Cape Town Doesn’t Have To Pay Waterfront Property Owner for Denying House, Court Says

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A Cape Cod property owner who can’t build a house on a lot she owns because of local wetlands regulations has not suffered a regulatory taking of her property and the town government doesn’t have to pay her, the Massachusetts Appeals Court has ruled.

The court overturned a jury verdict awarding property owner Janice Smyth $640,000 – the difference between what an appraiser says the property is worth if it’s unbuildable ($60,000) and how much it would be worth if she could build a house on it ($700,000).

The court decided that Smyth wasn’t entitled to the jury trial she got and that because the land is worth more in nominal dollars nowadays than it was when her parents bought it in 1975, she hasn’t actually lost value in it even though the local conservation commission has denied her permission to build.

The court noted that an appraiser said the lot could be turned into a park or a playground under existing town bylaws. It could also be sold to neighbors to expand their property.

“Based on the valuation determined by the plaintiff’s appraiser, the regulation reduced the value of the property from $700,000 (if buildable) to $60,000 (if unbuildable). While significant, we observe that even as unbuildable the property’s value is still greater than the amount ($49,000) the plaintiff’s parents paid for the property when they purchased it,” wrote Appeals Court chief justice Mark Green, in a decision released Tuesday.

Adjusted for inflation, $49,000 in 1975 dollars is worth about $213,000 in 2014 dollars (and about $231,000 in 2018 dollars).

Before the denial by the conservation commission, Smyth had been paying significant property taxes for the undeveloped lot to the town of Falmouth – in 2011, based on an assessment of $710,000, the yearly tax bill was $5,265.36, according to her lawyers.

The lot is at 250 Alder Lane in Wild Harbour Estates, an upscale development in North Falmouth near an inland waterway that leads to Buzzards Bay.

The property owner first took steps to build a three-bedroom house on the lot in June 2006, after she inherited full ownership. But she needed variances from the town’s wetlands protection bylaw concerning coastal banks, salt marshes, and storm water flow. The Falmouth Conservation Commission denied the variances in 2012, making it impossible for her to build.

Smyth asked a superior court judge to force the conservation commission to allow her to build. The judge refused, but allowed a jury trial to determine whether the regulatory denial amounted to a taking of her property by government regulation. The state and federal constitutions allow takings but require the government to pay damages to the owner.

The Appeals Court on Tuesday, February 19 overturned not only the trial jury’s decision but the right to have a trial by jury in such a case. (The town objected to the jury trial, which Smyth sought and got, as opposed to a bench trial decided by a judge.)

The Appeals Court decision says Massachusetts case law provides for jury trials only when both parties agree or if jury trials were commonly in use for that type of case when the Massachusetts Constitution was adopted in 1780. Smyth’s regulatory land-taking claim isn’t the sort of case that existed in 1780, so she wasn’t entitled to the jury trial she got, the Appeals Court ruled.

“We conclude that the question whether a particular regulatory scheme has effected a regulatory taking, as distinct from the question of what constitutes just compensation for the taking — or, in other words, the question of liability in a regulatory taking claim — is a ‘wholly new’ cause of action, to which the right to a jury trial does not attach,” the Appeals Court said in the decision.

The court also found that the local conservation commission’s denial of permission to build doesn’t amount to a taking, because “… even quite significant reductions in value do not necessarily constitute a regulatory taking.”

The court also examined whether the town was singling out the property owner, but concluded that that’s not the case.

“Here, the government’s action was clearly not like a physical invasion, and the plaintiff admits as much. The regulations at issue are of general applicability to all property in the town that has wetland resources and, by their terms, are designed to protect coastal and wetland resources generally,” the court decision states.

The case carries high stakes for both sides. Smyth had asked the Apepals Court to confirm the $640,000 jury award and grant her an additional $327,320 in interest. (The interest claim is figured at 12 percent dating back to the commission’s denial in 2012, on the legal theory that this was not an eminent domain case (which corresponds to a much lower interest rate) but rather a regulatory taking case, which commands 12 percent interest by state statute.)

Association To Preserve Cape Cod, an environmental advocacy organization headquartered in Dennis, filed a friend-of-the-court brief in the case arguing that salt marsh is particularly sensitive and citing a slew of court decisions upholding local environmental regulations dating back to 1970. The brief argues that Smyth’s lot “had ‘danger Will Robinson’ written all over it” when her parents bought it in 1975, referring to the 1960s science fiction television series Lost in Space.

“The taxpayers should not be expected to pay for undevelopable property particularly when the hurdles are clear at the time of acquisition,” the Association To Preserve Cape Cod brief states.

Smyth’s lawyers noted in their brief that when Smyth’s parents bought the lot in 1975 the town of Falmouth hasn’t adopted a local wetlands bylaw, and that the house Smyth wants to build there would have been legal then. The brief argues that the lot’s projected building site is “well above sea level” and would be buildable if it weren’t for the town’s regulations.

Lawyers representing the property owner and the town could not immediately be reached for comment Tuesday.

Smyth could appeal the state Appeals Court decision to the Massachusetts Supreme Judicial Court. The case could in theory reach the U.S. Supreme Court.

The case is called Janice Smyth vs. Falmouth Conservation Commission.