Virtually every owner of commercial real estate in the city of Philadelphia is aware of the prohibition on the taking of private property without due compensation. This prohibition – which is contained in the Fifth and Fourteenth Amendments to the United States Constitution – requires municipalities to pay owners for the fair market value of any land that is taken for a public purpose. In most cases, the municipality or other government entity announces its intention to purchase – or “take” private land by commencing eminent domain proceedings, but occasionally, a municipality will take an action or will refuse to take an action that can have a significant effect on the value of land. In such cases, the land owner often begins the formal proceeding by alleging that the municipality has effected a “de facto taking,” i.e., that the public action or lack thereof has deprived an owner of the value of his land and must therefore pay compensation.
In a recent case in Philadelphia, a land owner wanted to build residences on a parcel that had no direct road access. Even though the parcel had been properly zoned for residential use, and even though the developer had received approval from the City Planning Commission and the city Water Department, the land was useless without road access.
When the city refused to pave the only access road, the developer brought a suit in federal court, claiming a de facto taking had occurred. The after the federal suit was dismissed, the developer sued again in state court. The state trial judge found that the developer had proved that the city had “taken extraordinary and unique measures to suppress and interfere with the development of its private property. But on appeal to the Commonwealth Court of Appeals, the developer lost. The court ruled that the city’s refusal to pave the road was not a de facto taking and dismissed the case.
Other appeals may follow, and this case is not yet completely resolved. Nevertheless, it demonstrates the risks faced by a developer who requires significant municipal action to earn a profit on his investment. Anyone who finds themselves in a similar predicament may benefit from consulting a lawyer who specializes in real estate and eminent domain law. Such a consultation can proved a helpful evaluation of the circumstances, an enumeration of applicable zoning laws and ordinances and an analysis of the governmental approvals that may be necessary to move the project forward.
Source: Law360, “Developer Can’t Collect for Philly’s Refusal to Pave Road,” Dan Packel, July 30, 2015