The U.S. Supreme Court has just issued one of the most significant decisions in years concerning regulatory takings. The case, called Palazzolo v. Rhode Island, was decided on June 28, 2001 and will play a significant role in cases brought by people throughout the U.S. claiming that their property has become so heavily regulated that it no longer has any value to them.

The big news is that the Court has confirmed that a subsequent property owner can purchase a "takings claim" from a prior property owner. The case also stands for the proposition that aggrieved property owners only need to take reasonable measures so as to "exhaust" their local remedies before they can file a lawsuit against the government alleging that there has been a taking.

Who Is Affected By This Decision?

Any property owner located anywhere in the U.S. whose property has become so heavily regulated by the government that it no longer has any value. Examples: Property declared all wetlands, with no or little use available. Property that has been rezoned so that it can no longer be used. Property that has become landlocked as a result of government action. Property that cannot be developed due to coastal regulations.

What Do You Call Lawsuits Brought By Aggrieved Property Owners Claiming Their Property Has Become Regulated into Uselessness?

Answer: These lawsuits are called "Takings" cases. They are unique kinds of lawsuits requiring the aid of lawyers who have experience with them. Any time the government over-regulates a piece of property so that it no longer has any practical use, it may be that it has "taken" the property without paying just compensation. These cases are also called inverse condemnation lawsuits.

In parts of the country that are heavily developed there are now pressures to curtail development. This is being done through a number of mechanisms that often include attempts to re-zone open spaces, limits on the ability of developers to install infrastructure, such as sewers, and protection of sensitive areas, such as wetlands.

As the urge to preserve open space increases, expect more assertions that the government has taken property without just compensation. History has shown that takings claims are a natural by-product of government efforts to slow development. Takings cases are often a result of government laws designed to protect environmentally sensitive properties such as wetlands.

Does the government have a right to block all use of person's property through regulation?

Often the answer is yes, if the reason is for a public purpose. But, and this is a big but, the government must pay full fair market value and related costs when what remains following regulation is either no use or very little use. Caution: Whether a person may have a "takings" claim is a very fact sensitive inquiry that must be resolved with the assistance of an attorney that has experience with these kinds of cases.

When property has become over regulated so that no or little value remains, and if the government does not pay full fair market value ( it often does not) then the owner must go to court, or wherever the law says he or she must go, to seek just compensation and related costs. That often means ultimately filing a "takings" lawsuit.

Are Takings Cases Easy Cases?

Usually, no. Takings cases are unfortunately hard fought by the government. Government agencies have unlimited financial resources, and can remain in court indefinitely. Private property owners, on the other hand, usually have limited funds and one thing the government often tries to do is outspend property owners. Often, these cases reveal government at its ugliest.

If You Have Property That You Feel Has Been Over Regulated to The Point Where It No Longer Has Any Value, How Will Palazzolo Help You?

Palazzolo will help you if you acquired your property after the regulation at issue went into effect. For example, let's say that your property has all wetlands and you cannot develop it at all. Before Palazzolo, if you acquired the property after the wetlands law went into effect, there was a question concerning whether you had a right to file a takings claim. The government would usually argue that you knew or should have know about the restriction when you purchased the property and you are out of luck. Now, as a result of Palazzolo, it is clear that people can purchase a takings claim. This means that a person who purchased property already subject to debilitating laws may still be able to file a takings lawsuit.

In addition, as a result of Palazzolo an aggrieved property owner may not have to pursue every conceivable local appeal before he or she may file suit against the government. This is referred to as the "exhaustion or remedies " requirement and it may have been lessened somewhat as a result of this decision. This is a very technical issue, and one that must be evaluated by competent counsel.

What Else Should People Know About the Palazzolo Case?

All of the Justices did not agree on this outcome, which suggests that we may receive further guidance from the Court in the near future. But for now, this case represents a significant decision for affected property owners throughout the country.

This is one of the most complicated areas of law. If you have any questions, you should consult with an attorney that has experience in this area.

The information provided in this column is written by Stuart Lieberman,a practicing environmental attorney, and is for general information purposes only. It is not legal advice and should not be used in place of legal advice.

Stuart Lieberman, Esq., and IRED.Com, Inc., will not accept any responsibilty for any reliance on the information in this column or any damages whatsoever resulting from reading this column.