The Colorado Supreme Court upheld a 60-year-old decision when ruling Monday that the town of Monument did not have to compensate property owners when it acquired an adjacent parcel of land through eminent domain.
“The question we must answer,” wrote Justice Melissa Hart for the majority, “is whether sound reasons exist for departing from this settled precedent. We conclude that they do not.”
In September 2016, Monument purchased a lot from private owners in a residential subdivision for the purpose of locating a water storage tank. A restrictive covenant applied to the land, known as Lot 6, requiring that it remain residential in use and that only a single-family home could be built upon it. The town believed that it needed to use its powers of eminent domain to get around the stipulation.
The following January, Monument began the legal process of acquiring the title to the property without the constraints of the covenant. In response, dozens of property owners in the subdivision joined the proceedings, claiming they were owed compensation from the decrease in their home values that would accompany a water tower on Lot 6. Their argument was that the single-family covenant benefited all properties in the subdivision, and the town effectively used eminent domain on each of their lots, necessitating reimbursement.
The El Paso County Court that considered the town’s request sided with the property owners. On appeal, the Colorado Court of Appeals considered what the state Supreme Court decided in the 64-year-old case of Smith v. Clifton Sanitation District. In that instance, landowners attempted to form restrictive covenants to prevent a sanitary disposal system as the district began eminent domain proceedings on one parcel of land. The court labeled the landowners’ “scheme” as running contrary to public policy.
Appellate Judge Jerry N. Jones wrote that the Smith decision should guide the Monument case and, based upon the determination there, “a restrictive covenant of this type isn’t a compensable property interest for eminent domain purposes.”
The Monument landowners argued to the high court that because the parties in Smith organized to thwart the sanitation district, the circumstances were irrelevant to the question of Lot 6, where restrictive covenants already existed. While the property owners indicated that the town’s action placed a burden on individual citizens so that the public could benefit, Hart countered that the level of government interference had to be “very high” to trigger fair compensation under the state constitution.
“We are sympathetic to the frustration of the intervenors, who will almost certainly see a drop in the value of their properties as a result of the Town’s decision to build a water tower on Lot 6,” she wrote. But the court's majority concluded that the public benefit of the water tank outweighed the loss to the individual residents.
Allowing compensation for any government action that incidentally decreases the value of private property would create an “immense” burden on localities, Hart added. Voters in 2018 defeated a statewide proposal, Amendment 74, that would have codified such a right for property owners. The Colorado Municipal League echoed that fear in a brief filed to support Monument.
“With the continued development of subdivisions around the state and the popularity of private restrictive covenants, this requirement could impose the significant ... burden for hundreds or thousands of homes for something as simple as widening a road to allow for better traffic flow,” the league wrote.
Justice Richard L. Gabriel dissented from the court's decision, agreeing with what he called the majority rule in most of the United States that a restrictive covenant creates a property interest subject to compensation. The Smith decision, in Gabriel’s view, was “limited to the neighboring landowners’ ‘scheme’ and transparent attempt to ‘evade’ and ‘thwart’ (by way of hastily executed restrictive covenants) the lawful right of the district to exercise its power of eminent domain.”
He did not believe that the burden of paying property owners would be severe in this type of circumstance, as courts could require the landowners to show proof of damages in their claims.
The case is Forest View Co. v. Town of Monument.