Real Estate Law Blog

Inverse Condemnation

Inverse condemnation is a far more complex subject than it may seem at the outset. While condemnation proceedings are initiated by the government to acquire property and pay the owner just compensation, the general rule regarding inverse condemnation is that the owner of the property, and not a government entity, seeks to recover damages for a loss in value of the property as a result of governmental action. There are several avenues from which this type of action can arise, as there are multiple ways property can be affected by government activity. Rather than there being a cut and dried standard for what inverse condemnation looks like, each case involving it arises is based on a set of unique factual circumstances.

Inverse condemnation cases generally are initiated when a property owner sues a governmental entity because some action taken by that entity causes a profoundly negative impact on the property. For instance, a governmental restriction on certain types of development can effectively render certain property worthless. This can substantially damage owners who may have longstanding plans to develop the property, because it deprives them of economically-viable use of the property. Such conduct on the part of the government can be considered a de facto “taking” of the property under the Fifth Amendment, even if the government does not actually condemn or take possession of the property. A forced transfer of ownership is not necessary, and indeed one of the hallmarks of inverse condemnation is that the government usually does not take possession of the property permanently.

While the suit in an inverse condemnation case generally begins with the property owner, this is not always the case. In the 2010 Kentucky case of Baston v. Kenton County Airport Board, for instance, the makings of inverse condemnation arose during proceedings in a condemnation suit brought by the Airport Board for Mrs. Baston’s long held property. The Airport Board attempted to buy Mrs. Baston’s property in 1995 as part of a “noise mitigation” effort, which she declined. In 1997, the Airport Board announced its intention to condemn the property for construction of a new runway. The project wasn’t approved until 2001, however, and Mrs. Baston was not required to turn the property over to the Airport Board until 2003. The condemnation proceedings began in 2005. At issue in Baston was the value of the property being condemned, and the novelty here is that Mrs. Baston’s position was that the property was inversely condemned before the actual condemnation, as announcement and widespread knowledge of the Airport Board project stifled development on property that would be acquired by the Board, depressing the fair market value. It’s a subtle argument, but one ultimately upheld by the Kentucky Supreme Court. The actions of the Airport Board had a profound effect on the value of the property prior to condemnation, so the fair market value of the property at the time of the taking did not reflect the full extent of the effect of the taking.

Zoning regulations that control uses, setbacks and similar matter are sometimes challenged under a regulatory takings claim, but such efforts do not generally succeed. The standard of review that courts use to determine the validity of such regulations is a high hurdle for those claiming a taking, especially because the one claiming the violation has the burden of proof to show harm. Courts will uphold the regulation if the regulation is shown to be rationally related to a legitimate government interest. If such a nexus is present Courts will not find a taking, and the regulation will be upheld as a legitimate exercise of governmental power.

If you believe government action has substantially changed the value or nature of your property, contact the attorneys at McBrayer to help determine if an inverse condemnation action is necessary.

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This article does not constitute legal advice.