U.S. Supreme Court rules on landmark property rights case

The Court ruled it is proper to analyze a property as a single unit in assessing the effect of a government regulation.

In summer 2017, the U.S. Supreme Court narrowly upheld the Wisconsin Court of Appeals decision in Murr v. Wisconsin (No. 15-214; Decided June 23, 2017) that the property owners did not suffer a ‘taking’ because they have not been deprived of all economically beneficial use of their property, considering the property as a whole.

The case involved two adjacent lots under common ownership and regulations that treat the two lots as one for the purposes of use and development of the property. Known as merger regulations, or combination of nonconforming lot provisions, where the owner of an undeveloped nonconforming lot also owns another contiguous lot, and where the two lots together would be large enough to comply with the lot size minimum, the state law or local regulations requires the property to be used as one and prevents one lot from being divided, built upon, or sold from the other.

The Murrs (petitioners) own two adjacent lots (E and F) along the St. Croix River - a protected river by federal (federal wild and scenic river), state, and local law. State and local regulations prevent use or sale of parcels under common ownership to become two separate building sites unless each separate parcel meets the minimum parcel building envelope size requirements.

Petitioners sought to sell lot E, tried to get a variance to do so and were denied multiple times. They filed suit. The county circuit court ruled against Murrs explaining petitioners had other options, they were not deprived of all economic value of the property. The Wisconsin Court of Appeals affirmed and found that under the regulations, the two lots were combined into one parcel and one could only build on lots E and F as one parcel. The lawsuit claimed the regulations were a “regulatory taking that deprived them of all, or practically all, of the use of Lot E.” The Appeals Court also held “that the takings analysis properly focused on Lots E and F together and that, using that framework, the merger regulations did not effect a taking.”

The Murrs appealed to the U.S. Supreme Court and the majority of justices agreed that no taking of private property had occurred under the merger regulation and that the Wisconsin State Court of Appeals was correct to consider the two adjacent lots as a single unit in assessing the taking claim. In arriving at its decision, the U.S. Supreme Court established a three-factor test to determine what is the relevant parcel for a takings challenge (written in the author’s words):

  1. Is the government regulation at question consistent with how the property is bounded or divided under state and local law?
  2. Do the physical characteristics of the property support its treatment as a unified parcel (or, alternatively, do the physical characteristics of the property make it reasonable to expect the range of potential uses might be limited)?
  3. Is there still private value or personal benefit associated with using the property as an integrated whole?

If all of the above can be answered in the affirmative, the decision in Murr suggests the property in question should be treated as a whole in light of a regulatory takings claim. Applying these factors to the Murr’s property, the Court wrote:

First, the treatment of the property under state and local law indicates the petitioners’ property should be treated as one when considering the effects of the restrictions. . . . The decision to adopt the merger provision at issue here was for a specific and legitimate purpose, consistent with the widespread understanding that lot lines are not dominant or controlling in every case. . . . As a result, the valid merger of the lots under state law informs the reasonable expectation they will be treated as a single property. Second, the physical characteristics of the property support its treatment as a unified parcel. The lots are contiguous along their longest edge. Their rough terrain and narrow shape make it reasonable to expect their range of potential uses might be limited. . . . Petitioners could have anticipated public regulation might affect their enjoyment of their property. . . . Third, the prospective value that Lot E brings to Lot F supports considering the two as one parcel for purposes of determining if there is a regulatory taking. Petitioners are prohibited from selling Lots E and F separately or from building separate residential structures on each. Yet this restriction is mitigated by the benefits of using the property as an integrated whole, allowing increased privacy and recreational space, plus the optimal location of any improvements. . . . The special relationship of the lots is further shown by their combined valuation. . . . The State Court of Appeals was correct in analyzing petitioners’ property as a single unit.

Many local officials and municipal attorneys will find value in reading the entire decision in full (including the majority opinion and two dissenting opinions).

Local governments can take comfort in knowing:
  • Minimum lot sizes and merger regulations are defensible standards where there are reasonable governmental interests articulated in the ordinance(s).
  • Dimensional variances are a means of providing flexibility from regulations where a property owner has a legitimate practical difficulty satisfying such regulations (see Proving a practical difficulty for a dimensional variance request).
  • Zoning boards of appeals are empowered to deny variance requests if all the standards for determining whether the applicant has a practical difficulty (or unnecessary hardship in the case of a use variance) are not met, including whether the situation was self-created; and
  • The current general legal framework is not upset with this decision.

Of course, public regulation of private property still comes at some legal risk, as the founding fathers intended (see Reviewing the origins of property rights tension in American society). Local officials should review their ordinances for problematic regulations in light of this decision. In particular, they should examine their merger regulations or combination of nonconforming lot provisions. Of course, local officials should work closely with a municipal attorney who is experienced in land use planning and zoning law. Michigan State University Extension emphasizes this article is not legal advice. For a more complete analysis of the implications of this case on Michigan planning and zoning practice, see the October 2017 issue of Planning & Zoning News.

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