A lakeview lot, a dream deferred, a 20-year lawsuit

In 1959, Patricia Smith and her husband, Perry, purchased a wooded lot on a hill overlooking Lake Tahoe.

The Smiths were in their early 40s at the time, but they were thinking years ahead toward their retirement. They dreamed of sitting together on the veranda of their new home, enjoying the magnificent view.

Instead, their real-estate purchase has set the stage for a major legal battle that could redefine the rights of property owners across America.

When overdevelopment in the Lake Tahoe region threatened to cloud the crystal-clear waters of the lake, local officials enacted in 1981 a moratorium on new construction. It was good news for the lake, but terrible news for the Smiths. Since then, their dream of a quiet retirement with a lake view has been held hostage by a series of land-use regulations and the resulting litigation.

Today, the legal battle arrives at the US Supreme Court in a case that pits the rights of property owners against the power of government officials to enact regulations that affect private property.

"This is a case where property has been unavailable to people who purchased it," says Mrs. Smith, who has paid 42 years' worth of property taxes on her vacant lot. "It is just land-grabbing [by the government]."

Government officials counter that without a moratorium, there would have been a rush to build before comprehensive land-use regulations were in place. Such a stampede of builders would have caused much greater environmental damage, they say.

The case is significant because it could spark a flood of litigation by property owners nationwide whenever government officials enact regulations that effect the value of their land, even temporarily.

Such a development would greatly complicate land-use planning by officials at the federal, state, and local levels, and could make certain environmental regulations prohibitively expensive for the government to carry out.

On a broader level, the case is important because it is prompting a debate over when to spread the costs of certain types of government regulations. A key concern, as articulated by the court in a 1960 decision, is how to prevent the government from "forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."

But the court must be careful in drawing such lines, legal analysts say. If the government was forced to pay compensation every time a regulation reduced the value of private property, many important regulations would be prohibitively expensive.

The case now before the court, Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, involves a struggle by Mrs. Smith and some 400 other Tahoe area landowners.

At the heart of the case is the so-called takings clause of the Fifth Amendment. The provision mandates that private property shall not be taken for public use without just compensation.

That means, for example, if the government wants to construct a highway across a farmer's field, the government must pay the farmer a fair price for the land rather than simply taking it away.

The Supreme Court has also ruled that compensation must be paid when the government essentially does the same thing by enacting a regulation that denies a landowner all use of his or her property.

A permanent ban on building a home on a beachfront lot next to similar homes is the legal equivalent of the government taking the lot for its own use, the court has said.

Lawyers for the Tahoe Regional Planning Agency say their case is different from the Supreme Court's beachfront-ban decision because the moratorium and land-use restrictions at Lake Tahoe were only temporary, and thus do not trigger takings-clause compensation.

"A temporary moratorium should not be treated the same as a permanent ban," says Clement Shute Jr. in his brief to the court. "A temporary moratorium only limits the right to develop the property immediately, which has never been regarded as an interest absolutely protected by the Takings Clause."

Lawyers for the property owners disagree. "The purported 'temporary' planning 'moratorium' was nothing of the sort; it never allowed any use [by owners of their property] and it never ended," says Michael Berger in his brief to the court on behalf of the property owners.

"This court has consistently held ... that any time the government takes private property for public use, compensation will be paid," Mr. Berger says.

Even when a regulation only temporarily renders land unusable, compensation must still be paid, he says. "The duration of the taking only affects the amount of compensation, not the entitlement to compensation."

For Perry Smith, the moratorium was more than temporary. He died in 1999 and was never able to enjoy his dream of a Lake Tahoe retirement with his wife.

"You can't put a price on something like that," says Mrs. Smith, who is now in her 80s. "Something you've looked forward to for so long ... to sit on the veranda and look out at the lake. You can't put a price on that."