“They Said What?!: Iowa Supreme Court’s Misplaced Reliance and Taking Without Just Compensation”

William Reasoner, Iowa Construction Law, Des Moines Iowa, Dickinson Law Firm, Iowa Commercial Litigation, Iowa Real Estate & Land Use

Posted on 12/12/2017 at 12:00 AM by William Reasoner

Earlier this month, the Iowa Supreme Court held that the City of Eagle Grove could obtain title to properties in “an advanced state of disrepair” from a private owner without paying any just compensation to that owner.

Eagle Grove passed a resolution in 2014 which allowed the Eagle Grove Community Development Corporation to receive up to $250,000 from the City so that it could acquire, repair, rehabilitating or demolish certain properties in the City. Two of the properties designated as “problematic” were owned by Cahalan Investments, LLC. Those two properties were included in the Community Development project because the structures on the property were dilapidated, unoccupied, lacked water service, and were subject to complaints made by neighbors and other Eagle Grove residents. One of the houses was missing windows and siding, had a rotting roof, was sagging on side, and was home to raccoons, skunks, squirrels, and birds. A construction inspector concluded that both properties were unsafe for either entry or occupation. In accordance with the 2014 resolution, Eagle Grove attempted to purchase both properties for a total of $4,000 intending to demolish the problematic structures.  Cahalan Investments, LLC declined Eagle Grove’s offers.

Subsequently, Eagle Grove filed a petition under Iowa Code §657A.10A which allows a city to obtain title to abandoned properties. Although Eagle Grove proved that the properties were abandoned under §657A.10A, the district court dismissed the petition holding that it would constitute a taking of private property without just compensation in violation of the constitutions of both the United States and Iowa.

On appeal, the Iowa Supreme Court reversed the district court and held that (1) by allowing the properties to become abandoned, Cahalan Investments, LLC had no present intent to retain its constitutionally protected interest in the property and that (2) there was no unconstitutional taking because Cahalan Investments, LLC’s “bundle of rights” at the time the properties were acquired was subject to existing nuisance and forfeiture law. Applying the federal Lucas standard, the Iowa Supreme Court noted that  when a property owner’s “bundle of rights” never included the right to use the land in a way forbidden by regulation or statute, then the regulation or statute can deny “all economically beneficial or productive use of the land” with paying the owner just compensation. In this case, the Court pointed out that when Cahalan Investments, LLC acquired the properties, existing statutes dictated that it could lose title to the properties by forfeiture if the properties became public nuisances; thus, Cahalan Investments, LLC’s “bundle of rights” did not include the right to allow the properties to become abandoned and in a perpetual state of disrepair. Since Cahalan Investments, LLC did not have this specific property right, the Iowa Supreme Court held that the City of Eagle Grove could take title to the properties without needing to pay any just compensation to the property owner.

While the Court’s reasoning fits a logical chain, it ignores a major roadblock – that there is no common law rule allowing a public nuisance to be forfeited to the state. The Lucas decision relied on by the Court focused on long-standing common law property principles, and not regulations or statutes enacted by the state. Merely citing a statute allowing for such forfeiture does not suddenly mean that the State can skirt its constitutional requirement to pay just compensation to owners whose property has been taken. Because Iowa common law had not previously provided for forfeiture of public nuisances, the Court’s reliance on Lucas is misplaced and this decision ought to be subject to scrutiny in future takings cases.

For any questions regarding eminent domain or real property please contact William Reasoner. 

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed. 

- William Reasoner


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