Inverse condemnation is a remedy available to a property owner who is not fairly compensated for the property taken from him/her by a government for a public use. Usually a property of a land owner is taken by a condemnation proceeding, in which government is the plaintiff and the property owner is the defendant. When a governmental action causes injury to a property owner and s/he is not properly compensated, s/he can sue the government. In such cases, the status of the parties is reversed and hence, the action is termed inverse condemnation.
Usually, inverse condemnation occurs in three situations:
- Physical seizure of land;
- Reduction in value of the property making it not useful for any purpose, by a regulation of the government; and
- When the government unreasonably insists to convey the property as a condition for issuance of a permit.
The taking of the property by a government can be physical or regulatory. A few examples of physical taking are: seizure of land, retention of possession of land after the lapse of lease period, and deprivation of access to land[i]. For moving an action on inverse condemnation, a governmental authority needs to occupy or damage the subject property[ii].
When a government regulation regarding a property is so stringent that it makes the property not usable for any purpose and thus deprives an owner of any benefits of owning that property, inverse condemnation arises. If the purpose of the regulation and its economic effect on the property amounts to a taking of the property, the owner is entitled to compensation[iii].
Also, a government regulation amounts to a taking or damaging of property, when there is denial of building or demolition permits, burdensome conditions placed on development of the property, and the property is subjected to overly restrictive zoning regulations
In order to test whether a regulation has amounted to a taking of a property, there are three factors to look at. This test is known as the Penn Central test. The three factors considered are:
- the nature of the government regulation,
- the impact of the regulation on the property and
- the extent of interference on the land owner’s economic expectations of the property.
An action on inverse condemnation may not be equated to a tort of negligence or similar torts. Even though compensation is involved in the inverse condemnation proceedings, the provisions of the Tort Claims Act are not applicable to it[iv].
An ordinance of zoning does not represent a taking of property for public use merely because it diminishes the value of the regulated property. Governmental regulation amounts to a taking for public use only when it takes away from the owner all or substantially all reasonable uses of the property[v]. A mere reduction in the market value of the property cannot be the basis for a claim of inverse condemnation[vi].
The evaluation of a regulation has to be done considering its impact on the land owner’s whole parcel of land[vii].
[i] Buchanan v. United states, 1981 U.S. Ct. Cl. LEXIS 1538 (Ct. Cl. Dec. 10, 1981).
[ii] Willis v. Univ. of N. Ala., 826 So. 2d 118, 121 (Ala. 2002).
[iii] Southview Assoc., Ltd. v. Bongartz, 980 F.2d 84, 93 (2d Cir. Vt. 1992).
[iv] Owens v. Feigin, 394 N.J. Super. 85 (App.Div. 2007).
[v] Wild Rice River Estates, Inc. v. City of Fargo, 2005 ND 193 (N.D. 2005).
[vi] Braunagel v. City of Devils Lake, 2001 ND 118 (N.D. 2001).
[vii] Appolo Fuels, Inc. v. United States, 2002 U.S. Claims LEXIS 384 (Fed. Cl. Dec. 18, 2002).