Measure 37 Analyzed: A Recipe for Confusion and Litigation
By Steven W. Abel, Michelle Rudd
10/15/2004

In 1999, voters passed Measure 7, a measure providing for landowner compensation for land use regulations that reduce the value of property. While Measure 7 was ruled unconstitutional and never took effect, the compensation issue has not gone away and reemerges on the November ballot in the form of Measure 37. Unlike Measure 7. Other legal questions are, however, likely to arise concerning its implementation.

Central Premise

Measure 37 states its central premise as follows:

"If a public entity enacts or enforces a new land use regulation or enforces a land use regulation enacted prior to the effective date of this amendment that restricts the use of private real property or any interest therein and has the effect of reducing the fair market value of the property, or any interest therein, then the owner of the property shall be paid just compensation."

In lieu of paying compensation, the public entity has the option of waiving enforcement of the land use regulation.

While the potential reach of measure 37 is vast since (1) virtually any land use regulation (and many regulations not dealing directly with land use) will have at least a minor impact upon the fair market value of property and (2) the measure acts retroactively for any current enforcement of a "land use regulation enacted prior to the effective date of [Ballot Measure 37]," the scope of the measure will be limited to some extent by the exemptions listed in Section 3. The extent of the limitation, however, unclear.

Exemptions

The initial broad statement of the Measure is qualified by a series of exemptions which serve to allow local government to avoid the effect of the statute. Unfortunately, the exemptions are ambiguous. While government will want to liberally construe the breadth of the exemptions, private property owners will wish a narrow interpretation of the exemptions. This is a recipe for confusion and litigation.

Of the five exemptions, three are particularly troublesome. Each is subject to multiple interpretations as to its meaning and, thus of course, questions as to its scope. Let's examine these ambiguities.

Subsection 3(A) provides that compensable land use regulations shall not include "restricting or prohibiting activities commonly and historically recognized as public nuisances under common law. This subsection shall be construed narrowly in favor of a finding of compensation under this act."

Ambiguity

To be excluded from compensation the particular regulated activity or use must be "commonly and historically recognized as public nuisances under common law." The compound requirement of this section creates ambiguity. To qualify "public nuisances" with the phrase "commonly and historically recognized" adds an unknown element as to what public nuisances are considered. it is simply unclear what public nuisances are ones which are "commonly and historically recognized." Does the act intend that more contemporary public nuisances are not exempt?

Under Subsection 3(B) compensable land use regulations excludes those regulations "restricting or prohibiting activities for the protection of public health and safety, such as fire and building codes, health and sanitation regulations, solid or hazardous waste regulations, and pollution control regulations." The ambiguity in this Subsection is immense since all zoning regulations in some way arise from "the protection of public health and safety." Was this exemption intended to be so broad?

Debate Likely

Subsection (3)(E) is likely the section that will create the most debate. This section provides that compensable land use regulations shall not include those "enacted prior to the date of acquisition of the property by the owner or a family member of the owner who owned the subject property prior to acquisition or inheritance by the owner, whichever occurred first."

There is substantial ambiguity however as to the applicability of the family-member provision. The family-member language purports to require compensation for those regulations enacted after a family member acquired property, but before the current owner inherits or acquires the same property. It is unclear what is meant by "a family member of the owner who owned the subject property prior to acquisition or inheritance by the owner." One possible interpretation is that in order to utilize the family-member provisions the subject property must have been held, uninterrupted, by a family member of the owner until such time as the current owners acquired the property. In essence, this interpretation would require that a grandchild (current owner) inherit the property from his or her parent, who had inherited the same from his or her parent (or from grandparent to grandchild), in order to achieve the full effect of the provision.

However, a contrary interpretation is possible. The language can be read to require only that a family member of the current owner had at one time been the owner of the property. This interpretation is supported by the ambiguity found in the language "who owned the subject property prior to acquisition *** by the owner." A dictionary definition of "prior" is "[p]receding in time or order." Accordingly, a landowner who acquired the property from a third party, but who has a family member that had previously owned the property (at any time, including one other than directly preceding the current owner), could make a compensation claim based on regulations enacted after acquisition by the family member.

The language also confines the exception to those regulations "enacted" before the date of acquisition by the owner or family member though not enforced until after acquisition are exempt from the requirement of compensation. For example, a zoning statute enacted before a grandparent's acquisition but not enforced upon the property until after it is inherited by a grandchild does not entitle the grandchild (current owner) to compensation.

Compensation Questions

The problem does not end with the applicable scope of Measure 37 - it is also unclear what happens if the regulation requires compensation or waiver of the regulation.

If the regulatory entity chooses not to compensate the property owner, it may waive enforcement of the regulation. Section (8) and (10) however, significantly lessen the ability to make a claim based upon prior ownership by a family member. Section 8 provides that in lieu of paying compensation, the government may allow an owner to use a property for a purpose allowed at the time the owner acquired the property. Section 8 does not require allowance of a use permitted at the time family member acquired the property. Similarly, Section 10 provides that if a claim is not paid within two years from the date the claim accrues, the property owner shall be allowed to use the property as permitted at the time the owner acquired the property. The text does not require that the property owner be allowed to use the property for some purpose impermissible at the time he acquired the property but permissible at some earlier time when the property was held by a family member.

Waiver Provision Questions

Where a waiver will allow a different land use than permitted under the then existing zoning, a number of scenarios are possible. With respect to effect of a waiver of the land use regulation grant on subsequent owners of the property, once the land owner applies for a land use permit or other approval and is granted a waiver, there is a question of what effect a sale or transfer of the land has on the waiver. Will a sale of the property eliminate the waiver and reinstate the offending regulation? Will property owners enter into long-term ground leases to preserve an attractive ownership status?

The waiver provision may give rise to an equal protection claim based on Article I, section 20, of the Oregon Constitution. This provision requires that "[n]o law shall be passed granting to any citizen or class of citizens privileges, or immunities, which, upon the same terms, shall not equally belong to all citizens." [Or Const, Art I, Section 20] The issue will arise when a landowner who has held the property for many years is granted compensation or a waiver from regulation when another landowner, who had recently purchased a similar parcel of land, is denied a claim altogether. The likely result of the measure will be litigation concerning whether duration of ownership is a permissible basis for justifying unequal treatment of two individuals.

Measure 37 has been structured to avoid the deficiency which resulted in Measure 7's invalidation. If Measure 37 is passed, however, the state can expect that litigation will be needed to define the Measure's boundaries.

For Additional Information, Contact: Steve Abel, (503) 294-9599 or Michelle Rudd (503) 294-9390

(originally published in Oregon Insider, Issue #354, October 15, 2004)