On May 9, 2013, the California Court of Appeal issued a ruling in Lockaway Storage v. County of Alameda with positive implications for property developers. More specifically, the court's decision may make it easier for developers to allege damages caused by project delays.
In Lockaway, plaintiff Lockaway Storage purchased an 8.45 -acre parcel of land in Alameda County in May 2000. A year prior, the County approved a conditional use permit ("CUP") for the property that authorized its use a storage facility for recreational vehicles and boats. However, in November 2000, only 6 months after Lockaway purchased the property, voters in Alameda County passed Measure D, which prohibited the development of a storage facility in the area where Lockaway's property was located, except by public vote.
Since Measure D contained a grandfather clause providing that the ordinance did not affect existing uses that were legal at the time the ordinance became effective, Lockaway continued to the develop its property. During this time, the County planning department assured Lockaway that the ordinance did not prevent Lockaway's development plans. Nonetheless, despite the grandfather clause and the County's repeated assurances, on August 30, 2002 the County planning department reversed course and informed Lockaway that it had to obtain a new CUP by September 22, 2002 to proceed with its project. The County denied Lockaway's extension request, and when Lockaway did apply for a new CUP before the deadline under protest, it was denied. By this time, Lockaway had spent $800,00 to purchase the property and another $400,000 on the storage facility project.
Following the County's denial, Lockaway filed a lawsuit against Alameda County, alleging that the County's conduct amounted to temporary taking under the Fifth Amendment. The trial court agreed and found that the County's conduct constituted a temporary taking, meaning the government took private property for public use without just compensation.
The Court of Appeal affirmed, finding that the Lockaway project was exempt from the use restrictions of Measure D, and therefore the suspension of Lockaway's project amounted to a constitutional taking. More specifically, the court found that, even though Lockaway's property was not rendered useless after the County refused to allow Lockaway to continue the project, the County's decision had a "devastating impact on Lockaway" and deprived the company of "a meaningful opportunity to protect its property rights."
This decision shows a potential shift towards overreaching growth control measures by the government and may lead to more court judgments in favor of property owners for temporary and partial damages due to property as a result of subjective actions by city and county planning departments.
The U.S. House Judiciary Committee Approves Private Property Rights Protection Act (H.R. 1944)
The House Judiciary Committee approved the Private Property Rights Protection Act on June 12, 2013. The legislation prohibits state and local governments that receive federal economic development funds from using eminent domain for private development. The bill is meant to protect private property from government seizure following the U.S. Supreme Court's decision in Kelo v. City of New London, a widely criticized decision that approved taking property from one private citizen and giving it to another for the purpose of "economic development". House Committee Chairman Bob Goodlatte (R-Va.) noted the importance of private property ownership, citing it as "one of the most fundamental principles embedded in the U.S. Constitution." He added that the bill "will help to limit the negative impact" of Kelo. The bill will next go to the Senate for approval. If the bill passes in the Senate and is approved by President Obama, it will be one step closer to reducing abusive takings by the government that transfer property rights to private interests.
The Law Offices of James G. Schwartz has extensive experience representing all parties, including developers and builders, in commercial and residential real estate development transactions and disputes. Our Pleasanton law firm offers planning, counsel and legal representation to clients in Alameda County and Contra Costa County, and throughout the Bay Area and Northern California. If you have any questions about the Private Property Rights Protection Act or the recent court decision in Lockaway, consult with one of our Northern California real estate attorneys today using our online contact form or by calling us at 925-463-1073.