Landowner, Clayland Farm, challenged three local zoning ordinances designed to limit new residential development pending the completion of a comprehensive rezoning plan by Talbot County. The Landowner alleged a taking under the Fifth Amendment and state law, and a substantive due process claim under federal and state law. It was undisputed that Clayland possessed the ability to develop the Property for residential housing, but never took any steps to begin development, further subdivide the Property, or request sewer allocation for any future development prior to adoption of the local zoning ordinances by the County.
With respect to Clayland’s facial regulatory takings claim, the Court analyzed it under the three-prong analysis in Penn Central Transportation Co. v. City of New York, which recognized that a regulation can be so burdensome as to become a taking. 438 U.S. 104, 124, 98 S. Ct. 2646, 57 L. Ed. 2d 631 (1978). The Court noted that Penn Central required it to balance “‘a complex of factors,’ including (1) the economic impact of the regulation on the claimant; (2) the extent to which the regulation has interfered with distinct investment-backed expectations; and (3) the character of the governmental action.” Murr v. Wisconsin, 137 S. Ct. 1933, 1943, 198 L. Ed. 2d 497 (2017)(quoting Palazzolo v. Rhode Island, 533 U.S. 606, 617, 121 S. Ct. 2448, 150 L. Ed. 2d 592 (2001)). The first two factors—economic effects and investment-backed expectations—are “[p]rimary among those factors.” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538-39, 125 S. Ct. 2074, 161 L. Ed. 2d 876 (2005).
First, the Court held that the economic-effects factor weighed in favor of the County. The Property’s diminution in value was insufficient to establish a regulatory taking. Before the County enacted the ordinance, the Property was valued at $3,250,000; after enactment the Property was valued at $1,950,000, a decrease of approximately 40 percent. The Court had previously found that a hypothetical 83 percent diminution in value was insufficient to establish a regulatory taking. See Pulte Home Corp. v. Montgomery County, 909 F.3d 685, 696 (4th Cir. 2018).
Further, the Court noted that the Property retained valuable, expressly permitted uses under the new ordinances. The Court stated: “A regulation is not a taking merely because it ‘prohibit[s] the most beneficial use of the property . . . .’” Quinn v. Bd. of Cnty. Comm’rs, 862 F.3d 433, 442 (4th Cir. 2017)(alteration in original)(quoting Penn Cent., 438 U.S. at 125); see also Henry, 637 F.3d at 276 (finding no regulatory taking in part because “property zoned rural-agricultural under the ordinance retained a number of valuable, expressly permitted uses”). Under Bill Nos. 1214 and 1257, Clayland could subdivide any existing parcel into one additional lot, develop at one unit per two acres, or proceed with a previously approved six-lot subdivision. The Court thus held that the first Penn Central factor, therefore, weighed in favor of the County.
The Court next held that “[t]he second factor—reasonable investment-backed expectations—weighed heavily in the County’s favor.” The Court opined that Clayland had no affected preexisting development rights or “vested rights” under Maryland law in relation to the Property. Under Maryland law, in order to obtain a “vested right” in the existing zoning use which will be constitutionally protected against a subsequent change in the zoning ordinance prohibiting or limiting that use, the owner must (1) obtain a permit or occupancy certificate where required by the applicable ordinance and (2) must proceed under that permit or certificate to exercise it on the land involved so that the neighborhood may be advised that the land is being devoted to that use. A Helping Hand, LLC v. Baltimore County, 515 F.3d 356, 370-71 (4th Cir. 2008)(quoting Powell v. Calvert County, 368 Md. 400, 795 A.2d 96, 102 (Md. 2002)). Clayland never obtained a permit, began construction, or took any action on any other development to which it now claimed entitlement. The Court held that “Clayland could not reasonably expect that its zoning designation would remain unchanged in perpetuity.”
In considering the third factor, the character of the governmental action, the Court opined that the “[r]egulatory takings doctrine seeks to ‘identify regulatory actions that are functionally equivalent to the classic taking in which the government directly appropriates private property or ousts the owner from his domain.’” Henry, 637 F.3d at 277 (4th Cir. 2011)(quoting Lingle, 544 U.S. at 539). “Interference with property is less likely to be considered a taking when it ‘arises from some public program adjusting the benefits and burdens of economic life to promote the common good.” Quinn, 862 F.3d at 443 (quoting Penn Cent., 438 U.S. at 124). “Regulations that control development based ‘on density and other traditional zoning concerns’ are the paradigm of this type of public program.” Id. (quoting Henry, 637 F.3d at 277)(explaining that “[l]ocal governments need to be able to control the density of development to prevent the overburdening of public services, environmental damage, and other harms”).
The Court noted that the Supreme Court has expressly approved of the use of moratoria to regulate land use, stating that they “are used widely among land-use planners to preserve the status quo while formulating a more permanent development strategy” and “are an essential tool of successful development.” Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Plan. Agency, 535 U.S. 302, 337-38, 122 S. Ct. 1465, 152 L. Ed. 2d 517 (2002). “[T]he interest in protecting the decisional process is even stronger when an agency is developing a regional plan than when it is considering a permit for a single parcel.” Id. at 340. However, “the duration of the restriction is one of the important factors that a court must consider in the appraisal of a regulatory takings claim.” Id. at 342. There is no bright-line rule for how long a restriction may remain in effect before it implicates constitutional rights. See id. (“Formulating a general rule of this kind is a suitable task for state legislatures.”). Rather, whether a duration is reasonable depends on the context. In this case, the Court recognized that the ordinances were “paradigm[atic]” public-benefit regulations. Quinn, 862 F.3d at 443 (quoting Henry, 637 F.3d at 277), and that the County enacted them “to control the density of development to prevent the overburdening of public services, environmental damage, and other harms.” Id. However, the Court took issue with the six (6) year duration of the regulations. On the other hand, the Court noted the exacting rezoning process involved ensuring compliance with Maryland state law, communicating across several County bodies, revising its plan according to public comment and public hearings, and dealing with public opposition (including the instant litigation). Once the County adopted the 2016 Comprehensive Plan, it then had to contract with an outside company to enact the 2018 Comprehensive Rezoning consistent with the new plan. There was also evidence that the change in Maryland law—which required a review of the County’s comprehensive plan every ten years rather than every six years—derailed the County’s rezoning process to some extent.
The Fourth Circuit stated “[a]lthough the County provides legitimate reasons for the delay, the district court was correct to express concern over the length of that delay. The third factor weighs slightly in favor of Clayland.”
Having examined the three Penn Central factors for a regulatory taking, the Court held that despite the length of the delay, the balance of the Penn Central test ultimately favored the County. Thus, the ordinances were public-benefit regulations that did not deprive Clayland of all development potential and—most significantly, and perhaps even decisively—did not divest Clayland of any vested rights. Accordingly, Bill Nos. 1214 and 1257 did not constitute a regulatory taking.
With respect to Clayland’s substantive due process claim, the Court first stated the standard for establishing such a claim. A plaintiff must demonstrate “(1) that [he] had property or a property interest; (2) that the state deprived [him] of this property or property interest; and (3) that the state’s action falls so far beyond the outer limits of legitimate governmental action that no process could cure the deficiency.” Quinn, 862 F.3d at 443 (alterations in original)(quoting Sylvia Dev. Corp. v. Calvert County, 48 F.3d 810, 827 (4th Cir. 1995)). This is a particularly high hurdle in the zoning context: “it must be clear that the state’s action ‘has no foundation in reason and is a mere arbitrary or irrational exercise of power having no substantial relation to the public health . . . [or] public safety.’” (citing MLC Auto., LLC v. Town of Southern Pines, 532 F.3d 269, 281 (4th Cir. 2008)(quoting Nectow v. City of Cambridge, 277 U.S. 183, 187-88, 48 S. Ct. 447, 72 L. Ed. 842 (1928)).
Here, the Court held that first, Clayland cannot establish that the Bills limiting development deprived it of a property interest because Clayland lacked any relevant, cognizable property interest. As discussed, the Court found that Clayland had no affected development rights under Maryland law. The Court said therefore that “the inquiry ends there.”
The Court further stated that the Bills were reasonable and substantially related to public health and safety. The County enacted those Bills to maintain the status quo leading up to the new comprehensive plan and concomitant rezoning, which in turn were intended to bring the CWSP and 2005 Comprehensive Plan into conformity with each other, given the existing sewer problems and the need to protect the ecological area.
The Court also opined that the “tier map” pursuant to the third Bill did not constitute a substantive due process violation. Clayland argued that the tier map designations usurped its right to sewer service. However, the Court noted, as it held in Quinn and the Maryland Court of Appeals held in Neifert, that landowners have no such a right. See Quinn, 862 F.3d at 439-40 (finding no right to “access to a sewer system” when the municipality did not extend sewer service to the plaintiff’s property); Neifert, 910 A.2d at 1122 (same). Clayland argued that Quinn and Neifert were not binding because they involved different underlying facts. However, the Court said that while the facts may differ, the operative point remained the same: there is no constitutional right to sewer service.
The Court further held that “[e]ven assuming that the tier map designations deprived Clayland of a cognizable property interest, the tier map was rationally related to the County’s zoning powers.” Accordingly, the ordinances do not constitute a substantive due process violation.
Finally, the Court affirmed the district court’s holding that Clayland’s equitable claims were moot, as the challenged legislation had all been replaced and was no longer in effect. The 2016 Comprehensive Plan and the 2018 Comprehensive Rezoning superseded all three of these Bills. Under these circumstances, a declaratory judgment would constitute an advisory opinion.
The Fourth Circuit Court of Appeals’ summary statement at the end of its opinion is in line with many of its recent land use opinions:
“The Camper family and the Camper siblings may have had personal aspirations to develop the Property. But personal aspirations do not rise to the level of a vested property right under Maryland law. We decline to delegitimize ‘a standard zoning tool whose legitimacy was recently upheld by the Supreme Court,’ Quinn, 862 F.3d at 437, on the basis of a speculative property right.”
The Opinion further cements the Fourth Circuit’s application of the law to a somewhat unique set of facts, holding that in order for a property owner to assert a constitutional takings or substantive due process claim, it must have a protectible property right under state law. Maryland is a “vested rights” jurisdiction that requires a valid permit and substantial construction under that valid permit in order for the property owner to possess such a “vested right.” Moratoria are a standard zoning tool for local governments to maintain the status quo while more comprehensive planning and zoning actions are considered and implemented, and property owners who lack “vested rights” under state law will not be protected against the legitimate, comprehensive actions of local governments in carrying out their planning and zoning functions. With respect to sewer, the Fourth Circuit again recognizes in Clayland that there is no constitutional right to sewer service under state or federal law. The Court’s holding, taken together with its other recent land use decisions, should be a clear signal to land owners and developers alike of the limitations upon their rights and the limitations to regulatory takings claims in particular. It should forewarn them of the comprehensive nature and extent of local land use regulation in relation to their property and property rights.