On June 23, in a 5-3 decision by Justice Anthony Kennedy (Justice Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan joined; Justice Neil Gorsuch did not participate), the U.S. Supreme Court upheld the Wisconsin State Court of Appeals’ ruling that two waterfront lots should be treated as a single unit in a “regulatory takings” case. The Murrs are siblings who inherited two adjacent waterfront properties from their parents, and they wanted to sell one of the lots and develop the other. Unfortunately for the Murrs, the lots had been merged under local zoning regulations, and the local county board of assessments denied the Murrs’ request for a zoning variance to allow their plan to proceed.
The Murrs challenged this in state court, arguing that the state had effectively taken their second property by depriving them of practically all use without paying just compensation, as required by the Takings Clause of the Fifth Amendment. Affirming a lower state court, the Wisconsin Appeals Court held that the takings analysis properly focused on the two lots together and that, using that framework, the merger regulations did not effectuate a taking.
The U.S. Supreme Court granted the Murrs’ writ of certiorari. The Supreme Court found that in determining what the relevant unit of property is, courts must ask whether the owner would have a reasonable expectation to believe the property would be treated as a single or separate units. The Court held that in regulatory takings assessments courts must give substantial weight to how state and local law treat the property, evaluate the property’s physical characteristics, and assess the property’s value under the challenged regulation. The majority concluded that with regard to the Murrs’ property, there was a valid merger under state law, the terrain and shape of the lots made it clear that the merged lot’s use might be limited, and the second lot brought prospective value to the first. Thus, the lots should be treated as one parcel and they did not suffer a compensable taking, since the Murrs were not deprived of all economically beneficial use of the property.