The legal term is this context is “inverse condemnation.” Inverse condemnation occurs when a governmental body takes property in fact, but opts not to exercise the power of eminent domain, thus depriving the property owner of compensation.
The term also can include a governmental action that substantially interferes with, or deprives a person of, the use of his or her property in whole or in part, even if title to the land itself is not taken. These claims usually are associated with the state or municipalities declaring privilege over an easement of some sort, but through the years the charge has been made against an array of different actions – including bureaucratic delays that affected property and investment values – imposed by New Hampshire cities and towns.
One of the more recent inverse condemnation cases involved a painful slow-roll process by the New Hampshire Department of Transportation (“DOT”) to claim a portion of property owned by Kingston Place LLC, a contracting firm near the Massachusetts border. In the case, Kingston Place LLC v. New Hampshire Department of Transportation, 167 N.H. 694 (2015), the DOT intended to create a limited access highway on the property, and started the three-step process needed to complete the taking in 2004—a full three years before Kingston bought the property. A year later, DOT announced funding for the project would be delayed until 2017, so it never completed the eminent domain process.
Kingston sought to nullify the plans since DOT never held a vote on it, and asked for damages as compensation for what it considered an inverse condemnation. The presence of a drainage easement stopped it from getting full use of its property, Kingston asserted, and the eminent domain delays constituted inverse condemnation.
The trial court agreed, but the Supreme Court reversed the ruling on appeal. In its opinion the court said the DOT never actually initiated condemnation proceedings; therefore, the rules governing the voiding of the plan did not apply. As such, the delays could not constitute a taking.
Another case where bureaucratic delay led to an inverse condemnation claim was Pennichuck Corp. v. City of Nashua, 152 N.H. 729 (2005). Pennichuck served as Nashua’s water utility, and it became a merger target in 2002. Municipalities in New Hampshire can acquire utilities to keep them public, and it exercised that right in 2003, but the wheels in government can turn slowly, and Pennichuck argued the delays inherent in being absorbed by the city created a per se inverse condemnation. And, because the inverse condemnation had, in essence, already occurred, the company suffered a loss of about $80 million in potential shareholder investments.
The New Hampshire Supreme Court disagreed with both arguments. Pennichuck remained in operation despite the delays, the court said, so the company was not denied economically viable use of its property. As for the lost investment value, the court said that “while Pennichuck’s business … may have been affected by uncertainty and the value of its stock may have fluctuated … these are simply the inherent risks of ownership in a system.”
While the government won both of these “taking-by-delay” cases, not all inverse condemnation cases end that way. In a future blog, I will discuss cases where property owners prevailed against overreaching governments.
Paul J. Alfano