Effect of Existing Laws / Regulations on Claims of Inverse Condemnation and Regulatory Takings

A claim for inverse condemnation by a landowner can be brought if the government takes some action that has the effect of taking private land for public use even though the government has not formally exercised its power of taking under eminent domain. Generally, the value of the land is substantially diminished by the government’s action. Lawsuits for inverse condemnation are allowed pursuant to North Carolina statute. N.C. Gen. Stat. § 40A-51. A similar type of claim can be brought by landowners for what is called a regulatory taking. In North Carolina, this occurs when the government enacts a law or regulation that effectively makes the land in question useless and without value. However, for both inverse condemnation and regulatory takings cases, laws and regulations existing at the time of purchase or other action by the landowner may severely limit the ability of a landowner to succeed on these types of claims.

In general, courts have held that only two legal elements are necessary to prove an inverse condemnation claim:

• (1) That land has been effectively taken by an act or omission of a government agency and
• (2) No formal declaration of taking has been filed by the government agency

However, there is another element that must be shown (or maybe it can be said that the government can defend the case on this basis):

• (3) That the government's act or omission occurred after the landowner purchased the land in question or undertook other actions (such as building structures)

North Carolina case law is clear that, laws and regulations in effect at the time of purchase or other action of the landowner, cannot be the basis for a claim of inverse condemnation.

Thus, for example, in Adams Outdoor Adver. of Charlotte v. N.C. Dep't of Transp., 434 S.E.2d 666 (1993), the court rejected an inverse condemnation claim. The landowner/claimant asserted an inverse condemnation claim against the North Carolina Department of Transportation when it planted trees and other vegetation that obscured billboards erected by the landowner. The North Carolina Court of Appeals rejected the inverse condemnation claim on several grounds including that fact, prior to erecting the billboards, the landowner knew that the DOT was allowed to plant trees and other vegetation along the relevant road. This law was in effect long before the billboards were erected. The court held that the billboard owners were charged with notice of that law and that existing laws regulations cannot be the basis for a claim of inverse condemnation.

Likewise, in Shell Island Homeowners Ass'n v. Tomlinson, 517 SE 2d 406 (NC Court of Appeals 1999), certain landowners filed a claim for inverse condemnation regarding certain regulations imposed for ocean fronting property. The court rejected the claims partly because the regulations were adopted three years prior to issuance of the relevant construction permits.

A similar set of legal rules can result in the failure of landowner claims with respect to regulatory takings. So, for example, in the case of Bryant v. Hogarth, 488 SE 2d 269 (NC Court of Appeals 1997), the claimant had an exclusive franchise to cultivate and harvest shellfish on a submerged tract of land. However, the North Carolina Marine Fisheries Division subsequently designated the land in such a manner as to prevent use of mechanical harvesting methods. The claimants sued for regulatory taking claiming that the land designation rendered their interest in the tract worthless. However, the North Carolina Court of Appeals dismissed the claim. Claimant obtained their franchise in 1984. However, the regulations at issue went into effect in 1977. Although the tract in question had not yet been designated in a manner to forbid mechanical harvesting, the 1977 regulations clearly allowed for that designation. Claimants obtained their franchise with full knowledge of the regulations and the possibility that mechanical harvesting could be restricted. The court held there to be no claim for regulatory taking.

For more information, and to schedule a confidential consultation with experienced and dedicated zoning and land use attorneys in Charlotte, contact Arnold & Smith, PLLC. Use our “Contact” page or give us a call at 704-370-2828. We handle land use, zoning and condemnation legal matters in Mecklenburg County and elsewhere in North Carolina. We have offices in Charlotte, Lake Norman, and Union County.