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Builder’s Property Rights Fight a 14-Year Nightmare
 The federal courts have abdicated their responsibility to protect property owners, so Congress must enact legislation to ensure that liberties safeguarded by the takings clause in the Constitution can be defended in the federal courts, a Minnesota home builder told the House Judiciary Subcommittee on the Constitution on June 8.
“Passage of the Private Property Rights Implementation Act of 2006 (H.R. 4772) is absolutely essential to restore the fundamental private property rights that have been a bulwark of our democracy since the nation’s founders enacted the Bill of Rights,” said Frank Kottschade, a builder and developer from Rochester, Minn.
Kottschade is president of North American Realty, Inc., a small development and real estate brokerage company. Since it was founded 34 years ago, his company has provided more than 1,400 homes for Minnesotans across the economic spectrum, including single-family houses, rental apartments, seniors housing, mobile homes and affordable townhouses.
Kottschade recounted a true story of government abuse. When he applied for approval to construct 104 townhomes on a property he purchased in Rochester in 1992, as allowed under the city’s zoning code, the city planning department made a number of unreasonable demands, including that he create a man-made lake on the property, which ran counter to rules set forth by the Minnesota Department of Natural Resources. Other demands were equally egregious.
After years of enduring the city’s stalling tactics and unreasonable contingencies, Kottschade sued the city in the U.S. District Court for the District of Minnesota. As is typical in property rights cases, the federal court dismissed his case, finding that he was required to first litigate in state court because of a unique requirement in constitutional law. Ironically, in its opinion dismissing his appeal, the Eighth Circuit clearly recognized that claimants such as Kottschade, who are required to seek a remedy in state court, are “altogether denied a federal forum for what is undoubtedly a federal right.”
The U.S. Supreme Court, which hears only a small fraction of the cases filed, later declined to hear Kottschade’s appeal.
But in 2003, while he was waiting to learn if the U.S. Supreme Court would accept his case, the Minnesota Department of Transportation filed formal condemnation proceedings against Kottschade’s property in state court under its eminent domain powers and took title to all 28 acres, including the 16.4 acres he had sought to develop.
The state valued the confiscated land at about $875,000, or roughly 10 cents on the dollar of its actual market value, noting that Rochester’s development limitations had depressed what the property was worth.
Now, the city has asked Kottschade to enter into a “development agreement” under which he would be required to give to the city some of the “just compensation” he might receive from the state, on the grounds that if the proposed townhomes had been built he would have had to dedicate part of his land for a right-of-way.
“Assuming I receive money from the state to compensate me for the value of my land in the eminent domain proceedings — which has been lowballed because the city imposed excessive conditions that reduced the land’s development potential — the city wants me to pay it some of those compensation dollars because it would have required me to dedicate that land anyway — even though the dedication it demanded is excessive, extortionary, lacks proportionality, violates Fifth Amendment standards and escapes federal court review,” Kottschade said.
Kottschade pointed to his 14-year nightmare as a glaring example of why federal legislation is needed to provide citizens with access to federal courts in property rights cases.
“Takings law, in all its dimensions, is notoriously chaotic,” Kottschade said. “The Supreme Court itself has issued takings decisions that are difficult, if not impossible, to accept. With lack of coherence and no guidance from the high court, rampant confusion in the lower federal courts has been the predictable result. The time is ripe for Congress to clean up the ripeness mess.”
Kottschade pointed out to legislators that the state litigation requirement voids the Fifth and Fourteenth Amendment protections for property owners.
“I note with irony,” Kottschade said, “that on the Web site for the U.S. federal courts, www.uscourts.gov, it reads that ‘the federal courts often are called the guardians of the Constitution because their rulings protect rights and liberties guaranteed by the Constitution.’ Unfortunately, I know this is not true, from my own personal experience.”
To read the legislation, click here and enter H.R. 4772 in the box at the center of the page.
For more information, e-mail Blake Smith, or call him at 800-368-5242 x8583.
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