Property Owner Loses Inverse Condemnation/Regulatory Takings Challenge to General Plan Amendment/Zone Change

by Nossaman LLP
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It's not too often a property owner succeeds with an inverse condemnation/regulatory takings claim based on a general plan amendment or zone change.  The owner must generally demonstrate that the regulation either on its face, or when specifically applied to the owner's property, deprives the owner of the economically beneficial uses of the property.  The first attack (a "facial challenge") is difficult to prove, as it is uncommon that a general plan amendment/zone change is drafted in such a way that it -- on its face -- prevents all economic uses of the property.  The second attack (an "as-applied challenge") requires the owner to exhaust administrative remedies, including usually being denied specific plans of development.  A recent Court of Appeal decision, CACERF Norco v. City of Norco, provides an excellent example of just how this situation typically plays out.

In CACERF Norco v. City of Norco, the plaintiff owned 428 acres which had been zoned as "general manufacturing and hillside," which would allow for 378 acres to be used for manufacturing, and the remaining acres to be used for agricultural and low density single-family homes.  In 2010, the City of Norco processed a general plan amendment which created a new preservation and development zone, allowing for commercial, recreational, and resort development.  This new land use designation applied to two large parcels of property within the City, one of which belonged to CACERF Norco.

CACERF Norco challenged the general plan amendment by filing a petition for writ of mandate and asserting a cause of action for inverse condemnation.  CACERF Norco's primary contention was that under the new zoning designation, its property could not be put to an "economically beneficial or productive use," and the general plan amendment therefore constituted an unlawful taking of property.  Specifically, the owner claimed that none of the permitted uses are economically viable, and the only viable use for the property is residential development -- which is expressly prohibited.

The trial court denied CACERF Norco's claims, and it appealed.  The Court of Appeal considered CACERF Norco's inverse condemnation cause of action both as a "facial" challenge and as an "as-applied" challenge to the general plan amendment.  

  • Facial Challenge:  As to the facial challenge, the Court explained:  "The test to be applied in considering this facial challenge is fairly straightforward.  A statute regulating the uses that can be made of property effects a taking if it 'denies an owner economically viable use of his land'. . . ."  The Court held that CACERF Norco's facial challenge must fail, as the text of the general plan amendment/zoning ordinance -- which specifically allows for commercial, resort and recreational uses -- does not deny CACERF Norco all economically viable uses of its land.  The fact that the permitted uses may not be those that the property owner desires, or the uses from which it can maximize its investment, is beside the point.
  •  As-Applied Challenge:  As to the as-applied challenge, the Court held that CACERF Norco's challenge was not ripe:  the owner "failed to avail itself of ordinary processes by which a final decision could be obtained as to the application of the relevant land uses to its property."  In other words, because CACERF Norco failed to submit a specific plan of development, the City could not have reached a final decision regarding the application of the zoning regulation to the property at issue.  For example, even if CACERF Norco was correct that a residential development was the only economically viable use, if CACERF Norco submitted a specific plan of development, the City could decide to grant a variance or later further amend the general plan.  Because the owner had "not followed the reasonable and necessary steps to afford the City the opportunity to exercise its full discretion," the "as applied" challenge failed.

The case serves as a good reminder for property owners of the hurdles that must be overcome before proceeding with an inverse condemnation/regulatory takings action based upon a general plan amendment or zone change.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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