In the past I have tried to not spend too much
time commenting on new laws being considered
by the Arizona Legislature, mainly because all
kinds of bills get introduced at the start of
each session, but we never know which will actually
become law. This session, however, I can't resist
because there are too many bills that could
have a major impact on real estate in Arizona.
This month's example is House Bill 2411, titled
the Private Real Property Rights Preservation
Act.
I have alluded in past Updates to the legal
concept of "governmental taking,"
that is, when is a government body considered
to have "taken" private property such
that it must pay compensation to the owner.
There has long been debate in legal circles
about to what extent government can restrict
the use of property without "taking"
it. The basic concept of zoning regulations
as a permissible use of the government's police
power, and not as a "taking," was
not adopted by the courts until the 1930s. More
recently there have been several prominent cases,
notably one involving a "temporary moratorium"
on building in the Lake Tahoe area that lasted
some twenty years, in which the courts have
tried to draw the line between what is and what
is not a compensable "taking."
Now the Arizona Legislature has taken up the
issue, possibly in response to a recent ruling
by the Arizona Court of Appeals. In 1998 the
Legislature adopted a statute that prohibits
counties from "downzoning" property
without the owner's consent. "Downzoning"
can be defined as a change in the zoning of
a property that reduces the permitted uses of
that property. The Court of Appeals ruled that
the provision requiring owner consent to a downzoning
was an impermissible delegation of a legislative
function. A review of that decision is now pending
before the Arizona Supreme Court. If the Court
of Appeals' decision is upheld, it would presumably
also invalidate another statutory provision
that says a county cannot rezone private property
for "open space, recreation, conservation
or agriculture" without the owner's consent.
In the meantime, House Bill 2411 has been introduced
in the current session of the Legislature. Under
that proposal, any government action restricting
the use of property which would reduce the market
value of the property by twenty-five percent
or more is defined as a "taking."
The owner of property subjected to such a "taking"
would have the right to demand that the government
pay compensation for the reduction in the value
of the property. The government would then have
the choice of either voluntarily paying compensation
to the property owner or taking the matter to
a neutral arbitrator who would determine the
amount of compensation to be paid.
Adoption of the proposed legislation would
obviously have a significant impact on the way
counties make land use decisions. It would certainly
slow down, if not completely halt, any widespread
efforts to rezone properties as open space or
otherwise downzone properties in the wake of
the Court of Appeals' decision, assuming that
decision is upheld by the Arizona Supreme Court.
The overarching question is, of course, just
how much can government regulate the use of
private property without crossing the line between
a permissible exercise of the police power and
a "taking" for which the government
must compensate the property owner. That question
will continue to be debated in both legislative
and judicial circles regardless of the fate
of House Bill 2411.
