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City Misconduct Is Not Enough to Show Regulatory Taking in Texas
On March 5, a year and a half after the case was argued, the Supreme Court of Texas addressed the moratoria and rezoning concerns of a local developer. In Sheffield Development Company v. City of Glenn Heights, the Court agreed with NAHB’s position on moratoria, but still found that the developer was not subject to a regulatory taking of his property.
Sheffield had been interested in buying property for a residential subdivision and asked the city about the zoning situation. After learning that the existing zoning would remain in place, he purchased the property while Glenn Heights secretly began proceedings to rezone. Three days after closing, the city issued a moratorium to last one month purportedly for a land use study. The study was completed within the month, but the city kept renewing the moratorium until it lasted over a year while they debated the recommendations of the study. Sheffield filed a plat during a short break in the rolling moratorium, but the city manager rejected it.
At the end of the process, the land was rezoned unfavorably for Sheffield’s intended project. Sheffield raised regulatory takings claims, and he prevailed at both the trial and appeals court stages. However, the Texas Supreme Court viewed the case differently.
The three issues up for review were
- Whether the moratorium constituted a regulatory taking
- Whether the rezoning constituted a regulatory taking
- Whether Sheffield’s request for a declaration that his property rights had vested when he filed the plat during the moratoria lapse was ripe for review by the Court
Sheffield argued that the moratorium and the rezoning did not advance a legitimate state interest and that the action too severely restricted his use and enjoyment of the property. NAHB participated as an amicus on the moratorium issue and advised the Court that a moratorium adopted for purposes other than emergency may lead to a taking, and that partial loss (as opposed to all loss) of economic use coupled with impairment of distinct investment-backed expectations can lead to a taking.
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, the city tried to convince the Court that using delay to extract concessions from landowners is a legitimate government function, and the Court rejected the concept. Finally, the Court 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 rezoning, Glenn Heights argued that the Agins substantial advancement test was obsolete as a takings test, but the Court disagreed. Both lower courts found a legitimate governmental purpose. The Supreme Court of Texas concurred and noted city misconduct but stated that it did not diminish legitimate government interest that the city legitimately sought to achieve. The Court also found that while the impact of rezoning was “unquestionably severe,” it did not approach a taking and addressed Sheffield’s investment-backed expectations and allegation of rezoning targeted at the individual developer.
On the hopeful side, the Court found that the vested rights issue was ripe and should be heard by the lower court. Sheffield will continue the battle for a declaration that his rights were fixed at the time of the filing of the plat during the moratoria lapse, and therefore that he should be allowed to develop under those previous zoning restrictions. Sheffield has filed for rehearing of his takings issues at the Supreme Court of Texas.
For more information about this case, contact Mary Lynn Pickel, NAHB's director of legal services, at 800-368-5242 x8485.
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