By Deborah Rosenthal, FAICP, Esq., CPF Trustee and Partner, Fitzgerald, Yap, Kreditor, LLP
Property owners often complain that landmark designation is an unconstitutional "taking" of their property. Formal designation recognizes the historic character of the landmarked property as important to preserving the aesthetic features and physical environment of the community, but it does not impose any obligations on the owners beyond normal maintenance. Therefore, designation alone is never a "taking" of private property because the owner retains both title to and use of the landmarked property. Far from eliminating ownership of private property, designation is solely intended to establish an administrative process for reviewing privately-proposed changes to historic properties for the benefit of the entire community in which the landmark is located.
Under the Fifth Amendment to the United States Constitution and Section I, Article 19 of the California Constitution, private property cannot be "taken" for a public purpose without just compensation. Cases decided by state and federal courts have declared that denial of all beneficial use of land constitutes is the definition of a regulatory taking. In 1978, the United States Supreme Court held that local landmark designation of Penn Central Terminal was not a taking because the property owner retained the same or greater beneficial economic use of the site as it had before designation. The Penn Central Transportation Company v. City of New York case has been cited hundreds of times for the proposition that zoning and landmarking are not "takings" so long as the owner retains reasonable use of the property. The burden is on the owner to show that the regulation denies all reasonable use of property.
The United States Supreme Court has also consistently held that administrative decisions causing even substantial reductions in property value are not a "taking." For more than 100 years, the Court has ruled that mere diminution in value is not a "taking," provided the property retains some economic use, even if the value of the property is reduced by up to 97 percent. So long as the owner retains title and some opportunity to use the property for a lawful purpose, the "highest and best use" of property may be prohibited by regulation without violating the United States and California Constitutions.
Landmark designation rarely affects the uses permitted on private property because the purpose of the regulation is to preserve character-defining features of the environment. Special permits are usually required to protect historic elements from adverse change, such as demolition or incompatible development. New development is often directed to less sensitive areas of the site, or required to reflect existing architectural design and land use patterns. Normal maintenance and repair does not require special permits, and no affirmative obligations are imposed on the owner. Historic preservation regulations are expressly authorized by State law.
Even under the United States and California Constitutions, landmark designation must be supported by substantial evidence that the property is historic and must allow reasonable use of the property. Many jurisdictions establish a procedure for property owners to demonstrate that designation would not only impact market value, but would deny all reasonable beneficial or economic use of the property. Typically, property owners are unable to show a denial of all use; in other cases, the public agency has authority to allow a reasonable amount of well-located new development to avoid a takings claim. California courts have never found landmark designation to be an unconstitutional "taking."