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The Grass Is Looking Greener For Landowners


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THE GRASS IS LOOKING GREENER FOR LANDOWNERS

Brandt Child had a grand vision for the 450-acre tract he bought two years ago in southern Utah, just outside Kanab. The retired developer hoped to convert the lake property into a recreational oasis, complete with campgrounds, a golf course, and a water-slide park. But last year, the U.S. Fish & Wildlife Service dashed his dreams. The agency had discovered that the land is home to the rare Kanab amber snail, which is protected by the Endangered Species Act. The law would impose a fine of as much as $25,000 for each snail killed by the humans and horses that Child wanted to lure to his grounds. "It's cheaper for everybody to shoot the game warden," the 64-year-old Child jokes.

Unless he can sell the land to an environmental group, Child plans to file suit to challenge the regulations. But he just won a new legal weapon. On June 29, the U.S. Supreme Court broke legal ground by ruling that government, in some circumstances, must pay landowners when federal and state regulations wipe out a property's value. In the past, courts generally required such payment only when the government physically takes property to, say, build a highway.

SHORT REACH. The so-called Lucas decision may be ammunition for a new generation of regulation-fighting lawsuits that aim to push beyond the Supreme Court ruling. This issue "is the new frontier of property law," says Scott Bullock, an attorney at the conservative Institute for Justice in Washington.

At first blush, the high court's 6-3 decision is a disappointment for property-rights activists. They had hoped that the court would rewrite 70 years of property law and substantially broaden protections for property owners. They had argued that the Constitution requires compensation for any regulation--from rent control to wetlands protection--that impairs property values. But the Lucas ruling didn't go that far. And it follows an earlier Supreme Court case rejecting challenges to rent control. "People were expecting a whole new body of law," says Mona Zeiberg, senior counsel at the U.S. Chamber of Commerce.

The June 29 decision, Lucas vs. South Carolina Coastal Commission, involved a suit filed by developer David H. Lucas, who had paid $975,000 in 1986 for two beachfront lots in South Carolina. Two years later, the state barred development on coastal lands. Lucas claimed that the action made his property worthless, and that South Carolina should pay for the loss. He won a $1.2 million damage award, but the state's high court reversed the judgment.

The Supreme Court ruled that the state courts should take another look at Lucas' arguments. The opinion by Justice Antonin Scalia held that the Constitution generally requires regulators to pay property owners when laws unexpectedly make property worthless. The ruling cheered environmentalists. "It's not going to apply in the vast majority of cases," says National Wildlife Federation attorney Glen P. Sugameli.

WARNING SIGNAL. But property-rights activists plan to test how far the court is willing to carry its logic. They are attacking environmental, land-use, and historic-preservation regulations that merely chip away at a property's value. "That's 99% of the game; Lucas is 1%," says University of Chicago law professor Richard A. Epstein, the father of the property-rights movement.

One pending case involves Loveladies Harbor Inc., a Long Beach Island (N.J.) developer that bought 250 acres on the island in 1956. By 1972, when the government passed the Clean Water Act, Loveladies had developed most of the land. But its permit to fill 12.5 acres more in 1982 was rejected because the area had been designated a wetland. Loveladies won $2.6 million from the U.S. in 1990. Now, a federal appeals court in Washington must decide whether the Lucas case applies when regulations bar an owner from developing only a portion of his property.

Regardless of how property owners fare in court, many cash-starved states will be more cautious in writing regulations. In May, Arizona passed a law requiring state agencies to assess whether they might have to compensate property owners before issuing new rules. Delaware has a similar law. States including Colorado, Kentucky, Missouri, New Mexico, and Nevada have failed in the past two years to pass such statutes. But the Lucas case "will reignite the efforts," says Larry Morandi of the National Conference of State Legislatures.

That may not be enough for property owners, who gripe that regulation has gone too far. Lucas is just one step in their campaign to reclaim what they consider their economic freedom. "I've always been able to do on my property what I want to do as long as I don't interfere with my neighbors," says Child. The Lucas case doesn't guarantee that he'll be able to do that in the future--but it does give him a fresh legal edge on his snails.THE LUCAS DECISION'S IMPACT ON:

PROPERTY OWNERS

More protection against development rules

STATE LAWMAKERS

Headaches in imposing stringent environmental and land-use regulations

ENVIRONMENTALISTS

Most environmental rules will be left unchallenged. But new difficulties in

setting sweeping protections of wetlands and endangered species

INDUSTRY

Easier challenges to rules that wipe out a property's value, though most suits

against regulations are unaffected

Catherine Yang, with Peter Hong in Washington


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