Property Law Developments—Joseph William Singer

The California Supreme Court has upheld the inclusionary zoning ordinance of the City of San Jose against a challenge that it constitutes an illegal exaction and violates the state constitution’s takings clause or the federal constitution’s takings clause. Cal. Bldg. Indus. Ass’n v. City of San Jose, 2015 Cal. LEXIS 3905 (Cal. 2015). The ordinance required all new development projects containing 20 housing units or more to reserve 15 percent for sale at affordable prices to low- or moderate-income families. San Jose Mun. Code, §§ 5.08.010 to 5.08.730. The Court held that the municipal government had the power to enact reasonable land use regulations designed to increase the amount and dispersion of affordable housing and that this ordinance served those ends. Because it regulated land use, it did not constitute an “exaction” or forced donation of land to public use. The Court held that so long as a land use regulation does not deprive the owner of all economically viable use of the property or mandate a forced physical taking, there is no violation of the takings clause when restrictions govern an owner’s use of property. The Court also interpreted the Supreme Court’s requirements in the cases of Dolan v. City of Tigard, 512 U.S. 374 (1994) & Nollan v. Cal. Coastal Comm’n, 483 U.S> 825 (1987), that mitigation fees must bear a reasonable relationship to externalities caused by the development of land did not apply when the law simply regulates the uses to which land can be put.

New Jersey confusingly refers to conditional permits as “conditional use variances.” This language makes it easy to confuse conditional permits and variances. In TSI East Brunswick, LLC v. Zoning Bd. of Adjustment of Tp. of East Brunswick, 71 A.3d 762 (N.J. 2013), the Supreme Court of New Jersey reaffirmed the traditional rule that variances should be granted only in cases of unusual hardship (or other statutory requirements) because they allow something to be done that violates the intent of the zoning ordinance. Conditional permits, on the other hand, allow an activity to occur on land as long as the conditions are met and thus are subject to a lower standard of proof; they are presumptively permitted (as long as the conditions are established) rather than presumptively prohibited.

In 2011, Governor Chris Christie purported to abolish the Council on Affordable Housing (COAH), an agency set up by legislation and designed to implement the state’s Mount Laurel obligations; he planned to transfer its responsibilities to the Department of Community Affairs. The Supreme Court of New Jersey had held in the Mount Laurel litigation that towns were required to implement zoning laws in a manner that made room for all kinds of housing, including housing affordable by low and moderate-income families. S. Burlington County, NAACP v. Twp. of Mount Laurel (Mount Laurel II), 456 A.2d 390 (N.J. 1983); S. Burlington County, NAACP v. Twp. of Mount Laurel (Mount Laurel I), 336 A.2d 713 (N.J. 1975). When the legislature created an agency to manage those obligations, the court held that it constituted a legitimate institutional mechanism for complying with those constitutional obligations. Hills Dev. Co. v. Twp. of Bernards, 510 A.2d 621 (N.J. 1986). In In re Plan for Abolition of Council on Affordable Housing, 2013 WL 3717751 (N.J. 2013), the court interpreted the statute establishing COAH and the statute providing for reorganization of state government and determined that COAH was an independent agency that could not be abolished or reorganized without new authorizing legislation.

State zoning enabling statutes generally define who has the power to challenge decisions by zoning boards about allowable land uses. Many allow abutters who are specially affected by land uses to challenge the legality of building permits or zoning decisions on the ground that if they are not granted this right, there will be no deterrence to zoning boards who ignore the limits of local zoning regulations. The Massachusetts Land Court affirmed the right of abutters who can show they were affected by neighboring land use to challenge zoning permit decisions as “persons aggrieved” under state statutes. Teti v. Town of Sherborn, 20 LCR 154 (Mass. Land Ct. Feb. 29, 2012).

A Massachusetts trial court has banned a gun club from allowing pistols and rifles to be fired on its premises in the face of evidence that stray bullets have entered neighboring properties. Read article Justice Charles Hely converted a three-year-old temporary restraining order into a permanent injunction and ordered payment of a total $22,000 in damages to be paid to several neighbors who lived within a half-mile radius of the club. One plaintiff narrowly escaped being hit by a bullet that entered her laundry room shortly after she left it. The club had also been shut down for failure to obtain necessary permits.

A Mississippi appeals court ruled that an owner of an RV park on could allow portable cabins to be placed on the property as well as RVs. Jones v. Lutken, 62 So. 3d 455 (Miss. Ct. App. 2011). Many courts would find any change like this that expands the use of the property in any appreciable way to exceed the prior nonconforming use limitation but some courts, like this one, are more forgiving.

The Religious Land Use-Institutionalized Persons Act, 42 U.S.C. §2000cc, prohibits enforcing local zoning laws against religious institutions if those laws impose a “substantial burden” on the free exercise of religion and not justified by a compelling government interest that cannot be achieved in a less burdensome manner. The Ninth Circuit applied this statute to deny a city the power to exclude a church from moving to a larger building located in an area zoned for industrial use in the case of International Church of the Foursquare Gospel v. City of San Leandro, 2011 WL 1518980 (9th Cir. 2011). Read article. The church had become bigger over time and was looking for a new facility and hoped to move into an abandoned industrial building. The city hoped to attract a business to the site that would employ city residents and argued that its interest in promoting jobs was a compelling government interest justifying refusal to rezone the property for church uses even if this refusal imposed a substantial burden on religious freedom. The Ninth Circuit held both that job creation was not a compelling government interest that justified such a burden on religious freedom and that even if it was, there were less burdensome ways to achieve that result.

The Supreme Court ruled in Sossamon v. Texas, 2011 U.S. LEXIS 3187 (U.S. 2011), that Congress did not waive the sovereign immunity of the United States when it passed the Religious Land Use and Institutionalized Persons Act (RLUIPA). This means that the only relief available against federal officials for violating the statutorily protected religious freedom rights of federal prisoners is prospective injunctive relief; no damages can be awarded for federal violations of the act. A similar result would apply to land owners whose land use rights are violated by federal officials. The case, however, was not against federal office but state prison officials in a state that accepted federal money to fund its prisons. The precise holding in the case was that prisoners cannot sue such states for damages when those states deprive inmates in state prisons of religious free exercise rights. A similar result could be expected for claims for damages against states and municipalities; such relief appears now to be foreclosed. Of course, states are free to waive their sovereign immunity by clear legislation if they wish to do so.

When banks foreclose on property and then purchase the property at the foreclosure sale, they become the new owners of the property. They would like to resell the property as soon as possible. But in a recession, that is not always possible and when banks retain title to those foreclosed properties, they are subject to local law regulations to maintain the property and ensure that it does not become dilapidated. But many banks have been failing in that regard. They are in the business of financing the sale of property not in managing it. That has prompted the City of Boston to impose more than $80,000 in fines on Wells Fargo & Co and Bank of America for allowing many vacant properties in their possession ‘to fall into disrepair and blight neighborhoods.” Megan Woolhouse, Banks high on list of delinquent property owners, Boston Globe, Apr. 15, 2011.

Bank officials deny they own some of the properties, sometimes on the ground that they are merely the loan servicer or the trustee for securitized mortgages. This illustrates a problem with the securitization process and the practice of not recording the name of the bank that actually “owns” the mortgage. The city is using public records to contact the owner of record; if that institution is not the one who is the real owner, the fault lies not in the city but the failure of the banks to follow the requirements of the state recording laws which are designed to allow public identification of those with property interests in each parcel of real estate in the city.

The New York Court of Appeals affirmed the usual rule that an owner may have a “vested right” to engage in activity on land if the owner invests substantially in reliance on existing law even if the use has not commenced before the zoning law is changed to prohibit the previously lawful use. In this case, Glacial Aggregates LLC v. Town of Yorkshire, 924 N.E. 2d 127 (N.Y. 2010), the owner had invested $500,000 in mitigation measures to secure a mining permit and had received the permit; when the town amended its zoning law to classify mining as a use needing a special permit and then refused to issue the permit, the Court of Appeals had little trouble in finding the $500,000 investment, when coupled with the permit grant, to be sufficient to give the owner a vested right to engage in the mining activity. The case is interesting because no mining had yet occurred and all expenditures were undertaken to get the permit itself; in the usual case, a vested right is not found until the owner begins investing in creating the use–for example by beginning to build a structure. Here the initial expenditures were both necessary and expected and of such a magnitude that the new prohibitory law could not be imposed retroactively.

The Planning Board in Bourne, Massachusetts rejected an application from a home owner to install a 132-foot tall windmill in her back yard that would have generated enough electricity to power her home. Some people in other towns, including Vineyard Haven, Mass. have succeeded to getting permission to install these devices. read article