Penn Central Transportation Co. v. New York City

Supreme Court of the United States · 1978 · Property

PropertyConstitutional Lawregulatory takingslandmarksad hoc balancinginvestment-backed expectationsregulatory takingsLandmarks Preservation Law

Facts

New York City designated Grand Central Terminal and its tax block as a landmark and landmark site under its Landmarks Preservation Law, which required Commission approval for exterior alterations or new exterior improvements. Penn Central then entered a long-term arrangement to build a multistory office tower above the Terminal and submitted two plans, both of which the Commission rejected. Penn Central did not seek judicial review of the designation or certificate denials and did not submit smaller or modified plans, but instead sued claiming the law had taken its property without just compensation. On the record before the Court, the Terminal could continue in its existing use and was regarded as capable of earning a reasonable return, and Penn Central also possessed valuable transferable development rights to nearby parcels.

Issue

Whether application of New York City's Landmarks Preservation Law to Grand Central Terminal, by restricting development above the Terminal beyond ordinary zoning limits, effected a taking of Penn Central's property in violation of the Fifth and Fourteenth Amendments. More specifically, the question was whether the restrictions on development of the landmark site were so severe as to require compensation.

Rule

There is no set formula for determining when regulation effects a taking; the inquiry is essentially ad hoc and factual. Particularly significant factors are the economic impact of the regulation on the claimant, the extent to which the regulation interferes with distinct investment-backed expectations, and the character of the governmental action. In applying that inquiry, courts evaluate the effect on the parcel as a whole rather than treating discrete property interests, such as air rights, as separate segments.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Rosa Mercado owns a 12-story warehouse in Chicago that the city designates as an architectural landmark. The designation bars her proposed 25-story rooftop condominium addition, but the warehouse continues to operate profitably as storage and retail space. Rosa sues, arguing the city has taken all economically useful value of the rooftop airspace.

How should a court most likely analyze Rosa's takings claim?

Explanation. The governing approach is not to divide one parcel into discrete segments and ask whether one segment—such as air rights—has been entirely abrogated. Instead, the court evaluates the effect of the regulation on the parcel as a whole, with attention to economic impact, interference with distinct investment-backed expectations, and the character of the governmental action. Because the building remains in profitable use, Rosa's isolation of airspace is the wrong framework.