Salon recently published an excerpt of a new book, “The End of the Suburbs: Where the American Dream Is Moving,” by Leigh Gallagher.  The excerpt can be found here.

The article discusses the dramatic increase in suburban poverty in recent years; the number of poor living in the suburbs increased by 53% between 2000 and 2010. 

An interesting part of the article addresses the decline of the traditional enclosed shopping mall.  Ms. Gallagher points to the startling fact that “[o]nly one enclosed indoor shopping mall has opened in the United States since 2006.”  On a more positive note, she points out that some developers have turned moribund enclosed malls into open, new-urbanist “lifestyle centers,” restoring the street grid and combining retail, residential and office uses.  As an example, she cites the redevelopment of the Villa Italia Mall in Lakewood, Colorado into Belmar, a project developed by our client, Continuum Partners.  Her description is worth a read.

 

HOAs must now allow certain water conservation efforts and accommodate their homeowners’ hybrid and electric cars due to two quietly enacted but noteworthy bills.  Senate Bill 13-183 requires HOAs to allow xeriscaping—landscaping utilizing low-water-use plants—and prohibits them from requiring homeowners to install water intensive grasses.  The law also precludes HOAs from fining homeowners for failing to water their landscapes in accordance with the HOA’s watering requirements if the homeowner is watering the maximum amount permitted by in-effect municipal water restrictions.  Turning to hybrid and electric cars, pursuant to Senate Bill 13-126, HOAs must allow homeowners to install charging systems for their plug-in hybrid or electric cars on or in their units and in their parking areas.  And while the homeowner is responsible for the cost of the installation, HOAs cannot assess or charge homeowners a fee for placing or using the charging system on or in their units.  Both laws became effective in May.

 

 

 

The Colorado Supreme Court recently decided the case of Asmussen v. United States, which affects the determination of legal title to the land underlying abandoned railroad easements sometimes referred to as railroad “right-of-way” (please note that the term “right-of-way” can encompass fee simple interests held by railroads in addition to mere easements – this case only dealt with railroad easements).

RR image.jpgThe Asmussen case has its origins in the National Trails System Act, also known as the Rails-To-Trails Act, which allows railroads to “bank” right-of-way that they no longer need so that it can be converted into public trails.  If the railroad later decides that it once again needs to use the right-of-way, it is allowed to do so.  The Asmussen case started when a group of landowners, whose property is adjacent to abandoned right-of-way, filed claims with the Court of Federal Claims arguing that this “railbanking” amounts to a taking of their reversionary interest to the land underlying the railroad easement and entitles them to just compensation (rights to an abandoned easement estate generally revert back to the owner of the underlying fee interest).

The landowners in the federal takings case presented evidence that they owned the adjoining land, but they did not present any evidence that their title stemmed from the owner of the land at the time when the railroad first received its easement interest.  The government moved for summary judgment, arguing that the landowners did not present sufficient evidence to justify their claims.  In response, the landowners relied on what is known as the “centerline presumption.”  This common-law rule states that the conveyance of land abutting a railroad right-of-way is presumed to carry title to the centerline of the right-of-way to the extent that the grantor has any interest therein and absent a clearly expressed, contrary intent.  The government argued that the centerline presumption did not apply because the landowners failed to trace their title back to a grantor that held title to the land underlying the right-of-way.  The Court of Federal Claims decided to certify this issue as a question to the Colorado Supreme Court (this procedural device allows federal courts to ask state courts for guidance on undecided issues of state law).

The question certified to the Colorado Supreme Court was whether an adjoining landowner is presumed to be the owner of the fee interest all the way to the centerline of the abandoned railroad right-of-way even if that landowner has not presented evidence that his or her title derives from someone who actually held title to the land underlying the right-of-way.  The Court answered the question in the negative: an adjoining landowner cannot claim presumptive ownership to the centerline of the railroad right-of-way unless that owner produces evidence that his or her title derives from someone who held title to the land underlying the right-of-way.

The Court offered different rationales for its decision.  The most convincing was that absent this evidentiary showing the government might end up having to pay compensation to the wrong party.  For instance, the original grantor might have explicitly reserved the right to the land underlying the railroad right-of-way and conveyed it to someone else.  Additionally, the following hypothetical situation could occur:

In the 1850s Mr. Smith received a patent to a parcel of land next to another parcel owned by Mr. Thomas.  In 1865, Mr. Smith granted an easement to a railroad over a portion of his property that extended all the way to his boundary line with Mr. Thomas.  Mr. Thomas did not grant the railroad any easement.  Below is a crude visual depiction of the scenario:

 

Mr. Smith’s Land

 

    Deed to Mr. Black (1910)

 

       Deed to Mr. Orange (1960)

 

         Deed to Ms. White (1990)

 

|

|

RR Easement granted by Mr. Smith (1865)

|

|

<—–|—–> (centerline)

|

|

 

Mr. Thomas’ Land

 

       Deed to Mr. Green (1912)

 

           Deed to Ms. Red (1957)

 

              Deed to Mr. Blue (1985)

 

Under the rule advocated by the landowners, the modern-day landowner who derived title from Mr. Thomas (i.e., Mr. Blue) would be presumed to be the owner of the abandoned “right-of-way” all the way to the center line, even though Mr. Thomas never held title to the underlying property.  That means the landowner tracing her title back to Mr. Smith (i.e., Ms. White) would be deprived of compensation for half of the right-of-way, or the government might have to pay two claims.

It is important to keep in mind that this decision does not take any property rights away from landowners.  Rather, it merely increases the evidentiary burden on landowners in a takings or quiet title case by requiring them to trace their title back to the original owner of the land underlying the disputed railroad right-of-way.  While this may be onerous, it ensures that the correct party is receiving compensation.

            On June 25, the U.S. Supreme Court issued an opinion in the case of Koontz v. St. Johns River Water Management District with potentially noteworthy ramifications for property owners and developers.  The decision provides some clarification in an area that has troubled various state and federal courts since the Supreme Court decided the duo of Nollan v. California Coastal Commission and Dolan v. City of Tigard approximately two decades ago: does a government’s demand for a commitment of money or services in exchange for a development approval comport with the constitution’s protection against takings of private property without just compensation?

            Nollan and Dolan addressed the situation where a governmental permitting authority demands a dedication of property—such as an easement for public use—in exchange for the property owner’s obtaining a development approval (i.e. a site plan approval, conditional use permit, rezoning, etc.).  Such demands are frequently termed “exactions.”  Out of Nollan and Dolan came a two-pronged “heightened scrutiny” rule related to such demands: in cases where the government conditions approval on dedications of property, the government must demonstrate (1) a nexus, or tailoring, between the condition imposed and the government’s purpose in imposing the condition, and (2) a rough proportionality between the nature and extent of the required dedication and the proposed development.  Nollan and Dolan left two questions unanswered, however.  First, does a property owner of whom an exaction is demanded—but who refuses to consent to the condition—have a claim under the Takings Clause?  And second, is a government’s demand of money, services, or other non-real property interests in exchange for a development approval subject to heightened scrutiny? 

            June’s Supreme Court decision answers these questions.  In Koontz, a Florida property owner sought a permit to develop a small portion of his property, which would result in the reduction of a wetland area.  The permitting authority offered such a permit, with the condition that the landowner provide funds for the purpose of constructing off-site wetlands to replace those that would be impacted by the proposed development.  The landowner refused to comply with the condition, and sought judicial relief.  The Florida Supreme Court held that takings law was inapplicable where the permit was not issued because of the landowner’s refusal to comply with the condition, and that the dedication of funds could not be an unconstitutional condition as in the case of a property interest.

            The U.S. Supreme Court overturned the Florida court on both inquiries. First, all nine Supreme Court justices agreed that the denial of a permit on the grounds that the applicant failed to accede to a condition was equivalent to the issuance of a permit with conditions, thus bringing the matter within the purview of the unconstitutional conditions doctrine.  Second, a majority of the justices, in an opinion authored by Justice Alito, found the government’s demand for money in exchange for a development approval to be an unconstitutional condition violating the Fifth Amendment Takings Clause.  While the majority stated that its decision would have no impact on “taxes, user fees, and similar laws and regulations that may impose burdens on property owners,” the decision’s full effect with respect to monetary exactions is not totally clear.

            In Colorado, Koontz reaffirms some recent statutory law but has the potential to alter other established law.  In 2001, the Colorado Supreme Court in Krupp v. Breckenridge Sanitation District intimated that monetary exactions would not be subjected to heightened scrutiny because money was sufficiently distinct from real property.  Krupp also found that legislatively-enacted, broadly-applicable fees could not be subjected to the Nollan and Dolan tests, while ad hoc, administratively-crafted fees applied differentially to individual property owners could be subjected to such heightened scrutiny.  Also in 2001, the Colorado legislature enacted the Impact Fee Act, §§ C.R.S. 29-20-102, 104.5, authorizing local governments to condition development approvals on the payment of fees for public improvements.  Under the Impact Fee Act, impact fees must be imposed on a legislative, broadly-applicable basis, and not in an ad hoc manner.  Furthermore, in 2009, the Colorado legislature enacted the Regulatory Impairment of Property Rights Act (RIPRA), C.R.S. § 29-20-201 et seq., codifying the essential nexus and rough proportionality tests for ad hoc discretionary conditions requiring applicants to dedicate property, pay money, or provide services, resulting in a partial invalidation of Krupp.

            In essence, RIPRA was a Colorado precursor to Koontz, since it applied Nollan/Dolan-type scrutiny to exactions of money and services.  Koontz thus simply reinforces RIPRA with respect to exactions.  However, Koontz did not address the legislative-ad hoc distinction as it pertains to exactions. The majority opinion’s suggestion that heightened scrutiny is inapplicable to taxes and user fees does not rule out the possibility that legislatively-enacted impact fees or other permit fees could in fact be subjected to the essential nexus and rough proportionality tests.  The dissenters noted the majority’s silence on this matter and predicted that even legislatively-enacted fees could be subjected to heightened scrutiny in the future.

            In practice, Koontz’s effect is likely to be limited.  Especially in light of many Colorado jurisdictions’ reliance on individually-negotiated land use arrangements such as planned unit developments and development agreements, many property owners and developers rely on their ability to dedicate land, money or services to achieve more favorable entitlements from local governments.  Furthermore, most developers or property owners recognize that challenging such exactions is often more time consuming and costly than the exactions themselves.  Still, however, Koontz—which at least places a heavier litigation burden on governments seeking exactions—may provide some supplemental negotiating power for permit applicants to mitigate the extent to which conditions are imposed on local governments’ land use approvals. 

 

Approximately two and a half years ago, I wrote about a broad interpretation placed on the Colorado trust fund statute by the Colorado Court of Appeals.  In a 2010 decision titled AC Excavating, Inc. v. Yale, the court determined that an LLC manager’s voluntary injection of funds into the general business account of a single purpose LLC constituted “funds disbursed to a contractor on a construction project,” which opened the LLC manager to liability under the Colorado trust fund statute because he used those funds to pay general business expenses rather than to pay subcontractors in full. 

This February, in Yale v. AC Excavating, Inc., the Colorado Supreme Court reversed the Court of Appeals’ decision.  While the Court agreed that the funds loaned by the LLC manager were “disbursed . . . to a contractor,” it disagreed with the Court of Appeals conclusion that the funds were disbursed “on a construction project.”  Looking at the totality of the circumstances, the Court determined that the funds were not disbursed on a construction project, but were instead disbursed as a “survival” loan to be used to finance general operations.  However, had the funds been earmarked for construction purposes, or disbursed pursuant a construction contract, the Court’s decision would have subjected the manager to trust fund liability.

The Court’s recent ruling is good news to developers and general contractors, but it is limited in scope.  While the decision allows owners of struggling companies to voluntarily inject new funds to meet general operational expenses, funds received on account of a particular construction project or pursuant to a construction contract (including a construction loan) are still very much subject to the requirements of the Colorado trust fund statute.  Therefore, contractors need to continue to maintain strict accounting practices to avoid liability.