4.3.4.8. Special Considerations in Inverse Takings.Determining the larger parcel in connection with inverse taking claims for liability purposes requires different considerations than in eminent domain-based valuations because of the distinct—and complex—legal issues involved.419 As the Ninth Circuit explained, in eminent domain cases the issue is how much is due the landowner as just compensation: “[But i]n inverse condemnation the issue is liability: Has the government’s action effected a taking of the landowner’s property? [T]he boundaries of the property allegedly taken must be determined by taking jurisprudence rather than the laws of eminent domain.”420

In the context of regulatory inverse takings claims, the larger parcel is commonly referred to as the parcel as a whole or the denominator.421 It is the relevant parcel against which to measure the economic impact of the regulation being challenged.422 As a result, determination of the parcel as a whole plays a critical role in regulatory takings cases in determining liability—i.e., whether a compensable taking occurred.423 This complex legal determination requires careful consideration of all relevant facts, making close consultation between the appraiser and legal counsel essential.424 

The typical starting point is “the metes and bounds that describe [the] geographic dimensions” of contiguous acres held under common ownership,425 with a focus on the property owned by the plaintiff at the time of the government action giving rise to the taking. As a result, the unity-of-ownership test may need to be disregarded, or applied on an earlier date, so that the parcel as a whole will include properties originally (but no longer) held in common ownership on the date of valuation.426 The owner’s actual and projected use of the property must also be considered. Other relevant factors include the timing of an owner’s acquisition of property interests, the timing of the imposition of the regulations being challenged, the owner’s demonstrated expectations for the property, whether the extent to which property is linked through a common development scheme, and the extent to which regulated portions are integrated with and enhance the value of unregulated portions of the property. 

The Supreme Court has consistently rejected the “circular” approach of “defining the [relevant parcel] in terms of the very regulation being challenged.”427 But lower federal courts’ rulings weighing the various factors listed above have resulted in contradictory opinions, with some facing Supreme Court review as these Standards went to publication.428