Current Status Bill Number:3790 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19950314 Primary Sponsor:Harrison All Sponsors:Harrison, Jennings, Sharpe, A. Young, Kelley, Lanford, Stille, Huff, Williams, Spearman, Cato, H. Brown, Rhoad, Hines, McMahand, J. Brown, Bailey, Littlejohn, Limbaugh, Rice, Stuart, Law, Cain, Meacham, Mason, Davenport, Tripp, Whatley, D. Smith, Hutson, Wright, Quinn, Fair, Easterday, McCraw, Dantzler, Gamble, Seithel, Riser, Harvin, Neilson, Worley, Chamblee, Keegan, G. Brown, Kirsh, Witherspoon, Martin, Waldrop, Phillips, Kennedy, Harwell, Kinon, Stoddard, Elliott, Vaughn, Trotter, Wilder, Walker, Robinson, Cooper, Marchbanks, Koon, Townsend, McAbee, Baxley, McKay, Wofford, Carnell, Fulmer and R. Smith Drafted Document Number:bbm\9954jm.95 Companion Bill Number:839 Residing Body:House Current Committee:Judiciary Committee 25 HJ Subject:Property Rights Act
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
House 19950314 Introduced, read first time, 25 HJ
referred to Committee
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TO AMEND TITLE 28, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EMINENT DOMAIN, BY ADDING CHAPTER 4 SO AS TO ENACT "THE SOUTH CAROLINA PROPERTY RIGHTS ACT".
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 28 of the 1976 Code is amended by adding:
Section 28-4-10. This chapter may be cited as `The South Carolina Property Rights Act' and any references to the term `act', unless the context clearly indicates otherwise, mean the South Carolina Property Rights Act.
Section 28-4-20. As used in this chapter and as used in the South Carolina Eminent Domain Procedure Act, Title 28, Chapter 2, when made applicable by this act:
(A) Except as otherwise specified, the words defined in the Eminent Domain Procedure Act shall have the meanings defined therein.
(B) `Government entity' means:
(1) the General Assembly or a board, authority, commission, council, committee, department, office, officer, individual, or agency in the executive branch of state government;
(2) a political subdivision of the State; and
(3) a special purpose district.
(C) `Interest in real property' includes any rights to the use of property which may be limited through regulation by a governmental entity.
COMMENTS
Takings jurisprudence traditionally has recognized that compensation is due for what the property owner has lost, rather than what the condemning authority gains. With respect to the acquisition of a fee interest in real property, it is thus well established that valuation of the property must be based upon the status of the property in the owners' hands before the taking or acquisition occurs. Much recent litigation has centered on the question of whether a regulation on the use of property represents a taking of property in the constitutional sense that would require compensation. This definition explicitly provides that under state law any right to use property which may be limited through regulation constitutes an interest in real property. The phrase `interest in real property' is drawn directly from the eminent domain statute. Thus, the proposed legislation operates principally by bringing regulatory actions within the scope of that statute.
(D) `Acquire' as used in various forms referring to acquisition of an interest in real property or of property rights includes any enactment or enforcement of a regulation that has the effect of limiting or extinguishing any existing right to use real property by an owner, whether or not such regulation involves the physical appropriation or invasion of real property, and whether or not such regulation transfers such right to use to a governmental entity.
COMMENTS
The broad definition of `acquire' in this act reflects the notion referred to above that the emphasis in takings jurisprudence is on what is lost by the property owner, rather than what is gained by the condemning authority. By defining `acquire' broadly, the act brings all regulatory acts within the scope of the eminent domain statute, which otherwise might be narrowly read to include only those acquisitions which result in the passing of title to the State.
(E) `Condemn' includes the acquisition of an interest in real property by governmental entities through regulation.
COMMENTS
This definition serves to clarify the broadened scope of the eminent domain statute. In the past, condemnation was generally regarded as a process applicable only when the State acquired a fee interest in property or the equivalent. Because the effect of regulation may also require compensation, the same process, condemnation, should be used in the case of land use regulation.
(F) `Investment' as used in the expression `investment backed expectations' includes the:
(1) giving of value for the acquisition of property;
(2) giving of value to maintain, improve, or retain ownership of property;
(3) decision not to sell an interest in real property in the expectation of future use or sale; and
(4) giving of value to develop or improve adjacent property.
COMMENTS
A line of constitutional cases has recognized that one of the factors to be considered in determining whether compensation is required for a taking is the reasonable investment backed expectations of the owner. See `Penn Central'. In subsection (1)`the giving of value for the acquisition of property' represents the most obvious instance in which the owner has paid a specific sum in expectation of future use of the property. In actuality, there are other situations as well in which a property owner has a legitimate investment made in reliance on future use of property which should be taken into account in determining the right to compensation. Subsection (2) refers to investments made by an owner after the original time of acquisition. In subsection (3) `the decision not to sell an interest in real property...' addresses the situation in which a landowner may not expend funds on property, but elects to forego short term gains through liquidation of the property in reliance on long-term appreciation in value. It is a matter of economic reality that the decision to hold property over a period of time and to pass up an opportunity to liquidate it may often represent a conscious investment decision. In subsection (4) `the giving of value to develop or improve adjacent property' recognizes that individual parcels of land may not be viewed in isolation, and that funds spent to improve one tract of land may actually represent an investment benefiting other adjacent property.
(G) `Nuisance' refers to unreasonable, unwarranted, or unlawful use of property, as traditionally recognized in the common law, and is limited to those uses whose prohibition inheres in the title to the property and which use could be enjoined by adjacent landowners or other uniquely affected persons, or by the State under its power to abate nuisances that affect the public generally.
COMMENTS
This definition tracks the treatment of nuisance law in Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886 (1992). In that case, Justice Scalia reconciled the power of the State to control and abate nuisances without compensation with the constitutional requirement for payment of just compensation by explaining that preexisting nuisance law should be recognized as, basically, an element of value. To the extent that use of a property is already limited by nuisance law, the property's value would be similarly limited, and no compensation would be required for regulation affecting those same uses. On the other hand, newly created limitations on use cannot be exempted from the compensation requirement merely by characterizing them as nuisances.
(H) `Regulation' includes:
(1) All land use regulation, rules or emergency rules, statutes, ordinances, dedications, or denials of permits, licenses, authorizations, or other governmental permission if such denial is without cause or if such denial is with cause but is based upon selective enforcement of any statute, regulation, or standard; any of which has the effect of limiting or imposing conditions upon the owner's rights to use or occupy property.
(2) The following actions are not included in the definition of `regulation':
(a) exercise of the power of eminent domain to physically appropriate real property or to effect the physical invasion of real property;
(b) the repeal or amendment of a statute, rule, ordinance, requirement, or other action if the repeal or amendment qualifies, lessens, or reverses a limitation or restriction on the use of private property;
(c) a state governmental action specifically mandated by a federal governmental authority, to the extent that the state action does not result from the exercise of legislative, executive, or administrative discretion;
(d) law enforcement activity involving the seizure or forfeiture of private property for a violation of law or as evidence in a criminal proceeding;
(e) any regulation which would otherwise be included in this definition, to the extent that it does not affect existing property rights, or clarifies, restates, or otherwise imposes restrictions on property use which were already in effect before the enactment of such regulation; provided, however, that when such a regulation imposes new or broader restrictions, to that extent such regulation is subject to the provisions of this chapter; and further provided that exemptions created by this section shall not serve to limit or extinguish any rights or causes of action resulting from prior regulation.
COMMENTS
Subsection (1) defines regulation as broadly as possible. The only exceptions to this broad definition are those exemptions specifically identified in subsection (2). Clause (a), the physical appropriation of real property, refers to actions which would require compensation under the existing eminent domain statute. This exemption is included here so as to avoid affecting existing law pertaining to physical appropriation of property by the enactment of this act, which addresses other forms of government action. Clause (b) explicitly allows the State to relax regulations without triggering the need for compensation under this action. Presumably, existing zoning legislation and jurisprudence is better suited to address problems created by down-zoning and similar regulatory actions. Clause (c) is a narrow exemption which applies only to those regulatory actions which the State may be required to take by the federal government in which the State plays no significant decision-making role. In such instances, the federal government probably should be regarded as the true taking authority, and the state's purely ministerial actions would not fall within the scope of this act. This exemption does not remove from the scope of the act those state actions which are taken in compliance with a federally-mandated program when the General Assembly, executive, or administrative branch of the state government take part in the decision-making process in shaping the regulation or enforcing it. Clause (d) involves seizure and forfeiture of property which is governed by other law. Obviously, exemption from this act does not imply that improperly seized property may not be recovered or require compensation under other applicable law. Clause (e) is a savings clause protecting both the State and property owners. It allows legislation to be redrafted and clarified without giving rise to any new compensation requirement, except to the extent that further restrictions on property are created. On the other hand, in like manner the reenactment of regulation cannot serve to cut off any preexisting rights for compensation on the part of the property owner.
Section 28-4-30. (A) The General Assembly declares the basic state policies further by this chapter to be the recognition that land use regulation may constitute a constitutional taking requiring compensation, and the requirement that governmental entities follow similar procedures with respect to acquisition of property rights through regulation as they are required to follow for the physical appropriation of real property under the Eminent Domain Procedure Act.
(B) Specific policies to be promoted through the implementation of this chapter are to:
(1) provide uniform procedures for the acquisition of all property rights by governmental entities, both through regulation and physical appropriation;
(2) reduce costly litigation which may be caused by inverse condemnation claims arising from the implementation of regulations;
(3) provide for the development and use of administrative procedures to compensate landowners for loss of property rights resulting from land use regulation;
(4) assist governmental entities in planning and budgeting for state programs which involve the regulation of land use;
(5) provide for the efficient use of state resources in the achievement of state objectives involving land use regulation;
(6) maximize the results of desirable regulation through cost control, informed planning, and the avoidance of after the fact litigation;
(7) provide explicit guidelines for governmental entities involved in land use regulation;
(8) protect the property rights of landowners and to provide for compensation for the taking of those property rights through regulation.
COMMENTS
The overall purpose of this act is to provide a specific statutory right to compensation for state regulation of land use so as to eliminate the need for litigation based on constitutional takings. While this act is based on the constitutional requirement for payment of just compensation when property is taken for public use, the word `taking' is not used anywhere in the act except in this policy statement and the policy statement in Section VI. By `defining interest in real property' to include rights to use which may be limited by regulation, the act may create a property right under state law which would clarify property owners' rights with respect to the constitutional requirement for the payment of just compensation. However, the primary purpose of the act is to create a process for the payment of compensation when land use regulation causes an economic impact upon property owners, without requiring the litigation of constitutional issues. Under the act, it is not necessary for a property owner to prove that a constitutional taking has occurred; rather, as noted in Section VIII, the right to compensation will arise whenever an appraisal in accordance with this act indicates that a regulation has caused a substantial diminution in the total value of the real property. The simplest way to achieve this end, and the method chosen by this act, is to bring regulatory actions of the State within the scope of the eminent domain statute. Subsection (B) identifies some of the specific policies promoted by the act. Clause (1) refers to the fact that the legislature and state agencies should use the same procedures with respect to regulation of land use as they were previously required to use for the physical appropriation of land of property under the eminent domain statute. Clause (2) recognizes the fact that, in the absence of this action, property owners are forced to seek compensation for regulatory takings through inverse condemnation claims. This results in costly litigation, as well as, in many instances, damage awards which could be avoided by following the normal condemnation procedures. Clause (3) reiterates the concept that landowners should be compensated for what they lose without respect to the benefit, if any, accruing to the State by any regulation. Clause (4) extends to the regulatory arena the same principles which have been applicable under preexisting condemnation law. Under existing law, when the enactment of regulation only gives rise to state expense after affected property owners bring inverse condemnation actions, agencies are unable to budget intelligently for the cost of the regulations they enact. The result is that often regulations are enacted with the belief that the cost will be minimal, and years later it may be discovered that the total cost of litigation and damages has been substantial, at which time the regulations may even be rescinded. Clause (5) recognizes that state resources are limited, and that only with the informed planning and budgeting referred to in Clause (4) may these limited resources be effectively allocated. By engaging in a condemnation process for the regulation of property similar to that applicable for physical appropriation, agencies are required to estimate the cost of any program before going forward with it. Any regulations which would be unusually costly may be identified in advance. In that way, the optimum results may be achieved for the lowest cost possible. Clause (6) similarly recognizes that the costs of desirable regulation may be best controlled by advance planning. Clause (7) recognizes that regulatory agencies have traditionally been given broad discretion to implement state programs without any guidance or requirement to consider the economic impact of the regulations upon property owners. Clause (8) recognizes that the underlying purpose of the act is to provide for compensation when property rights are taken through regulation.
Section 28-4-40. Not later than January 1, 1996, all executive governmental entities which administer or issue land use regulations shall adopt regulations and internal procedures for the implementation of the policies contained in this chapter.
COMMENTS
This section is necessary to ensure that state agencies affirmatively incorporate the procedures required by the act into their internal procedures.
Section 28-4-50. (A) Before the adoption or enforcement of regulations affecting land use, governmental entities shall, consistent with the guidelines established by this act, assess the proposed regulation or proposed manner of enforcing such regulation, and prepare a written assessment which states the following findings:
(1) the specific purpose of the proposed regulation;
(2) the probable effect of the proposed action on the use and value of private property, including an evaluation of the probable cost of acquisition of an interest in that property through enactment or enforcement of the regulation;
(3) alternatives to the proposed action that may lessen the effect on private property or which may involve lower probable costs to the State;
(4) an estimate of the cost to the governmental entity including the cost of acquisition of property rights through regulation; and
(5) the source of payment within the governmental entity's budget for such compensation.
(B) If there is an immediate threat to health and safety that constitutes an emergency and requires immediate action, the assessment required under this section may be postponed until the action is completed.
(C) The governmental entity shall deliver copies of this assessment to the Governor, appropriate financial management authority, and the Attorney General.
COMMENTS
This section similarly requires affirmative action on the part of agencies adopting land use regulations. In the absence of such requirements, it would be easier for agencies to continue existing practices, forcing property owners to bring inverse condemnation claims. The whole purpose of this act is to encourage all regulatory agencies to engage in advance planning.
Section 28-4-60. To the extent reasonably possible, governmental entities shall avoid adopting or enforcing regulations in a manner that constitutes a taking of property requiring the payment of just compensation in accordance with the Constitution of this State or of the United States or which would require compensation under the provisions of this chapter.
COMMENTS
This policy statement derives from Executive Order 12630, issued by Ronald Reagan March 15, 1988, (53 F.R. 8859). Similar policy statements have been repeated in a variety of regulatory acts on the federal and state levels. See 49 C.F.R. Section 24.8 (1992); 3 C.F.R. 555 (1989); S.C. Code Ann. Section 48-39-30(C) (1987).
Section 28-4-70. In all cases in which it appears likely that the adoption or enforcement of a regulation may give rise to a right to compensation under the Constitution of this State or of the United States, under the common law of this State, under the statutes of this State, or under the provisions of this chapter, the proposed regulation must be treated as an acquisition of an interest in real property under the Eminent Domain Procedure Act, and the governmental entity shall proceed to condemn that interest in real property in accordance with the provisions of the Eminent Domain Procedure Act.
COMMENTS
This section explicitly brings regulatory takings into the condemnation process under the Eminent Domain Procedure Act. The existing procedures under the Eminent Domain Procedure Act are well tailored to fairly resolve the issues arising from condemnation, whether it involves physical appropriation or land use regulation, and there is no need to create a separate set of procedures to deal with regulatory actions.
Section 28-4-80. Any regulation of real property gives rise to a right to compensation when an appraisal or other valuation pursuant to this chapter or the Eminent Domain Procedure Act indicates a substantial diminution of the total value of the real property resulting from the regulation.
COMMENTS
This section creates an explicit right to compensation when regulation of real property results in a substantial diminution of the total value of the property. The amount of such a diminution would be determined through appraisal. No specific formula for determining what constitutes a `substantial diminution' is provided, because no formula could adequately address all of the various situations in which compensation would be appropriate. The right to compensation must therefore be determined on a case-to-case basis.
Section 28-4-90. (A) For the purposes of this chapter, in appraising property rights which may be acquired through land use regulation, in accordance with the procedures set forth in the Eminent Domain Procedure Act, the following additional factors must be taken into account:
(1) the economic impact of the regulation on the property owner;
(2) the extent to which the regulation interferes with distinct investment-backed expectations;
(3) the character of the regulation;
(4) the present use of the property and of adjacent property;
(5) the probable future use of the property;
(6) the extent to which the use of the property is already limited by other regulations, nuisance law, and the use of adjacent property;
(7) the extent to which remaining uses of the property are economically viable;
(8) any economic benefit to the property as a result of the proposed regulation;
(9) the existence of any liens or encumbrances on the property, and the extent to which claims secured by such liens or encumbrances on the property before the regulation exceed the extent to which such claims are secured by liens or encumbrances on the property subject to the regulation.
(B) The fact that a property owner paid taxes based upon a particular valuation or use is not relevant to the valuation of property or an interest in property for the purposes of this chapter; however, in the event that compensation is awarded based upon an anticipated change in valuation or use, payment of the compensation must be equivalent to a sale or change in use for tax purposes and the property may be subject to such tax rollbacks as would otherwise be effective in the event of such a sale or change in use.
COMMENTS
This section identifies additional factors which should be taken into account in appraising property taken through regulation in accordance with the general procedures created under the eminent domain statute. Subsection (A) requires that the following additional factors be considered: Clause (1), the economic impact of the regulation on the property owner, ties the property owner's right to compensation to the actual economic realities pertaining to the property in question. Clause (2) incorporates the constitutional test of investment backed expectations into the appraisal process. See Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978); Lucas v. South Carolina Coastal Council, 112 S.Ct. 2886 (1992); Agins v. Tiburen, 447 U.S. 255 (1980). Clause (3) incorporates additional language from Penn Central which is applicable to the determination of compensation for a constitutional taking. By their nature, some regulations will be more invasive and give rise more directly to a right to compensation, while other less invasive regulations would only give rise to a right to compensation when other facts such as economic impact of the regulation are also taken into account. Clauses (4) and (6) recognize that the use and value of property are subject to prior limitations resulting from nuisance law, the use of adjacent property, and so forth. Clause (5) indicates that, when a particular future use of the property is probable, a right to compensation may arise even if it is unsupported by substantial investment. Clause (7) recognizes that the economic impact of a regulation depends in part upon the remaining viable uses. The expression `economically' is drawn from Supreme Court takings jurisprudence. (See Lucas, Agins) Clause (8) is drawn from existing eminent domain legislation and recognizes and recognizes that the need for compensation is offset by benefit which are conferred upon property. Clause (9) has two purposes. First, it recognizes that the existence of liens and encumbrances upon property often is a good indication of the property's value or of investment backed expectation. Additionally, because any regulation which impairs the collateral value of property is likely to cause a default or acceleration of obligations secured by the property, this clause requires any appraisal to take into account the compensation which would be required to satisfy or secure existing obligations. The language is loosely patterned after language in Section 506 of the Bankruptcy Code. Section (B) eliminates the use of tax status of land as evidence of its value. The fact that a property owner takes advantage of tax reductions which may be available should not affect the owner's right to compensation when the land is acquired or regulated by the State. Rollbacks provided for under other state law adequately provide compensation to the State for recovery of lost revenues following a change in tax status.
Section 28-4-100. In the event that any governmental entity fails to institute condemnation proceedings in accordance with this act and the Eminent Domain Procedure Act when the enactment or enforcement of the regulation has the effect of diminishing the value of real property, then the property owner is entitled to bring an action for damages in inverse condemnation and is entitled to attorney's fees in accordance with Section 28-11-30. Nothing in this chapter shall be construed as limiting the rights of a property owner to seek damages for inverse condemnation or constitutional takings, or to challenge the constitutionality of any regulation.
COMMENTS
This section indicates that this act is not intended to limit property owners' rights to compensation for constitutional takings or their right to bring inverse condemnation claims. If the procedures created by the act are followed, the number of such claims should be reduced because in most instances compensation should be provided through the statutory process. Whenever the State fails to follow the procedures of the act, the property owner would retain the right to bring an action for damages under other law. This section also indicates that property owners should have the same right to recover attorney's fees when they are forced to bring actions for inverse condemnation for regulatory takings as presently exist in the case of physical appropriation of property, pursuant to Section 28-11-33 of the South Carolina Code."
SECTION 2. Except as otherwise specifically provided in this act, this act takes effect upon approval by the Governor.