In the past I have tried to not spend too much time commenting on new laws being considered by the Arizona Legislature, mainly because all kinds of bills get introduced at the start of each session, but we never know which will actually become law. This session, however, I can’t resist because there are too many bills that could have a major impact on real estate in Arizona. This month’s example is House Bill 2411, titled the Private Real Property Rights Preservation Act.

I have alluded in past Updates to the legal concept of “governmental taking,” that is, when is a government body considered to have “taken” private property such that it must pay compensation to the owner. There has long been debate in legal circles about to what extent government can restrict the use of property without “taking” it. The basic concept of zoning regulations as a permissible use of the government’s police power, and not as a “taking,” was not adopted by the courts until the 1930s. More recently there have been several prominent cases, notably one involving a “temporary moratorium” on building in the Lake Tahoe area that lasted some twenty years, in which the courts have tried to draw the line between what is and what is not a compensable “taking.”

Now the Arizona Legislature has taken up the issue, possibly in response to a recent ruling by the Arizona Court of Appeals. In 1998 the Legislature adopted a statute that prohibits counties from “downzoning” property without the owner’s consent. “Downzoning” can be defined as a change in the zoning of a property that reduces the permitted uses of that property. The Court of Appeals ruled that the provision requiring owner consent to a downzoning was an impermissible delegation of a legislative function. A review of that decision is now pending before the Arizona Supreme Court. If the Court of Appeals’ decision is upheld, it would presumably also invalidate another statutory provision that says a county cannot rezone private property for “open space, recreation, conservation or agriculture” without the owner’s consent.

In the meantime, House Bill 2411 has been introduced in the current session of the Legislature. Under that proposal, any government action restricting the use of property which would reduce the market value of the property by twenty-five percent or more is defined as a “taking.” The owner of property subjected to such a “taking” would have the right to demand that the government pay compensation for the reduction in the value of the property. The government would then have the choice of either voluntarily paying compensation to the property owner or taking the matter to a neutral arbitrator who would determine the amount of compensation to be paid.

Adoption of the proposed legislation would obviously have a significant impact on the way counties make land use decisions. It would certainly slow down, if not completely halt, any widespread efforts to rezone properties as open space or otherwise downzone properties in the wake of the Court of Appeals’ decision, assuming that decision is upheld by the Arizona Supreme Court.

The overarching question is, of course, just how much can government regulate the use of private property without crossing the line between a permissible exercise of the police power and a “taking” for which the government must compensate the property owner. That question will continue to be debated in both legislative and judicial circles regardless of the fate of House Bill 2411.

As some of you may know, the “Update” is posted each month on our web site, www.deconcinimcdonald.com. That added exposure is getting me a wider audience than I ever thought possible. I have received comments and questions from all over the country.

In the October, 2002, “Update” I told you about the “Heritage Tree” Ordinance in Santa Cruz, California. Some time after that “Update” was posted, I got a letter from Leslie Keedy, who identified herself as the Arborist for the City of Santa Cruz (in other words, by her own acknowledgement the “tree police”). She said that she reads the “Update” on our web site.

Since I am again addressing the issue of government regulation of private property, I thought it would be instructive to share some of Ms. Keedy’s comments with you. She says that “[t]here are a number of cities that have similar tree preservation ordinances based on Arboricultural Industry Standards.” She also says that she and her “staff act as responsibly as possible with practical and consistent implementation of this ordinance with the main objective of maintaining our existing Urban Forest.” A final point she makes is that the Los Angeles Times article I used as a source incorrectly overstated the amount of the fine: “The owner removed trees in a designated riparian area and was fined $500… not $5000.”

All of which still begs the question: just how much can government regulate the use of private property?