What The U.S. Supreme Court Takings Ruling In Murr v. Wisconsin Means For CRE

When the Murr siblings acquired two adjacent lots in Wisconsin from their parents in the 1990s, a 1976 regulation treating the property as one merged lot prevented their plans to sell. The Murrs argued this was a regulatory taking of their property, in which government regulation on private property deprives the owner of its value. But in a case against the state this June, the U.S. Supreme Court ruled in favor of treating the holdings as one parcel. 

For many, the Supreme Court’s decision continues to provide an unclear method for defining property and leaves real estate professionals with a blurry understanding of the legal nuances affecting their properties. 

The debate over Murr v. Wisconsin will be the centerpiece of the 15th annual Kratovil Conference. Created by The John Marshall Law School in 1994 to honor the memory of Robert Kratovil, the dean of Chicago's real estate attorneys and Chicago Title Insurance chief underwriter, the event brings together legal scholars, practitioners and members of the real estate community to discuss issues important to the industry. 

Bisnow sat down with The John Marshall Law School Center For Real Estate Law professor Celeste M. Hammond to talk about the landmark decision and the upcoming conference. 

Bisnow: What makes Murr v. Wisconsin a watershed moment for the real estate industry?

Hammond: Owners of commercial real estate and their attorneys must pay attention when the U.S. Supreme Court defines or explains what constitutes a regulatory taking for which payment of value is due. While it is pretty clear that when government takes land for a highway, the government owes the owner of that land the fair market value of the real estate taken, there are more questions when the government so limits the use of the land by the owner that it might be said that the government has actually “taken” the land. Many U.S. Supreme Court cases in the past 100 years have provided more or less clarification of when and to what extent a government regulation amounts to such a limitation on the use by the owner that the government must pay. On the other hand, some government regulations like zoning have been determined not to amount to a taking requiring compensation to the owner of the land. 

Bisnow: Regulatory taking has been a government practice for a long time. What makes this ruling different?  

Hammond: As times change and as the importance of uses beyond agrarian ones increase, the legal principles need to reflect that new reality. I look at the development of the law here as a process over time by decisions of the U.S. Supreme Court. My question for the experts is: Does the Murr decision clarify those rules or not? 

Bisnow: Is Murr v. Wisconsin just a ruling concerning merged lots, or does the ruling and its multifactor test apply to other regulations?

Hammond: The case will have meaning, especially in the realm of merged title, due to one owner owning two adjacent lots where the law applies a 1976 regulation that treats them as one lot. The case did not get to the courts until nearly 40 years after the regulation because the family owned those lots as separate ones until the 1990s. Even then the issue of whether the merger rule amounted to a regulatory taking did not arise until the petitioners tried selling only one of the two lots. Chief Justice Roberts dissented and criticized the majority for ignoring the fundamental question: "What constituted the property under the ordinary principles of Wisconsin property law?"

Bisnow: Why is the topic of regulatory takings a timely subject for the 15th Kratovil Conference?

Hammond: The real estate issues here are national in scope. Chicago Title Insurance's sponsorship of the Kratovil Conference reflects the significance of this decision of the U.S. Supreme Court for government regulation of land, whether by federal, state or local government. The U.S. Supreme Court should provide a clear, uniform standard upon which landowners can rely.

Bisnow: Why is it important to have the advocates for each side of the Supreme Court ruling at the conference?  

Hammond: Having advocates on both sides of the arguments made to the U.S. Supreme Court provides the audience with a better understanding of what arguments were persuasive and why. Understanding how learned counsel approached the important issues is critical to representing clients who own real estate. The practitioner panel will discuss what lessons the decision has for the future of regulations. 

Bisnow: The Kratovil Conference is known for bringing together not only legal scholars in real estate law and practice, but also members of the real estate community. Why is having that diversity of experience essential to educating real estate professionals?  

Hammond: Our law school emphasizes practice in the commercial real estate industry, rather than strictly academic perspectives. Therefore, we bring attorneys and non-attorneys who are real estate professionals, like brokers, title examiners, bankers, architects and developers, together into our classes to learn how to successfully achieve commercial real estate deals. The attorneys get a Master of Laws (LLM) degree in real estate law. The non-attorney professionals earn a Masters of Jurisprudence (MJ) degree in real estate law from John Marshall. 

The 2017 Kratovil Conference takes place on Sept. 28. Click here to register. 

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