We’ll start in Boulder and with commercial development. In February, the Boulder City Council directed city staff to draft an ordinance that would raise the city’s affordable housing linkage fee on new commercial development from $12 per square foot to $25, $30, or $35 per square foot.  Boulder’s current $12 linkage fee is the highest such fee of any city in the country between the two coasts, with Palo Alto the highest in the country at $35.  Even so, City Council members expressed that the current fee is still low enough vis-a-vis fees on residential development to incentivize commercial development over residential development. And more commercial development without new housing only exacerbates the city’s acute jobs-housing disequilibrium.  City Council did indicate, however, that certain applicants such as small businesses and nonprofits would not have to pay the higher fee. The final linkage fee amount will be decided after the ordinance’s first scheduled reading on April 17.

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Boulder wasn’t alone last month in moving towards doubling its affordable housing fees.  Looking to capitalize on the exploding construction in the city, the Lafayette City Council approved the first reading of a measure that would increase its affordable housing fee on new residential development from 30 cents per square foot to 60 cents per square foot.  This fee funds a trust that is used to supplement future affordable housing projects in the city.  The measure is expected to receive final approval in the coming months. Lafayette is also considering an ordinance to enact an affordable housing fee for new commercial development.

The Knick property. Source: Pacific Legal Foundation.

Last week, the U.S. Supreme Court granted a petition for certiorari in the case of Knick v. Township of Scott.  In Knick, the Court is being asked to re-examine its 30-year-old doctrine requiring takings claimants to exhaust state court remedies before filing a claim for just compensation stemming from a regulatory taking in federal court.  The decision to grant the petition indicates that at least four justices agree that it’s time to consider eliminating procedural hurdles created by the Court’s 1985 decision in Williamson County Regional Planning Commission v. Hamilton Bank.

The Fifth Amendment to the U.S. Constitution prohibits the government from taking private property without justly compensating the property owner.  The Takings Clause has been expanded to allow owners to seek compensation in cases where government regulation becomes so onerous that it effectively takes property.

Knick addresses a township law requiring individual property owners to, without compensation, maintain their properties open for public access.  Rose Mary Knick’s 90-acre parcel in western Pennsylvania, which includes her personal residence, was identified by township officials as being the possible site of an ancient burial ground.  Although Knick attempted to convince the township that no documentation proved the existence of such a burial ground, the township passed an ordinance in 2012 allowing general public access to any private cemetery during daylight hours.  Knick attempted to block public access to her property, but was issued a notice of violation by the township’s code enforcement officer.

Knick first sued in the Pennsylvania Court of Common Pleas in 2013, claiming that the township’s ordinance had effectively taken her property.  Because the township had not yet filed any judicial action against Knick, the state court dismissed her claim.  She then filed suit in federal court, again seeking compensation for the alleged taking.  The federal district court dismissed her claims as being unripe, since Knick had not sought compensation through state courts.  The Third Circuit affirmed the district court, similarly finding that Knick’s facial and as-applied claims were unripe.  The Supreme Court granted certiorari last week.

At issue in the case is what is frequently termed the “state litigation rule.”  Understanding the rule requires a look back at Williamson County.  In that case, which involved the denial of a plat application by a county planning commission and subsequent regulatory taking claim, the Supreme Court held that a party bringing a regulatory taking claim must first exhaust all state judicial remedies before bringing such a claim in federal court.  The Supreme Court specifically found in Williamson County that a plaintiff wishing to seek compensation for an alleged regulatory taking must first exhaust all administrative remedies—in Williamson County, the plaintiff should have sought a variance—and must also avail itself of any state procedures for obtaining compensation.  In most cases, that second requirement would have plaintiffs seeking compensation through state courts.

The practical effect of Williamson County has been to require plaintiffs seeking compensation for alleged takings to proceed through lengthy and costly state court litigation, all the way to a point of finality, before even commencing federal litigation to vindicate their Fifth Amendment rights.  In Colorado, for example, a landowner whose land use application was denied and who wanted to bring a subsequent regulatory taking claim would be required to file an action under Colorado Rules of Civil Procedure Rule 106(a)(4), along with a regulatory taking claim.  The claim would need to be litigated through district court and then through the Colorado Court of Appeals.  Only after the Colorado Supreme Court either ruled in favor of the defendant or denied a petition for certiorari—which could be expected to take anywhere from three to five years after the denial, and impose significant cost—could the plaintiff then file a claim in federal district court.

Property rights advocates have long panned the Williamson County decision as imposing a serious and unnecessarily high burden on property owners who wish to seek compensation in the event their property has allegedly been taken as a result of an onerous regulation.  As Knick notes in her petition for certiorari, many problems have been observed with Williamson County.  First, because federal courts are required under the Constitution to afford full faith and credit to state court decisions, most state court takings decisions have been found to be unreviewable by federal courts.  Second, because many parties remove takings claims to federal court, and federal courts subsequently dismiss such claims as unripe, the removal of these claims makes them effectively unreviewable.

The plaintiff in Knick asks the Supreme Court to do one of two things.  It first asks the Court to reverse its Williamson County decision in order to allow takings claimants to bring their claims in federal court.  In the alternative, Knick asks the Court to at least recognize that facial takings claims (i.e. claims that a law effects a taking on its face) be allowed to proceed to federal court without a detour through state court.  Assuming the Supreme Court grants either request, it could be considered a significant win for property rights advocates.

There is no telling what the Court will do with Knick.  Early indications suggest that Justices Thomas and Kennedy are not fond of the state litigation rule, as they joined together in a dissent from a denial of certiorari in an earlier case that attempted to seek the Court’s reversal of Williamson County.  And given the pro-property rights position of Chief Justice Roberts and Justices Alito and Gorsuch, there is a strong initial indication that Williamson County’s days are numbered.  However, the Court has been known to surprise, and much remains to be seen.

As previously reported on this blog a Colorado Court of Appeals decision in 2015 allowed a developer/declarant to retain a right to consent to amendments to a common interest community’s declaration that require arbitration of construction defect claims.

The Colorado Supreme Court has now weighed in on the case involved, which is known as Vallagio at Inverness Residential Condo. Ass’n v. Metro. Homes, Inc., affirming the decision of the Court of Appeals.

Vallagio involved a residential development in which the declaration, created pursuant to the Colorado Common Interest Ownership Act (“CCIOA”) included certain dispute resolution provisions, including an arbitration requirement.  The dispute resolution provisions also stated that those provisions could “not ever be amended without the written consent of the Declarant,” who was the developer of the project. Continue Reading Colorado Condominium Construction Defect Issue: Colorado Supreme Court Affirms the Right of Declarants for Condominium and Other Common Interest Communities to Require Binding Arbitration of Disputes

A survey of the two lots in question. Source: Pacific Legal Foundation.

In a 5-4 decision announced today, the U.S. Supreme Court held that Wisconsin could prohibit development of a subdivision lot—while allowing development on an adjacent lot owned by the same family—without paying just compensation.  The Court’s decision is a victory for states and local governments and a loss for property rights advocates. Continue Reading U.S. Supreme Court Finds No Regulatory Taking in Wisconsin Case

In our April Client Alert, we reported on a possible breakthrough in construction defect reform legislation, which had passed the House and was moving to the Senate.  The Colorado Senate has now unanimously approved House Bill 1279, and sent it to Governor Hickenlooper, who is expected to sign the bill.  HB 1279 was one of six bills introduced this year in an effort to address the dearth of condominium construction in Denver.  It is the only bill to reach the Governor’s desk, and the first bill in four years of effort to make substantive changes to the existing construction defect law in Colorado.