Managed Retreat Toolkit

 

Takings

The Fifth Amendment of the U.S. Constitution mandates that the federal government shall not “take” private property for a public use or purpose without just compensation.See footnote 1 This provision of the Fifth Amendment has also been applied to states through the Constitution’s Fourteenth Amendment.See footnote 2 The U.S. Supreme Court has come to apply the takings prohibition to a government’s regulation of uses that are “the functional or economic equivalents” of a government using its eminent domain powers or otherwise executing an action that physically occupies all or a portion of a property.See footnote 3 This section presents the three most likely takings claims — for regulatory takings and per se takings, which is one type of regulatory takings, and exactions — and legal rules under federal constitutional law that may apply to state and local decisions to regulate development in coastal areas. 

While states are required to meet constitutional minima set by the U.S. Supreme Court, state constitutions, legislatures, and courts may exceed those minimum requirements with stronger protections for private property owners. In addition, state legislatures can create additional causes of action through takings statutes. Notably, Florida and Oregon, and to a lesser extent Louisiana, Mississippi, Texas, and Arizona, have all codified takings protections for private property owners that exceed federal baselines and have created a second cause of action.See footnote 4 For example, Florida possesses one of the nation’s most aggressive private property protection statutes, the Bert J. Harris, Jr. Private Property Rights Protection Act.See footnote 5 The act provides property owners with a judicially enforceable right to compensation based on “burdensome” regulatory restrictions on the use of real property.See footnote 6 Through the act, the state explicitly establishes a second or enhanced ground — in addition to the constitutional case law discussed in this section — for private property owners to assert challenges against regulations that impact the use of their property. Specifically, through the Bert J. Harris Act, the Florida legislature established “a separate and distinct cause of action from the law of takings” wherein a property owner is entitled to “relief, or payment of compensation, when a new law, rule, regulation, or ordinance of the state or a political entity in the state, as applied, unfairly affects [or inordinately burdens] real property.”See footnote 7 The effect that statute has had in terms of potentially discouraging state and local regulations of private real property in Florida is, at best, unclear;See footnote 8 however, acts like this one can, at a minimum, create a perception that private property protections are a significant barrier to climate adaptation and managed retreat regulations. As this example shows, state and local governments must therefore look at both federal and state constitutions, statutes, and case law when crafting managed retreat proposals. Given the variation among states, this section does not provide a state-by-state analysis of takings law, but rather a broad overview based on generally applicable constitutional principles developed by the U.S. Supreme Court.  

This section also includes a few case law examples and practice tips for state and local governments to minimize potential legal liability. While takings claims are easy for private property owners to initiate, they are far more difficult to win. Governments can take steps to minimize their potential legal risks and should not be paralyzed from acting by the threat of litigation.

 

Regulatory Takings

Introduction to Regulatory Takings

This part of the section introduces the different tests courts apply for regulatory takings, including per se takings, which are a subset of regulatory takings. Under the per se test, a court will find a takings has occurred if a government regulation deprives a person of all the economic value of his/her property. If not, courts will then evaluate whether a regulatory takings has occurred under a three-factor balancing test. Private plaintiffs will often stack or layer both per se and fact-specific regulatory takings claims in a single lawsuit with the aim that if the per se threshold cannot be reached, a court may find against the government under the more flexible regulatory takings test. Rules and practice tips to minimize legal risk are described below. There are exceptions to takings in the managed retreat context that can come into play — one is for public nuisances and the other is for the public trust.See footnote 9 Given current case law, only the former is discussed in detail herein, but it is important to note that both preclude takings liability. 

Per Se Takings

One clear limit on a coastal government’s regulatory authority is that a regulation cannot amount to a per se takings. The U.S. Supreme Court enunciated the rule for a per se takings in a well-known case called Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992). In Lucas, David Lucas owned two coastal lots in the Isle of Palms in South Carolina. After he bought the properties, South Carolina passed a setback law that prohibited the construction of residential properties on those lots. The U.S. Supreme Court relied on a lower court finding that South Carolina’s law had deprived Lucas of “all economically beneficial uses” of his property to hold that the regulation effected a taking “per se” requiring the government to pay Lucas substantial compensation.See footnote 10

The Lucas or per se takings rule essentially tells policymakers that coastal regulations cannot prohibit or restrict private property uses to the point of depriving an owner of all the economic value of his/her property. In practice, the per se bar can be a hard one for a plaintiff to meet in a court. Here, Professor J. Peter Byrne and other legal scholars have argued that “likelihood that a retreat regulation will be found” to rise to the level of a per se takings will likely depend on “the severity of the economic effect” of that regulation on a property owner.See footnote 11 Moreover, the Supreme Court has held that the Lucas rule will only be applied where a government regulation effectively removes a property’s economic value in its entirety;See footnote 12 therefore, if a government can show that a property owner retains the right to conduct at least some economically beneficial uses on all or a portion of his/her property, it will be found to have some economic value and there is no Lucas per se takings.See footnote 13 In the latter instance, a court will instead apply the more flexible rule for a regulatory takings. 

Regulatory Takings

When a land-use regulation has seriously decreased the value of a property but not deprived it of all “economically beneficial uses,” claims of regulatory taking will be assessed under the fact-specific inquiry established by the Supreme Court in Penn. Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978). In Penn Central, the Court employed a three-factor balancing test for courts to analyze a regulatory takings claim. Those three factors are: 

  1. The character of the government’s action, perhaps including the weight of the public purpose advanced; 
  2. The extent to which the regulation has damaged the property’s economic value; and 
  3. The effect of the regulation on the reasonable investment-backed expectations of the owner. 

The Penn Central test is applied on a case-by-case basis. While the application of this test can create uncertainty for coastal governments, case law shows that “governments have generally succeeded in showing that thoughtful regulation does not excessively impinge on the constitutionally protected core of private property.”See footnote 14

Regulatory Takings in a Managed Retreat Context Generally 

Governments should consider how to build comprehensive retreat strategies that minimize regulatory takings claims. In a managed retreat context, a purely regulatory approach is more likely to trigger takings claims, whereas an approach that uses a combination of land-use regulations, voluntary acquisitions/buyouts, and market-based tools, like Transfer of Development Rights or “TDR” programs, is much more likely to pass constitutional muster because these types of tools allow property owners to recoup some economic value for their land. Regulatory tools — like those featured in this toolkit for living shorelines requirements, hard armoring restrictions, setback and buffer requirements, conditional permits, and zoning and overlay zones — have faced legal barriers in some states, and policymakers considering these types of approaches, in particular, should seek guidance from their attorneys.

State and local governments have successfully navigated takings limits to protect people, property, and sensitive coastal areas and floodplains. For example, in Chatham, Massachusetts, the town passed a zoning bylaw that designated a “conservancy overlay district” that encompassed the town’s entire 100-year floodplain to protect people and properties from future flooding risks.See footnote 15 The conservancy district prohibited uses, such as the filling of land and the construction of residential structures, but permitted limited uses like recreational and water-dependent activities.See footnote 16 One property owner in Chatham wanted to sell her property to a prospective buyer couple who made the deal contingent upon their ability to obtain a development permit to build a home; this deal occurred after the conservancy district was established. When Chatham denied the development permit, the property owner sued alleging claims that either a per se or regulatory takings had occurred as a result of the bylaw.

The town’s floodplain regulations survived this legal challenge. In 2005, the Massachusetts Supreme Court found in favor of the town, holding that no takings had occurred.See footnote 17 Under the Lucas per se analysis, the property still had economically beneficial uses, just not for residential purposes.See footnote 18 Then, under the Penn Central balancing test, the court found that: the city had a legitimate public purpose in protecting people and property from flood risks; the property still had economic value; and the property owner had no reasonable investment-backed expectations in the property to build a residential structure since the bylaw prohibiting such residential structures predated the purchase offer.See footnote 19 To reach its conclusion, the court cited supporting factors, including how Chatham: (1) clearly articulated public safety goals in its zoning bylaws; (2) did not apply the regulation to a greater spatial area than was necessary to meet its stated purposes; and (3) gave residents adequate notice because the conservancy district existed prior to the town receiving the development application.See footnote 20 At least in Massachusetts, the Chatham case established that local governments can restrict or limit development in vulnerable floodplains, so long as a property maintains some economic value and a regulation serves a legitimate public interest. 

As the Chatham case illustrates, takings challenges are a legal risk that state and local governments must consider in the context of managed retreat; however, state and local governments also have tools to minimize their own potential legal risk. For example, in Chatham, the court pointed to the town’s purposes and findings in its bylaws, which demonstrated a clear threat to people and property. Moreover,  the conservancy district was fair and consistently applied to all property owners in the 100-year floodplain that share the same risk. Other governments can similarly seek to prepare strong justifications to support their regulatory actions, for example, by collecting and documenting best available scientific evidence and community knowledge and lived experiences. Governments should carefully develop such evidence and findings in the administrative record, which justifies the regulation of private property in relation to the Penn Central factors. Based on the evidence justifying a regulation, governments should apply regulations proportionally to address the risk or need confronting people under its jurisdiction. In a managed retreat context, that may mean applying a tool judiciously in a jurisdiction’s most vulnerable coastal areas subject to imminent threats from sea-level rise, flooding, and erosion. In addition, the property owner in the Chatham case had advance notice of the conservancy district, since purchase of the property was contingent on securing a new development permit. Governments can provide notice to property owners through a variety of means such as plans (notably local comprehensive plans and policies), community engagement processes, and real estate disclosures,See footnote 21 which courts consider when analyzing a property owner’s “economic or investment-backed expectations.”

Regulatory Takings Relating to Infrastructure Disinvestment

Additional takings considerations could potentially arise in the context of disinvestment decisions relating to public roads, although there are few if any cases addressing this issue directly in the context of sea-level rise and coastal hazards, and state and local governments could further reduce legal risk with proactive planning, policies, or laws and ordinances. Tools and strategies for infrastructure disinvestment are discussed further in the Infrastructure section of this toolkit.

Disinvestment may increasingly become an attractive strategy for dealing with rising safety risks and maintenance costs to keep roads open in vulnerable coastal areas. “Disinvestment” in the infrastructure context generally refers to a process of consciously allowing an infrastructure asset to “fall below previously accepted standards of condition or performance,” typically to be able to reduce long-term investment in the asset and prioritize resources elsewhere.See footnote 22 In this context of managed retreat, the term “disinvestment” is referring more specifically to strategies that either phase out maintenance of roads or affirmatively abandon or discontinue roads (e.g., via legislatively authorized procedures) where coastal conditions make upkeep challenging or prohibitive. Although disinvestment decisions will often relieve a government of its duty to maintain infrastructure (as discussed in the Negligence section), nearby landowners may still challenge that action as a “taking” of their property without just compensation. The closure of a road can prevent or diminish a landowner’s ability to access abutting public roads and/or the general public road network, and the takings claim in this context therefore would derive from a landowner’s loss of access.See footnote 23  

In some states, courts have examined the question of when a government action that results in a road closure or otherwise affects a landowner’s access amounts to a taking, although not in the specific context of disinvestment in the face of increased flooding and road damage.See footnote 24 In states where loss of access has been evaluated as a potential taking, it has typically been a fact-dependent exercise, based on the level of interference a road closure causes for property owners. If the loss of access to public roads is total (e.g., that road is the only access point to a person’s property) or “unreasonable” or the access is “substantially impaired,” a court is more likely to find that a taking has occurred.See footnote 25 For partial losses of access where alternative, though perhaps more circuitous, access routes exist,See footnote 26 the analysis may also involve looking at how the road or road system is used and whether alternative routes offer the same level or type of use (e.g., whether the road can accommodate the same load).See footnote 27 Additionally, a loss of access specific to one landowner is more likely to be found as a takings than a closure that affects the general public more broadly.See footnote 28

Credit: Tom Horton, in the State of Maryland report, Sea-Level Rise: Projections for Maryland 2018.

It is also important to distinguish between whether the abandonment is a formal action by the government (e.g., going through statutory abandonment, closure, or discontinuance procedures) as opposed to inaction (e.g., underinvestment or failure to maintain, leading to an effective partial or total loss of access). Typically takings claims require some kind of government action in order to succeed,See footnote 29 although inaction in this context could alternatively give rise to claims that the duty to maintain has been breached, as discussed further in the Negligence section.

Governments considering the need to disinvest in high-exposure coastal roads may reduce the risk of successful takings claims by integrating a disinvestment strategy into planning and policy. This might be done, for example, by establishing clear frameworks for phased out maintenance or closure as environmental conditions degrade or reach certain flooding thresholds. While there may still be some risk of successful takings claims, formal policies or ordinances laying out a disinvestment strategy can help put landowners on notice of potential access restrictions, thereby helping set reasonable investment-backed expectations under the Penn Central framework.See footnote 30 Additionally, the purpose of the policy would be relevant; a disinvestment policy that seeks to avoid public harm (e.g., by demonstrating safety considerations, such as protecting the public from repeated flood conditions) is more likely to survive a takings claim than a disinvestment action that is primarily for public benefit.See footnote 31 Agencies considering disinvestment strategies for public roads in high-risk areas should evaluate the potential for negligence claims and takings claims in different road maintenance and abandonment scenarios, and consider proactive policy options to reduce legal risk. 

Public Nuisance Exception to Regulatory Takings

Before concluding the discussion on regulatory takings in a managed retreat context, it is worth mentioning that the U.S. Supreme Court has recognized that a regulation that abates a nuisance cannot be a taking, since the owner has no property right to engage in a nuisance.See footnote 32 A public nuisance is generally a private property use that interferes with the public welfare, health, or safety or the public’s ability to use public property.See footnote 33 

One case from Nags Head, North Carolina provides some context to evaluate this exception. Under state law, North Carolina provides a right of public access to the beach.See footnote 34 Due to erosion, many homes in Nags Head are now located in the public trust area between mean high water and coastal dunes. In 2009, the Town of Nags Head declared a row of cottages along East Seagull Drive that had been severely damaged by a nor’easter storm as public nuisances that had to be demolished.See footnote 35 The town’s public nuisance determination was based on the fact that, due to coastal erosion, this row of cottages —  located halfway between mean high water and the dunes — was now located in the public trust domain and posed a safety threat and obstructed public access to the beach.See footnote 36 The majority of homeowners agreed that their homes could be demolished, but three groups of homeowners who owned nine of the cottages challenged the town’s nuisance declaration and findings.See footnote 37

Although the plaintiffs, in one of their claims against Nags Head, alleged that the town’s action was in effect a taking that required “just compensation,” Nags Head declared the properties to be a public nuisance, which did not require compensation to private property owners under state law.See footnote 38 The decision ultimately was overturned on appeal, although on other grounds.See footnote 39 Specifically, the North Carolina Court of Appeals found that a state public trust statute preempted or precluded local governments from declaring public nuisances.See footnote 40

As sea levels rise, lands erode, and the line demarcating public from private ownership of coastal lands (usually the mean high tide line) migrates inland, public nuisance declarations and lawsuits may become more common, particularly as an avenue to avoid takings issues. Regardless, it would behoove governments to be proactive and truly “manage” or plan retreat from vulnerable coastal areas by taking early actions to prepare for climate change impacts. Even if other state and local governments have a clearer authority to declare public nuisances than Nags Head initially did,See footnote 41  governments should seek to have these discussions with their communities before sea-level rise begins threatening properties to maximize benefits for communities and the environment. 

 

Exactions and Development Permit Conditions

Introduction to Exactions

In addition to per se and regulatory takings, the U.S. Supreme Court recognizes special rules for exactions. Exactions are regulatory obligations imposed as conditions for the grant of a development permit that require a private property owner to convey to the public an interest in real property or the monetary equivalent.See footnote 42 The purpose of such conditions will be to mitigate the public harm caused by new private development.  The property interest required to be conveyed can be a fee interest in land or a public easement authorizing public access. The Supreme Court also has held that exaction analysis is appropriate when a property owner is required to pay money to the government as a substitute for conveying a real property interest.See footnote 43

Exactions raise takings concerns because they require a property owner to convey property to the government without the payment of just compensation. The U.S. Supreme Court has found that exactions do not effect a taking when two requirements are met. First, there must be an “essential nexus” between the character of the exaction and the public harm that the exaction is mitigating.See footnote 44 Second, there must be a “rough proportionality” between the value of the property rights conveyed and the harm to the public interest that the exaction mitigates.See footnote 45 The principal cases for those two requirements are Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1978) and Dolan v. City of Tigard, 512 U.S. 374 (1994), respectively. Legal experts often refer to the two cases concurrently as the “Nollan/Dolan” test when describing the constitutional requirements for exactions. 

Exactions and Development Permit Conditions in a Managed Retreat Context

In a managed retreat context, states and local governments can set conditions for new development and redevelopment through coastal zone management, environmental, and land-use and zoning permits. For example, governments could require a property owner to remove or relocate structures upon the happening of some event, such as a beach eroding to a minimum width (for more information, see the Regulatory Tools>Development Permit Conditions section of this toolkit). A condition that would likely amount to an exaction would be allowing an existing public easement along the beach to migrate inland with the beach. Here, it is important to distinguish between permit conditions that require the conveyance of an interest in property, which are analyzed as exactions, and other permit conditions on land use that do not involve the transfer of an interest in property, which are analyzed under the general Penn Central regulatory takings analysis. Under Nollan/Dolan, governments will be expected to meet a heightened takings threshold for exactions compared to regulatory takings under Penn Central. For exactions subject to the Nollan/Dolan test, a government can minimize its potential takings liability by having a clear nexus or link between an exaction and the government’s purpose for imposing that condition.See footnote 46 Here, the purpose will likely be related to protecting people, property, and the coastal environment — including public access and public trust resources — from sea-level rise, flooding, and erosion. In addition, as long as a government’s permit condition does not take more land than necessary to facilitate a public purpose for retreat, and that land interest “does not exceed in size or value the portion permitted to be developed,” that exaction should pass the Dolan rough proportionality test.See footnote 47

For comparison to the case in Encinitas, this is an image of cliff-top development and erosion in Isla Vista, California. Credit: Patrick Limber, U.S. Geological Survey. 

One recent case illustrates many of these concepts and provides takeaways for state and local governments about how to draft legally viable permit conditions. In one California case, the California Court of Appeals upheld coastal restrictions to protect coastal development and ensure continued public beach access from bluff erosion. In Lindstrom v. Cal. Coastal Comm’n,See footnote 48 property owners sought a coastal development permit to construct a home on a bluff in Encinitas. The city approved the permit with conditions, including that the home be set back 40 feet from the edge of the bluff for safety reasons.See footnote 49 Dissatisfied with the outcome, the property owners appealed the local decision to the state’s coastal management agency, the California Coastal Commission. Ultimately, the commission added conditions to the permit including a larger 60- to 62-foot setback, a waiver prohibiting any future hard armoring structures, and managed retreat conditions requiring the removal of structures in whole or part if the bluff erodes to a certain point.See footnote 50 

On appeal from the commission’s decision, the California Court of Appeals upheld the constitutionality of almost every one of the conditions, including the ones for managed retreat. Notably, the court upheld the requirement that the Lindstroms follow the recommendations in a geotechnical report to remove unsafe portions of their home if the bluff recedes to a point within 10 feet of it.See footnote 51 While another condition requiring structure removal was held to be “overly broad” as currently drafted, the court allowed the commission to revise the condition in accordance with its order.See footnote 52 In other words, at least in California, the court found that removal conditions can be constitutional so long as they meet minimum requirements. 

Based on the plaintiff’s complaint, the court analyzed the permit conditions under state law claims as well as takings and procedural and substantive due process claims. The condition that bans a seawall was the only one evaluated as a regulatory taking, and the court found that it did not raise Lucas or Nollan/Dolan concerns.See footnote 53 Under the Lucas framework, the court found that the property would still retain economic value despite that condition, so it did not cause a complete deprivation of economic use or value.See footnote 54 Under Nollan/Dolan, the court found that the condition was not an exaction because it did not require the conveyance of a property interest or payment of money; thus, the condition did not have to meet the nexus/proportionality requirements. In contrast, the conditions requiring the removal of structures (in whole or part) if the bluff erodes to a certain point were only challenged on procedural and substantive due process grounds, which the court found lacked merit due to a lack of factual arguments made by the plaintiffs.See footnote 55 The main takeaways from this California case are that: (1) restrictions on property (as opposed to requirements to dedicate land or pay fees) are not exactions that are subject to Nollan/Dolan scrutiny; and (2) the court upheld the commission’s ability to restrict someone’s future ability to build a seawall, which will help ensure natural shoreline processes continue unabated. As to the former takeaway, this case illustrates the point that not every permit condition or development restriction has to meet Nollan/Dolan nexus/proportionality requirements. Accordingly, governments may be able to avoid meeting heightened scrutiny under Nollan/Dolan if permit conditions are drafted as land-use regulations rather than exactions. More broadly, as the use of exactions and permit conditions in coastal and land-use permits evolve at the state and local levels, governments should keep apprised of new federal and state case law on the subject and the multiple and different claims plaintiffs may assert.

  Overview of the Legal Framework Negligence