Penn Central Transportation Company v. City of New York
438 U.S. 104 (1978)
New York City adopted the Landmarks
Preservation Law. The aim of this law
was to protect landmarks and historical buildings. The law imposed
restriction on those who owned historical buildings.
Owners had to maintain the
exterior of the building.
Owners could not modify the
exterior of the building without approval by a Commission. The Commission
would have to grant a certificate saying that the construction would not
A) alter the exterior of the building, or that B) the alterations would
The law allowed for
judicial review when the Commission didn't approve an alteration.
Penn Central owned Grand
Central Station in NYC, which had been designated a landmark. They applied
for a certificate to allow them to build two 53-story office buildings on
the roof of the existing building. The Commission denied the building
The first building would not
have altered the faŤade, but the second building required the destruction
of an entire side of the Station.
Penn Central did not seek judicial
review of their application, and instead sued NYC, contending that the Landmarks
Preservation Law amounted to a taking
of their property without compensation.
Penn Central argued that the
taking was a violation of due
process under the 5th Amendment and the 14th Amendment.
Penn Central argued that
NYC had taken 100% of the value of their "air rights."
Penn Central also argued
that this was unfair because forced a few people to bear a huge public
burden that should be shared by all NYC residents.
Zoning hits everybody
equally, but this only hurt people who owned historic buildings.
NYC argued that this wasn't
a taking because the restrictions
were minor, and even if it was, there was just compensation available
because Penn Central could sell the unused development rights to
Under New York City law,
land that was not fully developed could transfer or sell those unused
development rights to nearby buildings.
The Trial Court found for Penn
Central. NYC appealed.
The Appellate Court reversed.
Penn Central appealed.
The Appellate Court found
that the restrictions were necessary for the public interest,
The Court found that a
regulation only amounted to a taking
if it deprived the owner of all reasonable beneficial use of the property.
The New York Supreme Court
affirmed. Penn Central appealed.
The US Supreme Court affirmed.
The US Supreme Court found
denial of the ability to exploit a property interest did not amount to a taking.
The Court found that laws
that diminish property values do not amount to a taking (see Euclid v. Ambler Realty Co.
(272 U.S. 365 (1926)).
The Court found that the Landmarks
Preservation Law was not unfair nor
arbitrary even though it only applied to specific properties and the
designation as a landmark was a subjective decision.
Especially since Penn
Central didn't ask for a judicial review of the Commission's decision.
The Court found that the law
didn't stop Penn Central from using their property to make money, nor did
it interfere with the present uses of the Station, it just stopped them
from significantly changing the exterior.
The law does not deprive
Penn Central of their "primary investment backed
expectations". Meaning, that Penn Central bought Grand Central
Station in order to run a train station, that's the main purpose of the
property. So the law doesn't go too far because it doesn't stop the
property from being used for its primary purpose.
In a dissent it was argued
that the property had been subjected to a "nonconsensual servitude
not borne by any neighboring or similar properties." Therefore, some
value had been taken from Penn Central.
In Pennsylvania Coal Co. v.
Mahon (260 U.S. 393 (1922)) the Court
found that if a regulation goes too far, it will be considered a taking,
but the courts have never determined what "too far" means.
Penn Central argued that NYC
took 100% of the air rights. However, the Court here (and in Pennsylvania
Coal) found that there is no such
thing as "conceptual severance".
Basically, that means you
can't argue that someone is taking 100% of a part of the value. You can
only look at the entire value of the property. So Penn Central didn't
loose 100% of anything.
In this case, at least part
of the lost rights on Grand Central Station were made up by allowing Penn
Central to use the unused space to make other buildings higher. So NYC
didn't even take 100% of the air rights.
On the other hand, if this
case didn't represent going "too far", then what would have to
happen for the regulation to go too far? If you buy the argument that
there are regulations that can be considered takings, then what would constitute a taking?
The current last word on
this topic can be found in Tahoe-Sierra Preservation Council Inc. v.
Tahoe Regional Planning Council
(535 U.S. 302 (2002)).
One argument for allowing takings without compensation is that if NYC had to pay
Penn Central they may not have the $$$ or the political will to spend the
$$$, so Penn Central and others would be free to destroy historic
If the city had to pay,
there'd be the possibility of extortion by property owners who propose
large modifications specifically in order to get the $$$ for not
On the other hand, allowing
the city to designate historic buildings without paying basically means
that the city is getting something for nothing. Is it fair to property
owners to have their property interests damaged with no compensation, just
to make the city more beautiful?
The counterargument to that
is the city isn't profiting at all, they are simply preventing the
property owner from inflicting a harm on the people who live in the city.
(For example, less historic buildings means less tourists and less $$$ to
storeowners). It's not a taking,
it's more like preventing a nuisance, which is within a city's police powers.