Tag: property rights

Community Associations Have Property Rights Too

The U.S. housing market has seen a major shift in the past 30 years: the rise of the community association. In 1970, only 1 percent of U.S. homes were community association members; today, more than half of new housing is subject to association membership, including condominium buildings. These organizations provide substantial benefits, including community facilities, maintenance, and rules designed to preserve property values, in exchange for assessment fees.

Accordingly, Mariner’s Cove Townhomes Association v. United States affects the rights of the more than 60 million Americans currently living in these associations. This case arises from the federal government’s taking 14 of 58 townhouses from one development in the wake of Hurricane Katrina. Mariner’s Cove owned a right to collect dues that was appended to those 14 townhomes, and sued the government for extinguishing that valuable right without just compensation under the Fifth Amendment’s Takings Clause.

In contrast to most lower courts, however, the U.S. Court of Appeals for the Fifth Circuit held that “the right to collect assessments, or real covenants generally” are not subject to Takings Clause analysis. In other words, the government can take those rights without paying anything to the owners. Cato and a group of esteemed professors, including Richard Epstein, James W. Ely Jr., and Ilya Somin, has submitted an amicus brief supporting Mariner’s Cove and arguing that the Supreme Court should take the case to clarify whether community association fees are compensable property under the Fifth Amendment.

Without such clarification, these beneficial private communities will be undercut. Such associations often shoulder the burden of providing and maintaining infrastructure, services, and utilities, which allows for more diverse and customizable amenities for homeowners than if those decisions were left with remote municipal governments. Because of these benefits, and because they increase the tax base, local governments are increasingly requiring developers to structure developments as community associations.

The perverse implications of the Fifth Circuit’s ruling are clear: it would allow for local governments to require he creation of a community association, benefit from the resulting private delivery of services while collecting taxes from its members, and later take the property without even paying back the very fees that enabled the government’s benefit. And the Fifth Circuit’s holding affects more than simply community associations. The court’s reference to “real covenants generally” implicates conservation easements, for example, which restrict the development and use of land for preserving the land’s natural, historic, or ecological features. This precedent would make association land an attractive option for uncompensated government takings.

The ruling also clashes with the Supreme Court’s recent decision in Koontz v. St. John’s River Water Management District: that an income stream from real property is a compensable interest under the Fifth Amendment. For these reasons, we urge the Supreme Court to take the case and to recognize the compensable property rights of the Mariner’s Cove Townhomes Association and the millions of other Americans choosing—and paying—to live in a community association.

A Legal Blow to Cities That Want to Take Your Property

As Roger Pilon has previously noted, on Tuesday, June 25, the Supreme Court issued a decision that helps protect people’s property rights from greedy municipalities. On Thursday, the New York Times published an op-ed critical of that decision by Vermont Law School Professor John Echeverria, who considers it a blow to “sustainable development,” whatever that means. 

In the case, a Florida property owner named Coy Koontz Sr. wanted to fill and develop 3.7 acres of wetlands. To mitigate the wetland fill, Koontz offered to put 11 acres of his property (75 percent of the total) under a conservation easement. But the St. Johns River Water Management District denied the permit, saying it wanted either 13.9 acres of Koontz’s land (leaving him less than an acre, or just 5 percent of the total, for development) or for Koontz to spend a bunch of his money helping the district restore wetlands elsewhere.

Koontz sued, citing the Supreme Court’s Nollan and Dolan decisions. (Cato and the Institute for Justice filed an amicus brief supporting Koontz.) In the Nollan/Dolan cases, permits were granted on the condition that the property owners give some of their land to the public. The Supreme Court had held that such conditions were an unconstitutional taking of private property.

The Florida Supreme Court rejected Koontz’s argument, saying that there was a big difference between his situation and the Nollan/Dolan cases. In the latter cases, the permits were granted conditional upon the property owners giving up land. In Koontz’s case, the permit was denied unless he gave up land or money.

Echeverria considers these differences to be so clear and obvious that he is amazed that five Supreme Court justices were bamboozled into overturning the Florida court’s decision. After all, granting a permit conditional on giving up your land is completely different form denying a permit unless you are willing to give up your land. Moreover, giving you a choice between giving up your money or property is completely different from simply demanding that you give up your land.

The Constitution Protects Even Old-Timey Property Rights

In the 19th Century, when railroads were being built across the West, the federal government granted significant land and benefits to the railroad companies. The Great Railroad Right-of-Way Act of 1875 allowed the government to give railroad companies easements to build tracks — that is, a right to use sections of another’s property without legally owning it. The Brandt family eventually acquired land in Wyoming that came with pre-existing railroad easements.

In 2001, the owner of the easement formally abandoned all claims to it, presumably returning the property to the Brandts. But the government wanted that land. In 2006, it sued for title to the former easement land on the theory that the government retained a residual claim to it after the railroad abandoned it. The Brandts argue that the government has no such right and that taking their land requires just compensation under the Fifth Amendment’s Takings Clause.

Although this may seem like a small, unique problem, the scope of the Old West’s railway system was huge and those old easements criss-cross the land of thousands of property owners. In 1983, Congress amended the National Trails System Act to allow the government to take abandoned railroad easements and turn them into land for public recreation and “railroad banking.” Landowners have been fighting the taking of their property under the Trails Act ever since, claiming, as here, that the government’s original grant to the railroads contained no residual right of possession for the government.

Indeed, two federal courts of appeals, the Seventh and Federal Circuits, have held that the government didn’t retain any residuary rights. In the Brandts’ case, however, the Tenth Circuit held otherwise. This circuit split is untenable. Over 5,000 miles of abandoned track has been taken by the government since the Trails Act, and about 10,000 property owners are currently fighting in federal courts to hold onto their property.

Of course, given the possible benefits of not having to pay compensation to landowners, the government has responded to these claims by being aggressively litigious, reaching into its endless war-chest of taxpayer-provided resources to challenge the landowners on every tiny point. As the Federal Circuit said, the government’s behavior is “puzzling” in that it is “foregoing the opportunity to minimize the waste both of its own and plaintiffs’ litigation resources, not to mention that of scarce judicial resources,” but also by advancing arguments “so thin as to border on the frivolous.”

U.S. Can’t Use Supreme Court’s Property Rights Ruling to Rewrite Takings Law

The Supreme Court ruled in December that a taking occurs when a government action gives rise to “a direct and immediate interference with the enjoyment and use of land,” thus allowing the Arkansas Game & Fish Commission to proceed with claims relating to the damage caused by government-induced flooding of a state wildlife management area. (The lower court had bizarrely held that while temporary physical invasions and permanent floods were subject to takings analysis, temporary flooding, even if repeated, was not.  For more background and links to Cato’s amicus briefs before the Supreme Court, see Roger Pilon’s commentary.)

On remand to the U.S. Court of Appeals for the Federal Circuit, however, the United States, relying on a single passage from the opinion, contends that the Supreme Court created a new multi-factor test applicable to all regulatory and temporary physical takings claims. Cato has now joined the Pacific Legal Foundation, National Federation of Independent Business, and National Association of Home Builders on a brief supporting the Commission and arguing that the passage upon which the government relies is both non-binding (“dicta” in legal terms) and in any event cannot be read to upset the distinction between regulatory and physical takings that the Court has consistently asserted.

It is well established in the Supreme Court’s takings jurisprudence that government intrusions on private property that permanently deprive the owner of a valuable property interest are to be subjected to the same test, regardless of whether the invasions are permanent or temporary. Under that test, courts are to consider the duration of the government intrusion, along with other information, to determine (1) whether the invasion is the direct cause of injury to the property and (2) whether the injury is substantial enough to subtract from the owner’s full enjoyment of the property and limit his exploitation thereof. If the injury to the property is substantial, it doesn’t matter whether the it was caused by an invasion of limited duration; once it is shown that the government invasion directly and substantially interfered with an owner’s property right, the government has a categorical duty to pay compensation.

In this case, the government’s intrusion permanently damaged significant property — valuable timber, from the destruction of trees — and is thus a compensable taking. The Supreme Court’s decision in Arkansas Game & Fish Commission didn’t modify or overturn the well-settled test for adjudicating physical takings claims, which remains distinct from the test that controls regulatory takings claims.

The Federal Circuit will hear argument in the case later this spring.

A Good Day for Property Rights

Property owners enjoyed a qualified win in the Supreme Court this morning when a unanimous Court (Justice Kagan recused) decided that “government-induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection.” The case, Arkansas Game & Fish Commission v. United States, was brought by AGFC, which owns and operates 23,000 acres of land as a wildlife refuge and recreational preserve. Clearwater Dam, a federal flood control project, lies 115 miles upstream. Water is released from the dam in quantities governed by a pre-approved “management plan” that considers agricultural, recreational, and other effects downstream.

Between 1993 and 2000, the federal government released more water than authorized under the plan. AGFC repeatedly objected that these excess releases flooded the preserve during its growing season, which significantly damaged and eventually decimated tree populations. In 2001, the government acknowledged the havoc its flooding had wreaked on AGFC’s land and ceased plan deviations. By then, however, the preserve and its trees were severely damaged, requiring costly reclamation measures, so AGFC sued the government, claiming damages under the Fifth Amendment’s Takings Clause. Today, the Supreme Court agreed, reversing the U.S. Court of Appeals for the Federal Circuit.

Earlier, Cato had joined the Pacific Legal Foundation on an amicus brief urging the Supreme Court to take the case, which it did. We then joined the Pacific Legal Foundation and the Atlantic Legal Foundation with a second amicus brief urging the Court to uphold the Fifth Amendment rights of property owners whose land is destroyed by the federal government.

As is so often the case with the Court’s property rights jurisprudence, however, today’s decision was not an unqualified win for property owners. Because there is “no magic formula” for determining whether a particular government action constitutes a taking of property, Justice Ruth Bader Ginsburg wrote for the Court, “the Court has recognized few invariable rules in this area.” It has drawn some bright lines: regulations that constitute a permanent physical occupation of property or that require an owner to sacrifice all economically beneficial uses of his property will be ruled a taking. But in other cases, the Court will weigh several “factors.” Here, for example, in deciding whether the temporary flooding was a taking and hence compensable under the Takings Clause, the Court weighed the duration of the flooding, the degree to which the flooding was an intended or foreseeable result of the government’s action, the character of the land at issue, the severity of the interference, and—drawing from its infamously opaque Penn Central opinion—the owner’s “reasonable investment-backed expectations.”

Thus, the case is not over yet. Because the government had challenged several of the trial court’s fact-findings, including those relating to causation, forseeability, substantiality, and the amount of damages, the Court remanded the case for further proceedings. Still, the basic principle was settled: temporary government-induced flooding enjoys no automatic exemption from Takings Clause inspection. And that’s a win.

Renters Have Privacy and Property Rights Too

Cato legal associate Sophie Cole co-authored this blog post.

A person’s home is his castle and thus affords certain protections and immunities — including the right to exclude unwanted visitors — that apply whether you own or rent.

Unfortunately, ordinances authorizing general administrative searches of rental properties have been increasingly adopted by local authorities with little protection for privacy interests. These inspections reach the whole of the buildings and all of the activity that occurs within, opening up every aspect of people’s lives to the government: political and religious affiliations, intimate relationships, and even all those Justin Bieber posters and Fifty Shades of Gray books you hide when people come over.

For the past five years, the city of Red Wing, Minnesota, has been enforcing such a rental property inspection program whereby landlords and tenants must routinely open their doors to government agents. These searches take place even if both the landlord and tenant believe it not to be necessary. The owner of the property even has to pay a fee for the unwanted search to receive a rental license!

The city sometimes makes initial requests for consent, but these are mere courtesy because the city proceeds with an administrative warrant in the event of a refusal — without a showing of probable cause to believe there’s a housing code violation or other problem. The inspection ordinance doesn’t even attempt to prevent the disclosure of information revealed during the search; the whole neighborhood may find out that you have five different facial cleansers and an unusual amount of apple sauce.

A group of landlords and tenants have thus challenged the inspection program, arguing that several alternatives are available to meet what legitimate interests local governments have. They successfully opposed three applications made for administrative warrants and now seek a court order that the rental inspection ordinance is unconstitutional.

Unfortunately, the U.S. Supreme Court has read the Fourth and Fourteenth Amendments as not prohibiting such legislation, but of course states are free to offer more protection for individual rights. The Red Wing plaintiffs have thus invoked Article I, Section 10 of the Minnesota Constitution, which contains language similar to the federal Fourth Amendment.

Cato has joined the Reason Foundation, Libertarian Law Council, Minnesota Free Market Institute at the Center of the American Experiment, and Electronic Frontier Foundation in filing an amicus brief urging the Minnesota Supreme Court to take the Red Wing case and confirm that no Minnesotan should be subjected to an intrusive invasion of privacy when there has been no showing of some cognizable public health or safety issue within the home subject to inspection.

The Minnesota Supreme Court should be the first to decide that its state’s constitution provides greater protections against warrantless home inspections than even the Fourth Amendment (as construed by the U.S. Supreme Court). No other state judiciary has substantively ruled on constitutional protections against administrative searches in residential contexts, so this case presents an opportunity to set a benchmark for liberty.

The Minnesota Supreme Court will decide whether to take the case of McCaughtrey v. City of Red Winglater this fall.

Another Dismal Assessment of Obamanomics: United States Drops to 7th in WEF’s Global Competitiveness Index

Every year, I look forward to the annual releases of both Economic Freedom of the World and the Index of Economic Freedom. With their comprehensive rankings, these two publications enable interested parties to compare nations and see which countries are moving in the right direction.

As an American, I’m ashamed to say that these publications also show which nations are moving in the wrong direction. And the United States ranks poorly by this metric, having dropped from 3rd place to 10th place since 2000 according to Economic Freedom of the World.

The United States also has dropped to 10th place in the Index of Economic Freedom, and is now ranked only as a “mostly free” nation.

Some people dismiss these pieces of data because the two rankings are considered to reflect a pro-free market bias.

But the folks at the World Economic Forum surely can’t be pigeonholed as a bunch of small-government libertarians, and the WEF’s Global Competitiveness Report shows the same trend.

The United States took the top spot in the WEF’s Global Competitiveness Index as recently as 2007 and 2008, but then dropped to 2nd place in 2009.

I think Bush bears the full blame for that unfortunate development. But the decline has continued in recent years, and Obama deserves a good part of the blame for the drop to 4th place in 2010.

The United States then fell to 5th place last year, in part because of horrible scores for “Wastefulness of Government Spending” (68th place) and “Burden of Government Regulation” (49th place).

Given this dismal trend, I opened the just-released 2012 Report with considerable trepidation. And my fears were justified. The United States has now dropped to 7th place.

Here is some of what was said about America.

The United States continues the decline that began a few years ago, falling two more positions to take 7th place this year. Although many structural features continue to make its economy extremely productive, a number of escalating and unaddressed weaknesses have lowered the US ranking in recent years. …some weaknesses in particular areas have deepened since past assessments. The business community continues to be critical toward public and private institutions (41st). In particular, its trust in politicians is not strong (54th), perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts. Business leaders also remain concerned about the government’s ability to maintain arms-length relationships with the private sector (59th), and consider that the government spends its resources relatively wastefully (76th). A lack of macroeconomic stability continues to be the country’s greatest area of weakness (111th, down from 90th last year).

For people who like to look at the glass as being 1/10th full, the United States does beat Portugal (116ht place) in the score for macroeconomic stability.

Here are a few additional highlights. Or lowlights might be a better word.

  • The United States scores 42nd in property rights, behind Namibia and Uruguay.
  • The United States ranks 59th in government favoritism, behind Guinea and Bolivia.
  • The United States scores 76th in wastefulness in government spending, behind Mali and Nicaragua.
  • The United States also is 76th in the burden of government regulation, behind Kenya and Thailand.
  • The United States scores 69th in extent of taxation, behind Gambia and Ethiopia.
  • The United States ranks 103rd for total tax rate, behind Greece (!) and Philippines.

Now time for some caveats. The WEF report is based on survey results, for better or worse, and it also probably is best characterized as a measure of the attitudes of the business community rather than an estimate of economic freedom.

Regardless of limitations, though, it is a good publication. As such, it is downright embarrassing to see the United States fare so poorly in key indices—particularly when third-world nations score better.

We know that small government and free markets are the keys to prosperity. Bush took us in the wrong direction, however, and Obama is repeating his mistakes.

So don’t be surprised to see the American score decline further as additional reports are issued.