Everything’s Bigger in Texas
Both the US and Texas Constitutions provide compensation for property takings. Under the US Constitution, the government is required to compensate property owners for “taken” property. However, the Texas Constitution is broader and per Tex. Const. art I, § 17(a) “no person’s property shall be taken, damaged, or destroyed for or applied to public use without adequate compensation being made.”
Occasionally, a regulation can infringe on an owner’s property to such an extent that it can be considered a taking by either denying the owner its economic value or by unreasonably interfering with its use and enjoyment. The Penn Central balancing factors are used to determine if a regulation is a taking by considering the:
- Character of the government’s action
- Extent to which the regulation has interfered with the owner’s reasonable investment-backed expectations
- Economic impact on the owner of the regulation
Typically, the government is immune from a lawsuit unless it waives immunity. However, the government waives its immunity when it refuses to acknowledge an intentional taking. This is known as an inverse condemnation claim. To succeed on an inverse condemnation claim a plaintiff must show that the government intended or was substantially certain it would take or damage private property.
What happened in the City of Baytown v. Schrock?
In 1993, in the city of Baytown, Texas, Alan Schrock purchased a lot with the intention of leasing out a mobile home on the property. The City of Baytown assessed Schrock’s past unpaid utility bills, determining he owed $1,157.39 and placed a lien against the property for that amount in 2009. Within the year, Schrock attempted to pay the lien, but the City refused to accept his check. Ultimately, payment was never tendered, and Schrock’s property fell into disrepair.
In 2012, Schrock sued the City for inverse condemnation, arguing that the City had violated section 552.0025 of the Texas Local Government Code by refusing to reconnect his utility services once payment was offered. The City claimed immunity from Schrock’s claims and eventually all claims were dismissed except his regulatory takings claim. The trial court determined that Schrock had failed to provide evidence of a taking.
The court of appeals reversed the trial court’s decision citing Penn Central and stating that a fact issue existed as to whether the City had interfered in bad faith with Schrock’s investment-backed expectations. The Supreme Court of Texas determined that the trial court had rendered the proper verdict and reversed the judgment of the court of appeals.
Schrock argued that the improper action of the City denied him all economically viable uses of his property and interfered with his enjoyment. He argued that the appeals court had correctly applied the Penn Central factors which provided evidence of a regulatory taking.
The City instead relied on City of Houston v. Carlson, a similar case that the Court most recently rejected. In Carlson, the City of Houston ordered condominium owners to vacate their property for failing to fix mandatory repairs. In that case, the Court found that condominium owners failed to show a regulatory taking because the ordinance was not one that directly regulates land use. Likewise, Schrock failed to show that the ordinance created an intentional taking, and instead his case revolved around the City’s wrongful enforcement of an ordinance.
Ultimately, the Court agreed with the City. It explained that Schrock could have simply reversed the lien via payment or an appeals process. Thus, Schrock failed to show such economic impact as to appropriate the property from him.
The Resulting Impact on Property Owners
The Court has distinguished regulations concerning land use with those that don’t regulate land use but might have an effect on it. The Baytown ordinance regulated a service provided to a property and not the property itself. The remedies for such regulations are narrower because the government will most likely have immunity in these circumstances. Landowners in this situation can relieve the problem by paying what they owe, seeking review through an appeals process if the ordinance allows, or seeking some type of injunction.
While the Court did not foreclose the possibility of succeeding on a damages claim, it expressed the severity needed to succeed, explaining that “a condition of use ‘so onerous that its effect is tantamount to a direct appropriation or ouster’” is necessary to sustain a regulatory takings claim.
As a landowner, if you find yourself in an adverse position similar to Schrock, know that your remedies are limited and consider paying the amount owed or seeking review through an appeals process. Consulting an experienced Texas real estate attorney will let you know your rights and remedies to protect your property and your enjoyment of your assets for years to come. Contact Cassie McGarvey at cmcgarveypllc.com or visit the website at mcgarveypllc.com for more information.
1 U.S. Const. amend. V (“[N]or shall private property be taken for public use, without just compensation.”).
2 City of Houston v. Carlson, 451 S.W.3d 828, 830 (Tex. 2014).
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