This spring, the US Supreme will decide a Wisconsin case on the government’s right to consolidate abutting properties into one unit of land.
The Murrs owned two adjacent parcels on the St. Croix River. They bought Lot F in 1960 and built a cabin on it, and then bought Lot E in 1963 as an investment and used it for a volleyball court and open space. Together, the lots contain .98 acre of “net project area,” which is the gross area less deductions for slope preservation, floodplain, right-of-way, and wetlands.
In 2007, the county increased the minimum “net project area” to one acre, and prohibited the development or sale of adjacent, substandard lots under common ownership. The Murrs sought a variance to separately sell or use their two adjacent lots, which was denied, and appeals were unsuccessful. They then sued the county for an uncompensated taking of Lot E because it could not be sold separately, even though it had been purchased separately for investment and the Murrs always expected to be able to sell it separately in the future.
The county argued that the Murrs had no protectable property interest to sell the lots separately and that they were not deprived of the beneficial use of their property. For a regulatory takings claim, the Wisconsin courts first determined a claim for a taking of Lot E could not be considered independently of the common ownership with Lot F.It concluded the combined property remained viable for residential use, and no taking occurred.
The U.S. Supreme Court held oral argument on March 20, 2017 and the federal government argued in favor of the county. The Murrs’ attorney insisted the two separate lots must be viewed and valued independently; however, he faced tough questions from Justice Kennedy, who is commonly the swing vote on takings cases. The decision is due by late June. Only eight justices participated and if there is a tie, the Murrs lose.
What does this mean for Oregonians? Our state land use system also combines adjacent parcels that are owned by the same owner in some instances. For example, the state law for county zoning(ORS 215) defines a “tract” as one or more contiguous lots or parcels under the same ownership. Tracts created by this law affect many uses, including “agri-tourism,” wineries, and forest dwellings, and many property owners are as surprised as the Murrs when they learn that their different parcels, often aggregated over many years, are considered as just one.
Careful owners may avoid this problem by not holding title to adjacent parcels in the same name. This means creating a patchwork of ownerships so that no two adjacent parcels are owned by the same owner. While this workaround does not solve every problem, for most owners it will prevent the Murrs’ situation. If the US Supreme Court agrees that the government can legislate away the internal parcel lines of larger land holdings, the decision will flash a bright green light to regulators who would prefer that multiple properties in common ownership be combined into just one. If that conflicts with your personal estate planning, or your exit strategy for investment real estate, you should get some help with that.
Jamie Howsley is a land use and development lawyer at Jordan Ramis PC and serves on the board of the Oregon Home Builders Association. Contact him at 503-598-7070 or jamie.howsley@jordanramis.com
