Texas Town’s Misconduct Not Enough to Show Taking - 5/10/2004 - Attorney Lawyer Legal Building Codes Zoning

Texas Town’s Misconduct Not Enough to Show Taking

Increasingly, state and local governments are trying to restrict property development by adopting indefinite development moratoria, imposing unreasonable impact fees as part of the permitting process, and even rezoning affected land. As a result, property owners have been unable to develop their land for long periods of time — even with existing permits in hand.

To counter these actions, property owners have brought legal challenges to vindicate their rights and receive compensation for the unlawful taking or deprivation of the use of their property under the U.S. Constitution’s Fifth Amendment. They are encountering stiff resistance in state and federal courts across the country, and NAHB continues to work with affected members to redress these unlawful takings.

Glenn Heights Uses ‘Rolling’ Moratorium, Rezoning to Stop Developer

Gary Sheffield, of the Sheffield Development Company, had wanted to build a residential subdivision in Glenn Heights, TX, but was stymied when the City of Glenn Heights abruptly slapped him with a moratorium and then rezoned his property after first assuring him that he would be able to build.

Before purchasing the property, Sheffield asked city officials if the existing zoning would remain in place. Having received no specific information of any pending zoning changes, he purchased the property.

However, during the purchase process the city secretly began proceedings to downzone the property. Three days after Sheffield’s purchase was complete, Glenn Heights issued a one-month moratorium on the property, purportedly so the city could conduct a land use study. The city then extended the moratorium for another month, let the moratorium lapse for several days, and then reinstituted and extended the moratorium for several more months — in effect creating a “rolling” moratorium — even though the study was completed during the second month of the moratorium.

During the short lapse in the “rolling” moratorium chain, Sheffield did file a plat, but the Glenn Heights city manager rejected it. Then, when Glenn Heights ended the moratorium, it rezoned the property to allow about half the number of houses permitted under the original zoning.

Sheffield raised regulatory takings claims and prevailed at both the trial and appeals court stages. The city kept appealing all the way to the Texas Supreme Court where arguments were heard about 18 months ago.

Three issues were up for review before the court:

1. Whether the moratorium constituted a regulatory taking
2. Whether the rezoning constituted a regulatory taking
3. Whether Sheffield’s request for a declaration — that his property rights had vested when he filed the plat during the moratorium lapse — was “ripe” for review by the court

NAHB participated as an amicus curiae — a party not directly involved in the litigation but allowed to advise the court — on the moratorium issue. NAHB advised the court on two points:

1. That a moratorium adopted for purposes other than an emergency may lead to a taking
2. That partial loss (as opposed to all loss) of economic use coupled with impairment of distinct investment-backed expectations (as judged to include pre-purchase due diligence and specific development plans) can lead to a taking

On March 5, a year and a half after the case was argued, the Supreme Court of Texas addressed Sheffield’s moratoria and rezoning concerns.

The Court Rules in the City’s Favor

On the moratorium issue, the court agreed with NAHB that a taking may occur. However, the court found that a legitimate government purpose existed even though there was a delay and perhaps improper action by certain city council members. Interestingly, Glenn Heights tried to convince the court that using delay to extract concessions from landowners is a legitimate government function, and the court rejected the concept.

The court also found that Sheffield did not effectively show what economic impact he suffered as a result of the moratorium. But the court did state that it could easily imagine circumstances where delay, which is aimed more at one person or is more protracted with less justification, is more indicative of a taking.

On the rezoning issue, the Supreme Court of Texas concurred with lower court rulings and noted that misconduct on the part of the city had occurred but stated that the misconduct did not diminish the city’s legitimate government interest. The court also found that while the impact of rezoning was “unquestionably severe,” it did not approach a taking.

The court did rule for Sheffield on one point. It found that the vested rights issue was “ripe” and should be heard by the lower court. Sheffield has filed for rehearing of his takings issues at the Supreme Court of Texas.

For more information about this case, e-mail Mary Lynn Pickel, NAHB director of legal services, or call her at 800-368-5242 x8485.