Iowa Supreme Court Rules that Cities May Take Possession of Abandoned Properties

Cby Eric Christianson

Eagle Grove v. Cahalan Investments
(Iowa Supreme Court, December 1, 2017)

Cahalan Investments purchased two residential properties in the City of Eagle Grove, one in 2002 and the other in 2011. Both properties have remained unoccupied and in deteriorating condition since their purchase. The properties were the subject of multiple complaints by neighbors and were found to be unfit for human occupancy.  In 2014 the city began an effort to clean up a number of nuisance properties, these properties were among those targeted. The city sent several letters to Cahalan advising them that they were in violation of the city’s nuisance ordinance. Cahalan made no effort to abate the nuisance and would later testify that they had no intention of making either property habitable in the foreseeable future

Iowa Code section 657A.10A allows cities to petition a district court to transfer ownership of abandoned properties to the city. The code details the following criteria that a court is to use when determining if a property has been abandoned.

a. Whether any property taxes or special assessments on the property were delinquent at the time the petition was filed.
b. Whether any utilities are currently being provided to the property.
c. Whether the building is unoccupied by the owner or lessees or licensees of the owner.
d. Whether the building meets the city’s housing code for being fit for human habitation, occupancy, or use.
e. Whether the building is exposed to the elements such that deterioration of the building is occurring.
f. Whether the building is boarded up.
g. Past efforts to rehabilitate the building and grounds.
h. The presence of vermin, accumulation of debris, and uncut vegetation.
i. The effort expended by the petitioning city to maintain the building and grounds.
j. Past and current compliance with orders of the local housing official.
k. Any other evidence the court deems relevant.

The code then states that if the court finds the property is abandoned, “the court shall enter judgment awarding title to the city.” In this case, the district court found that Cahalan’s properties were indeed abandoned under the definition set forth in the statute. In fact Cahalan Investments does not dispute this finding; however, Cahalan argued that awarding ownership of these properties to the city without compensation violated the takings clause of the US Constitution. In this case, the district court found Cahalan Investment’s argument convincing and did not award title to the City of Eagle Grove.

The City of Eagle Grove appealed the district court’s decision to the Iowa Supreme Court.

The Iowa Supreme Court revisited the question of whether awarding ownership to a city under Iowa Code section 657A.10 is constitutional.

Proving that a section of state code is unconstitutional is not easy. The court quotes an earlier decision stating that, “statutes are cloaked with a presumption of constitutionality. The challenger bears a heavy burden, because it must prove the unconstitutionality beyond a reasonable doubt.”

Takings jurisprudence is based primarily on the takings clause of the Fifth Amendment which states that, “private property [shall not] be taken for public use, without just compensation.” To determine if a governmental action has violated the takings clause, the court uses the following framework:

(1) Is there a constitutionally protected private property interest at stake? (2) Has this private property interest been “taken” by the government for public use? and (3) If the protected property interest has been taken, has just compensation been paid to the owner?

In this case, Cahalan’s case fails on the first question. The court cites an earlier ruling which states that “the State has the power to condition the permanent retention of [those] property right[s] on the performance of reasonable conditions that indicate a present intention to retain the interest[s].” Ownership of property comes with many rights, but is not absolute. Here the court is saying that in Iowa a property owner’s rights do not include allowing properties to remain abandoned. By doing so here, Cahalan has forfeited their rights.

By allowing the properties to persist in a condition unfit for human habitation, allowing the properties to remain vacant, and failing to make timely and reasonable efforts to remedy the public nuisances created by the properties after notification of the problems, Cahalan did not comply with the section 657A.10A(3) criteria. Thus it failed to “indicate a present intention to retain the interest.” See id. at 526, 102 S. Ct. at 790. We conclude the district court erred in concluding Cahalan holds a constitutionally protected private property interest in the abandoned properties for which just compensation is owed.

Finding that Cahalan Investment’s stake in the properties was not a constitutionally protected right is enough to decide the case, but for completeness the court did examine the second question as well.

Assuming that Cahalan did have a constitutionally protected private property right the court still found that takings jurisprudence supports the city’s actions. A taking occurs when the government denies a property owner “all economically beneficial or productive use” of property. In this case there is no dispute that Cahalan Investments has been deprived of all use of these two properties. Generally when that occurs, the government is required to pay just compensation. However, there is a public nuisance exception in takings jurisprudence. The state has the “power to abate nuisances that affect the public generally, or otherwise,” and this action, “is not a constitutional taking for which compensation is required.”

The court also examined whether the fact that Cahalan Investments purchased these properties before the enactment of this particular section of 657A would prevent it from being applied in this case. Here the court found that the state’s existing legislation as well as the principles of nuisance law already in place at the time of purchase were sufficient to hold that Cahalan never possessed the right to maintain properties in an abandoned state.

The Iowa Supreme Court reversed the finding of the district court that the city’s exercise of 657A constituted an unconstitutional taking and remanded the case back to district court.

Recap of yesterday’s Minnesota Supreme Court arguments RE: Winona rental restrictions

The Minneapolis Star-Tribune has posted a good article recapping yesterday’s MN Supreme Court arguments concerning Winona’s 30% cap on rental units.  You’ll find the article here.

News from around Minnesota: Winona rental restriction ordinance now before the MN Supreme Court

Winona, Minnesota’s ordinance restricting the number of rental units to 30% of the total properties on any given block is going to be heard by the Minnesota Supreme Court today.  We blogged about the Court of Appeals case here.  The Court of Appeals determined that the 30% rule was a valid exercise of the city’s police power, and was not a violation of the Equal Protection clause of the US Constitution.

An article from the Winona Daily News can be found here.  According to the article, Mankato, West St. Paul and Northfield, Minnesota have all approved similar ordinances, and I know of at least three Iowa cities that are watching this Minnesota litigation.

Limiting percentage of rental units allowed per block was valid exercise of police power

by Rachel Greifenkamp and Gary Taylor

Dean v. City of Winona

(Minnesota Court of Appeals, February 24, 2014)

In the City of Winona, MN, there exists an ordinance that limits, in certain districts of the city, the number of lots on a block that are eligible to obtain certification as a rental property. Based on the findings from the city’s planning commission and a Parking Advisory Task Force that was formed to consider the issues of increased parking demands, the City found that rental-housing units comprised about 39% of the City’s total housing units, but that these rental properties comprised 52% of the complaints received by the Community Development Department. Based on data from 2004, the planning commission found that 95 of the 99 calls for police service based on noise and party-related complaints involved rental properties. They also found that 52% of the zoning violations that resulted in written violations were for rental properties. In 2005, the idea of restricting the number of rental properties per block was suggested. The Parking Advisory Task Force suggested that the number of rental units be restricted to 30% of the total properties on any given block. The task force adopted a motion to forward a “30% rule” to the planning commission for its consideration. The planning commission voted to recommend the 30% rule to city council, and the council subsequently passed the 30% rule.  The three appellants challenging the 30% rule in this case were the owners of three houses that were purchased after the 30% rule was adopted. In January of 2013 the district court denied the appellants’ motion that the 30% rule was an invalid exercise of the City’s broad police power, and that it violated their Equal Protection, Substantive Due Process, and Procedural Due Process rights under the Minnesota Constitution, and granted summary judgment to the city. The appellants then took their case to the Minnesota Court of Appeals.

Police Powers. The Court of Appeals determined that the 30% rule was, in fact, an authorized exercise of police power. The term “police power” means simply the power to impose such restrictions upon private rights as are practically necessary for the general welfare of all. “The development of the law relating to the proper exercise of the police power of the state clearly demonstrates that it is very broad and comprehensive, and is exercised to promote the general welfare of the state….[T]he public has a sufficient interest in rental housing to justify a municipality’s use of police power as a means of regulating such housing.”

Equal Protection. In order for an equal protection challenge to be valid the appellant must show that “similarly situated persons have been treated differently.” Similarly situated means that the two groups in question are alike in all relevant respects. The Court concluded that the 30% rule is not invalid on its face:

The ordinance is facially neutral and applies equally to all property owners in the regulated districts. The ordinance sets a 30% cap, but it does not define or predetermine which lots will be certified. That determination is made based on the changing facts and circumstances on each block, and not based on the ordinance or the characteristics of lot owners. The fact that the number of lots that may be certified might be less than the number of property owners who desire certification is not a class-based distinction between two groups of property owners.

The Court also concluded that the 30% rule was not discriminatory in the manner it was being applied by the city.  The Appellant did not show that the city “has done anything other than apply the mathematical formula on a first-come, first-served basis. Appellants’ real complaint is about the effect of an otherwise neutral ordinance on their particular circumstances, which does not give rise to an equal protection claim.”

Substantive and Procedural Due Process.  The substantive due process and procedural due process claims were also considered invalid. The appellants argued the the 30% rule violated their right to rent their property, but such a right is not a “fundamental right” protected by the Minnesota Constitution.  Unless a fundamental right is at stake, substantive due process requires only that the statute not be arbitrary or capricious.  The Court concluded that the 30% rule was adopted after a long, deliberate information-gathering process that considered public input, data, and expert review, and was thus not arbitrary or capricious.

As for procedural due process, the appellant’s argued that the 30% rule improperly delegates the power of deciding whether or not they may receive a license to their neighbors, but the Court reasoned otherwise because the “neighbors” (owners of certified rental properties) do not determine which other lots may be certified. “The certified-property owners’ views regarding whether a particular lot should be certified as a rental property are irrelevant; they can neither grant certification by consenting to it nor prevent certification by denying consent.”

The Minnesota Court of Appeals affirmed the district court’s award of summary judgment in favor of the city because the adoption of the ordinance was an authorized exercise of its police power and because the appellants did not met the burden to show that the ordinance is unconstitutional.

Wisconsin town’s non-metallic mining ordinance is not zoning

by Victoria Heldt

Zwiefelhofer, et al., v. Town of Cooks Valley
(Supreme Court of Wisconsin, February 8, 2012)

The plaintiffs in this case (Zweifelhofer, Schindler, Sarauer, and La Gesse) are all residents of Cooks Valley.  In 2008, the Town adopted a Nonmetallic Mining Ordinance that prohibited nonmetallic mining unless a permit was obtained from the Town Board.  The plaintiffs, who have all engaged in nonmetallic mining in the past, sought to have the Ordinance declared invalid in the event that they want to engage in nonmetallic mining in the future.  Their argument claimed the Ordinance was invalid because it did not have the approval of the County Board.  In the Town of Cooks Valley, zoning ordinances must gain approval of the Board.  The Town claims that the ordinance is not a zoning ordinance, but rather an exercise of its police power.  Consequently, they argue that the ordinance does not require approval of the Board.  The Court had to discern whether the Ordinance constituted a zoning ordinance or an exercise of the Town’s police power.

The Ordinance begins with a preamble stating that the intent of the statute is to “promote the health, safety, prosperity, aesthetics, and the general welfare of the people and communities.”  Specifically, it attempts to regulate land mining so as to protect the population from disease and pestilence and to further the conservation of land and water use.  It describes nonmetallic mining as commercial land and mining pits and all activities associated with it.  The Ordinance allows for nonmetallic mining only if a permit is obtained from the Town Board.  The Town may place a number of restrictions on any nonmetallic mining permit that it issues.  The Ordinance does not apply to previously existing mines, but does apply to the expansion of any existent mines.

The Court conceded that the line between a zoning ordinance and a building code enacted pursuant to a Town’s police power is fine and that the two are similar in nature.  Wis. Stat. §62.23 (7) governs zoning and, within the statute, the grant of zoning power overlaps with police power.  Zoning is a subset of the police power.   In addition, both powers serve the same general purpose of promoting the health, safety, and welfare of the community.  In its analysis, the Court compared the characteristics of the Ordinance to those of typical zoning ordinances to determine whether the Ordinance in question is a zoning or non-zoning ordinance.  It identified and focused on six main criteria.

First, the Court recognized that zoning ordinances typically divide property into separate zones or districts.  The Ordinance in question does not.  It applies universally to all land within the Town.  Second, zoning ordinances usually allow explicitly stated uses and prohibit those not stated.  The Town’s nonmetallic ordinance does not permit anything as of right or automatically prohibit anything since a permit could be obtained to engage in nonmetallic mining.  Third, a zoning ordinance typically regulates where an activity takes place, not the activity itself.  This Ordinance is comparable to a license in that it regulates an entire activity and not the location of the activity.

The fourth criterion that the Court focused on was a zoning ordinance’s tendency to comprehensively address all possible uses of a specified area of land.  The Wisconsin Attorney General was quoted as saying “The more comprehensive the ordinance, the more likely it will be characterized by a court as a zoning ordinance.”  The Town’s ordinance applies to only one activity – nonmetallic mining.  The plaintiffs argued that, since the Ordinance comprehensively regulates nonmetallic mining, it should be considered comprehensive.  The Court clarified that the term “comprehensive” should not be interpreted as “thoroughly” regulating a single activity for the purpose of zoning ordinances.  It is intended to mean all-inclusive.  The plaintiffs and some friend-of-the court briefs attempted to argue that the Ordinance is a zoning ordinance because it “pervasively” regulates the use of land.  They look to a previous case in which the Attorney General stated “when an ordinance constitutes a pervasive regulation of, and in many instances a prohibition on the use of, land, [it must be concluded] that such an ordinance is a zoning ordinance which requires county board approval.”  The Court in this case deemed the phrase “pervasive regulation” as over-inclusive in application.  It noted that the phrase does not create an effective bright-line rule to guide the Court.

The fifth criterion was that zoning ordinances operate by fixed rules that allow many land uses to proceed without discretionary decisions by administrative officials (i.e., permitted uses).  The Ordinance in question, conversely, operates only on a case-by-case basis and does not allow any non-metallic mining operation to proceed without administrative action.  The plaintiffs urge that the Ordinance must be a zoning ordinance because it allows for “conditional use” permits, which have historically been associated with zoning ordinances.  The Court said that that logic placed too much emphasis on the terminology of the Ordinance.  Licenses required under non-zoning police powers could also be considered similar to conditional use permits.  Just because the language of the Ordinance includes the phrase “conditional use permit” does not mean it is a zoning ordinance.

The sixth and final criterion addressed a zoning ordinance’s tendency to exempt pre-existing activities from the new regulation.  In this way, the Ordinance in question is similar to zoning ordinances because it does not apply to pre-existing nonmetallic mines.  The Court noted that the differences between the characteristics of the Town’s nonmetallic mining ordinance and those of typical zoning ordinances exceeded the similarities.

The Court finally looked to the general purpose of zoning ordinances in comparison to the general purpose of the Town’s nonmetallic mining ordinance.  The Court acknowledged that, in a broad sense, the Ordinance has the same purpose as that of zoning ordinances (to promote the welfare of the community as a whole); however, this broad definition of purpose is not helpful in an analysis of whether an ordinance is zoning or non-zoning.  It looked instead to the more specific purpose of zoning ordinances to “separate incompatible land uses.”  The Ordinance does not share that purpose in that it does not explicitly separate different land uses or declare any land uses incompatible with others.

After looking to the Ordinance’s specific characteristics and its general purpose, the Court concluded that the Town’s non-metallic mining ordinance is not a zoning ordinance, but rather a general welfare ordinance enacted pursuant to the Town’s police powers.  Consequently, it did not require the Board’s approval and is therefore valid as enacted.  The Court reversed the lower court’s decision.

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