, some "natural state" lands may be valuable in terms of overall density, such as where the owner has the ability to cluster development on uplands. In such circumstances, the court could focus on remaining value in the regulated lands and not merely on the value of the lands not subject to regulation.

2. Parcel as a Function of the Owner's Knowledge of the Regulatory Environment.

In Loveladies Harbor the plaintiff acquired 250 acres of property in the 1950s. By the late 1960s Loveladies had filled and developed 199 acres of the original site. In 1981 Loveladies obtained a permit from the State of New Jersey to develop 12.5 acres of the remaining 51 acres, with the balance (38.5 acres) to be deed-restricted against development, but the Corps of Engineers denied a Section 404 permit for the 12.5-acre tract.

The Federal Circuit, per Judge Plager, affirmed Judge Loren Smith's 1988 parcel analysis in the Claims Court (see 15 Cl. Ct. 381, 391-93), holding that the 12.5 acre development area was the relevant parcel. The court excluded from the relevant parcel the lands which were to be deed-restricted and the lands developed before the regulatory environment had changed. Among the excluded lands were approximately 6.4 acres of scattered lots still owned by Loveladies in 1982 when the Corps of Engineers denied the 12.5-acre permit. Affirming, Judge Plager indicated that even after the categorical rule announced in Lucas, the distinct investment-backed expectations of the owner remains critical in takings analysis. The court's review of precedent called for a "flexible approach" with particular emphasis on the regulatory environment:

These factual nuances include consideration of the timing of transfers in light of the developing regulatory environment. New Jersey apparently made no effort to impose restrictions on the development of this wetland area until after the initial project had been approved for development, and until 199 acres had been developed. This development occurred over a substantial period of years beginning in 1958, and involved many kinds of government permits. The trial court concluded that land developed or sold before the regulatory environment existed should not be included in the denominator. The Government has failed to convince us that the trial court clearly erred in this conclusion.

[Loveladies, 28 F.3d at 1181.]

The regulatory atmosphere approach to the parcel as a whole utilized in Loveladies can also be found in two other recent opinions from the Court of Federal Claims. In 1991 the court found no taking in Ciampitti v. United States, where wetlands acreage was purchased in 1983 at a cost dramatically lower than uplands purchased at the same time. Because the property owner assigned little value to the wetland tract, the court concluded that the owner had little in the way of reasonable investment-backed expectations. At the time of purchase, the owner was aware of the difficulties attendant upon the development of wetlands. The court determined that non-contiguous but extremely valuable upland tracts should be included in the denominator because this property owner had related the uplands and wetlands for purposes of purchase and finance. 22 Cl. Ct. at 320. When the owner's loss of wetland value was compared against the owner's remaining value in the "whole" tract, the reduction in value was deemed not sufficient for a taking. Enumerating criteria for defining the relevant parcel, the court stated:

In the case of a landowner who owns both wetlands and adjacent uplands, it would clearly be unrealistic to focus exclusively on the wetlands, and ignore whatever rights might remain in the uplands. If a governmental entity required a buffer, for example, around a housing development, a court would not entertain a separate claim for the land dedicated to buffer. It would no doubt take into consideration the extent to which the whole parcel could be developed. Factors such as the degree of contiguity, the dates of acquisition, the extent to which the parcel has been treated as a single unit, the extent to which the protected lands enhance the value of remaining lands, and no doubt many others would enter the calculus. The effect of a taking can obviously be disguised if the property at issue is too broadly defined. Conversely, a taking can appear to emerge if the property is viewed too narrowly. The effort should be to identify the parcel as realistically and fairly as possible, given the entire factual and regulatory environment.

[Id. at 318-19.]

More recently, in Atlas Enterprises v. United States, 32 Fed. Cl. 704 (1995), the issue was whether certain historic site development limitations affected a taking. The United States argued that the owner should be denied recovery because it had actual or constructive knowledge of the historic site restrictions at the time of purchase. Denying summary judgment, the court held:

Generally, when an owner buys property with knowledge of restrictions upon the development of that property, he assumes the risk of any economic loss The market has already discounted for the restraint. Loveladies Harbor, 28 F.3d at 1177. A party may not undertake a calculated business risk and then seek reimbursement from the Government when the party's gamble does not result in its favor. Ciampitti v. United States, 22 Cl. Ct. 310, 321 (1991). However, whether plaintiff knew or should have known of the possibility of full building retention remains at issue. The threshold question is whether this knowledge was a possibility.

[Id. at 708.]

A parcel test which focuses extensively on the owner's actual or constructive knowledge of regulatory restraints tends to limit eligibility for a takings award to those who purchased before imposition of such restraints. In Loveladies, the State of New Jersey had a wetland regulatory program in place for about twelve years when the Corps' permit was denied in 1982. The appraisal testimony showed that numerous property owners had sold large wetland tracts for nominal payments during that period. Thus, the existence of the regulatory program had effectively driven down wetland values over that period. Where ownership prior to the onset of the regulatory regime is the key element, private purchasers of lands at discounted prices can never recover. In this situation, the nature of the government action, i.e., the decision by government that land remain in its natural state, has little or no impact on the takings analysis.

Recent State Court Wetland/Conservation Decisions

In Volkema v. Department of Natural Resources, 241 Mich. App. 66, 542 N.W.2d 282 (Mich. Ct. App. 1995), the plaintiff owned 50 acres of contiguous commercial property. After selling certain parcels and leasing a ten-acre parcel, plaintiff retained 24.6 acres. The remaining land, however, included six acres of regulated state wetlands. The state denied plaintiff's permit application to fill 4.3 acres.

The court observed that the facts before it were similar to the facts in Loveladies and determined that the property developed before the enactment of the wetland statute should not be included in the denominator. However, the court distinguished Loveladies on the ground that the remaining 24.6 acres had high value despite the loss of the six acres. Accordingly, the 24.6-acre parcel was the denominator for measuring the plaintiff's loss. 542 N.W.2d at 285. Judge Sawyer dissented and opined that wetland restrictions which require that property be maintained in its natural state should be treated differently than restrictions which limit the extent of development but do not prohibit fill or removal of vegetation. According to the dissent, where government regulation has the effect of dedicating property to public use, compensation must be awarded. Id. at 287.

The Supreme Court of Wisconsin departed from Loveladies in Zealy v. City of Waukesha, ___ Wis.2d ___, 548 N.W.2d 528 (1996). There, the plaintiffs sold off most of a 250-acre parcel, and retained 10.4 acres. A large part of the land was zoned to permit residential use and a smaller part was zoned for business use. The city changed the zoning of 8.2 acres of the remaining tract to create a conservancy district. Thereafter, the plaintiffs' parcel consisted of 8.2 acres in the conservancy district, 1.6 acres zoned for residential use, and .6 acres zoned for business use.

The court decided that Loveladies was inapposite because the plaintiffs had not developed or alienated any of the 10.4-acre parcel. Moreover, the 8.2-acres now in the conservancy district still could be farmed. "Viewed as a whole, the [10.4 acre] parcel retains a combination of residential, commercial, and agricultural uses." Id. at 534. The court rejected the claimants' argument that they had been deprived of all substantial value in the entire 10.4-acre parcel:

[The landowners] argue their property has been severely depreciated in value. But this depreciation of value is not based on the use of the land in its natural state but on what the land would be worth if it could be filled and used for the location of a dwelling. While loss of value is to be considered in determining whether a restriction is a constructive taking, value based upon changing the character of the land at the expense of harm to public rights is not an essential factor or controlling.

[Ibid.]

Conclusion

Despite Lucas and a few successful cases like Whitney Benefits and Loveladies, "natural state" takings cases remain exceedingly difficult for landowners to win. Indeed, as Justice Scalia indicated, the rhetorical force of the categorical takings rule has often been overshadowed by relevant parcel determinations which preclude a finding of a taking. In the absence of bright-line rules, courts have often focused on the owner's knowledge of and expectations regarding development restrictions, and on value arising from other lands not subject to the regulation. These approaches have tended to expand the denominator and defeat the claims of property owners.

Reliance on the owner's knowledge and on other lands held by the owner tends to limit takings awards to relatively rare cases where facts peculiar to the owner are strong, i.e., the owner acquired the subject property before the regulatory change and does not own other valuable lands nearby. Except in such circumstances, the fact that the regulation requires land to remain in its natural condition is of little significance in the takings analysis.