H 3790 Session 111 (1995-1996)
H 3790 General Bill, By Harrison, Bailey, J.M. Baxley, G. Brown, H. Brown,
J. Brown, B.D. Cain, Carnell, Cato, C.D. Chamblee, Cooper, Dantzler, Davenport,
Easterday, L.L. Elliott, Fair, R.C. Fulmer, Gamble, Harvin, B.H. Harwell,
J. Hines, T.E. Huff, H.G. Hutson, Jennings, Keegan, Kelley, Kennedy, M.H. Kinon,
Kirsh, Koon, Lanford, Law, L.H. Limbaugh, Littlejohn, C.V. Marchbanks,
L.M. Martin, Mason, J.G. McAbee, McCraw, McKay, McMahand, Meacham, Neilson,
Phillips, Quinn, Rhoad, Rice, Riser, Robinson, Seithel, Sharpe, D. Smith,
R. Smith, Spearman, Stille, E.C. Stoddard, Stuart, Townsend, Tripp, Trotter,
Vaughn, D.C. Waldrop, Walker, Whatley, Wilder, D. Williams, Witherspoon,
S.S. Wofford, H.G. Worley, D.A. Wright and Young-Brickell
Similar(S 839)
A Bill 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".
03/14/95 House Introduced and read first time HJ-129
03/14/95 House Referred to Committee on Judiciary HJ-129
A BILL
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:
"Chapter 4
The South Carolina Property Rights Act
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.
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