Measure 37 Presents Opportunities, But Requires Diligence

By Edward H. Trompke

Measure 37 permits a person to demand compensation from a local government if the local government has enacted land use regulations that (1) restrict the use of real property and (2) lessen its value. Both elements must be present, or no claim can be brought. Local governments have the option of either waiving the regulation or paying compensation.

Most cities and counties have adopted administrative procedures for processing claims made under the Measure, but the Measure seems to state that such a process cannot prevent a landowner from suing the local government for the loss of value if the land use regulation remains in effect on the property 180 days after demand is made for compensation.

The various procedures that cities and counties have adopted range from simply meeting with the city or county manager to discuss what use the landowner wants to make of the property, to requiring the landowner to submit deeds, appraisals, and copies of regulations. Each landowner must decide whether to simply send a demand and sue the city or county, or to comply with the procedures adopted by each government. In court, the landowner will be required to prove the two elements, restriction on use and loss of value. Appraisals will be needed in most cases, showing the value of the property with and without the land use regulation. Governments may contest whether there really is any restriction on use, as well as whether appraisals accurately show loss of value. If a judge agrees that the elements are satisfied, judgment will be entered in favor of the landowner for compensation from the local government.

A judgment against a local government must be paid from a special fund for Measure 37 claims. If no money has been deposited to that fund by the city council or county commission, the local government will be unable to pay, and the landowner will have a judgment that is unenforceable. Oregon law does not permit a court or sheriff to sell government properties or to attach other government bank accounts or moneys to enforce judgments against specific government accounts, such as the account Measure 37 requires.

So what is an unenforceable judgment good for (except framing)? It is possible that the judgment could be used to set off against tax revenues, but that is unlikely, given that the payment is to come from the Measure 37 fund and not the general fund of the government. Measure 37 itself provides a solution: If the judgment remains unpaid two years after the claim "accrues," the judgment may be treated as a waiver of land use regulations.

But the waiver is significantly different from an award of compensation. For a compensation award, loss of value relates back to the time that the landowner or the landowner's family member first acquired the property. The waiver, however, applies only to regulations adopted after the current owner acquired an interest in the property. Therefore, even if a landowner is awarded a large sum of money for lost value relating back to the date on which a grandparent acquired the property, but the landowner only recently inherited the property, the waiver may not apply to any land use regulations at all. The owner in that case would probably not choose to use the property under the regulations but would instead seek to have the judgment paid. The judgment would expire after 10 years unless it were renewed for a second 10-year period. At that point, the landowner would be without further recourse.

Most counties have opted for the easier procedure — they evaluate claims and, if valid, do not apply land use regulations adopted after the present owner acquired the property, which Measure 37 states acts as payment in full of any claims.

Clearly, Measure 37 requires every property owner to prove certain facts before bringing a claim. Measure 37 does not provide remedies for all landowners who may have suffered loss of value.

Measure 37 received clear voter support, and the issues it seeks to address are highly charged politically. Therefore, it is very possible that the legislature will not come into agreement to fix any of the defects in Measure 37 in 2005. As a result, each landowner must decide for himself whether to file a claim under the somewhat uncertain state of the new law. An informed decision requires (1) investigation of the history of ownership of the property; (2) a history of the land use regulations that apply to the property; and (3) solid evidence that the regulation has diminished the property's value. Good legal advice is essential.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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