What is the Difference Between an Inverse Condemnation and a Regulatory Taking in North Carolina?

Inverse condemnations and regulatory takings both refer to situations in which a government takes some physical action or promulgates some statute or regulation that damages the value of private property. In general, governments can take private property for public use if the government pays the fair market value of the property taken. This is allowed under the doctrine of eminent domain. An eminent domain taking usually occurs when the government physically takes title and possession to a private parcel of land.

But a government "taking" of private land can also occur in other circumstances where there is no physical possession of the land in question. Inverse condemnations and regulatory takings are two examples of this.

A regulatory taking occurs when a government passes statutes or promulgates regulations that are so burdensome and restrictive that those laws/regulations destroy the value and use of private lands. Practically speaking, through the statutes/regulations, the government has essentially “taken” the private land. Legally, this is called a "constructive" taking of private land. A landowner that has suffered a regulatory taking can sue the government to recover just and fair compensation. Note that there are other types of regulatory takings, like when a physical "invasion" of private land is allowed. The legal rules are different for those types of regulatory takings and are beyond the scope of this article.

Inverse condemnations also involve statutes and regulations. However, instead of the laws/regulations destroying the whole value and use of private lands, the laws/regulations only diminish the fair market value of the lands. A landowner that has suffered an inverse condemnation can sue the government to recover just and fair compensation for the loss in fair market value to their property. An inverse condemnation can also involve other actions by governmental agencies that damage the value of private lands. For example, if the government builds a road or other structure that diverts ground water causing recurring and persistent flooding on private land, the landowner can sue for inverse condemnation. As another example, if a government builds an airport and the persistent and constant noise of the planes overflying houses adjacent to the airport causes loss in value to those homes, the homeowners can sue for inverse condemnation.

Succeeding on a regulatory taking lawsuit is extremely difficult because it must be shown that nearly the whole value of the land has been destroyed. The leading case in North Carolina is Responsible Citizens v. City of Asheville, 302 S.E.2d 204 (North Carolina Supreme Court 1983). In that case, the City of Asheville passed an ordinance that designated certain lands as being in a newly-created "flood hazard district." The ordinance required that new construction and substantial improvements in the flood hazard district be built so as to prevent or minimize flood damage. Various landowners filed a lawsuit claiming that the ordinance amounted to regulatory taking of their private property. The landowners claimed that the ordinance caused their land to diminish in value to a fraction of the value that the properties had prior to the enactment of the ordinance.

However, the North Carolina Supreme Court rejected the regulatory taking argument. Even if the value of the private property dropped to a fraction of its former value, the private land in question did not become valueless and the land could still be used in commercially valuable ways.

For complicated legal reasons, filing a lawsuit for regulatory taking can allow a court to invalidate the statute/regulation at issue. For certain landowners, invalidating a statute/regulation may be a more optimal result than trying to obtain fair and just compensation for the loss in value to the property. The complicated legal reasons involve how courts define a government's use of police powers versus its use of the power of eminent domain. Use of eminent domain powers to take private land for public use is typically okay. But, using the government's police powers to effectively take private land is seen as an abuse of the police powers under some circumstances. Thus, under this reasoning, the statute/regulation can be declared invalid.

For more information, and to schedule a confidential consultation with experienced and dedicated eminent domain and condemnation 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 federal court, in Mecklenburg County and elsewhere in North Carolina. We have offices in Charlotte, Lake Norman, and Union County.