Last month, the Supreme Court issued an opinion in a case stemming back 12 years, rooted in the enactment of a regulation affecting a family’s property rights. The Murr family owned two adjacent lots and wanted to sell one to finance the improvement of the other but were prohibited from doing so by a state regulation impacting contiguous lots with common ownership. In response, the Murr family argued that governmental entities, in essence, took their real property, not by some physical occupation, but instead by enacting burdensome regulations that forbade the improvement or separate sale of the property.
In this case, the Court was tasked with reconciling two competing objectives central to regulatory takings doctrine: (1) the individual’s right to retain the interests and exercise the freedoms at the core of private property ownership and (2) the government’s power to “adjust the rights” for public good. The Supreme Court ultimately ruled in favor of the governmental entities, limiting the Murr family’s use of their property.
Setting aside the actual outcome of the case, let’s instead hone in on the question of whether this outcome would have changed had the Murr family been more familiar with the regulatory terrain they were traversing. The Murr family parents purchased the lots in the 1960’s and maintained them under separate ownership until transferring the lots to the Murr family children in 1994 and 1995. Prior to that conveyance, in 1976, governmental entities enacted the statute that would later come to alter the Murr family’s property rights. Had the Murr family parents been aware that there existed a state regulation impacting contiguous lots with common ownership, perhaps they would have conveyed to each child a separate parcel in lieu of giving each child joint ownership in both lots. Doing so would have removed the property from within the purview of the regulation, and the Murr family children would later enjoy the freedom of engaging in what possibly could have been a valuable real property transaction.
This case is a great example of how state and federal regulations can impact, among many other things, even the very feasibility of a profitable transaction for those who are unfamiliar with their regulatory terrain. Prior to undergoing any major transaction, solicit the aid of a compliance professional who can act as a “tour guide,” ensuring your continued financial success while navigating the current regulatory landscape.