Rezoning and Regulatory Takings

Last week in Noghrey v Town of Brookhaven, 2008 NY Slip Op 01314 the Second Department ordered a new trial in case where the plaintiff claimed that the Town’s rezoning constituted an unconstitutional taking of his property. A jury had found in favor of the plaintiff, the but Second Department reversed because the trial court’s court charge did not covey the proper standard for partial regulatory takings.

In 1985 the plaintiff purchased two parcels of real property on Middle Country Road in the Town of Brookhaven, with the intention of building shopping plazas. At the time of the purchases, the properties were zoned J-2 Business, which permitted the construction of shopping plazas. In 1987 the Town enacted a moratorium on new commercial development in certain areas while it reviewed and updated the Town’s master plan. After the review, the Town changed the zoning on numerous parcels, including those owned by the plaintiff, from J-2 Business to B-1 Residence. The rezoning was effective February 14, 1989.

After trial, the jury found that the plaintiff had not established a total regulatory taking but the jury found, however, that the plaintiff had established a partial regulatory taking. When charging the jury regarding the federal partial regulatory takings under Penn Cent. Transp. Co. v City of New York (438 US 104), the court instructed the jury:

With respect to the first factor; that is, the economic impact of the regulation, [the plaintiff] claims that the values of his properties were reduced substantially. You may consider the values of the properties immediately before and immediately after the rezoning, and whether or not this reduction in value was a substantial reduction relative to the value before the properties were rezoned. [The plaintiff] must prove by a preponderance of the evidence that the rezoning deprived him of any use permitted by the residential zoning classification and this resulted in . . . a near total or substantial decrease or significant reduction in value [emphasis added].

The Second Department found that the terms “substantial” and “significant” were insufficient to convey the extent of diminution necessary to support a partial regulatory taking. The Court held that on retrial the trial court should instruct the jury that the economic impact factor of the Penn Central analysis required a loss in value which is “one step short of complete.” It should instruct the jury that the proper inquiry is whether the regulation left only a “bare residue” of value, or use similar language which would properly convey to the jury the high threshold of loss necessary to support a partial regulatory taking.

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