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High Courts Leave Mark on Industry : 1987 Decisions Bring New Rules for Real Estate-Related Matters

January 10, 1988|DAVID W. MYERS

Home buyers may remember 1987 as the year interest rates stopped their prolonged decline, while realtors and investors might remember it as a year spent adjusting to the new tax laws.

Lenders and homeowners might call it the "year of the home-equity loan," while builders and developers will remember the effects the spreading slow-growth movement had on their projects.

But 1987 was, above all, a year in which the face of the real estate industry was changed more by the courts than by lenders, lawmakers or the population at large.

And those changes will affect everyone--from tenants in one-bedroom apartments to owners of multimillion dollar mansions, from part-time real estate agents to the men and women who build the nation's office towers.

"For years, the pendulum of real estate law had been swinging in a direction that permitted the government to control the property rights of individuals," said Phillip R. Nicholson, partner in the Los Angeles-based real estate law firm Cox, Castle & Nicholson. "But in 1987, the pendulum swung firmly back in the other direction."

Part of the courts' renewed emphasis on the rights of individual property owners has been linked to the new, conservative majorities that gained control in the U. S. Supreme Court, California Supreme Court and many other courts last year.

Previously, those courts had been dominated by more liberal judges who tended to side with state and local agencies acting on behalf of the public as a whole, rather than developers and other individual property owners who were affected by the actions of those agencies.

Perhaps the most important legal decisions in 1987 concerned land-use regulation and control, and were made by the U. S. Supreme Court in the first half of the year.

Developers scored a big victory last June, when the high court ruled that the California Coastal Commission could not force a land owner to allow the public to cross his property in exchange for getting a building permit.

The decision was based on the grounds that there must be a reasonable relationship between the concession the government demanded of a landowner and the impact the proposed development will have on the public.

The case, Nollan vs. California Coastal Commission, involved two Ventura County homeowners who wanted to tear down a tiny beachfront cottage and build a two-story home about four times as large.

The commission, formed in 1972 to assure ample public access to the beach, argued that requiring a builder to allow the public to walk across the beach in front of his house was a fair exchange for giving him the right to "burden" the community with more development, traffic and the resulting need for public services.

But attorneys for the Nollans argued that requiring such an easement effectively was a "taking" of their property, in violation of the Fifth Amendment's promise that the government can't take a person's land for public use without paying the landowner "just compensation."

The court, in a 5-4 decision written by new conservative judge Antonin Scalia, sided with the Nollans.

"The case is particularly important because it held that the right to build on one's own land is a right, subject to reasonable regulation, and not a privilege--a reversal of a position taken by the courts of California," attorney Nicholson said.

Church Camp Decision

The U. S. Supreme Court had validated the concept that extreme land-use regulations could constitute an illegal "taking" earlier in the year in another landmark case, First English Evangelical Lutheran Church of Glendale vs. County of Los Angeles.

Several buildings at a camp the church owned were washed away by a flash flood in Angeles National Forest in 1978, and the county refused to let the church rebuild. The high court bought First English's arguments that the county's decision effectively took away the church's property.

While the Nollan and First English decisions are viewed as victories for developers and other property owners, some experts say the rulings have also undercut the ability of cash-strapped cities to have big builders pay for various types of public facilities.

Over the past several years, a growing number of cities across the nation have successfully required developers to set aside space in their projects for low- and moderate-income housing, or to reserve a portion of the property as undeveloped open space.

Fees on Developers

Other municipalities required developers to build or fund roads, schools, child-care and transit facilities, and other items. The Nollan and First English decisions seemingly will make it harder--or, in some cases, impossible--for cities to impose such fees or set-asides.

Although some controlled-growth proponents initially feared that the two decisions would gut the public's ability to slow big development projects, some of their fears were laid to rest by a decision the California Supreme Court handed down last summer.

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