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Cienega Gardens v. United States

Citation: 32 ELR 20154
No. No. 00-5104, 265 F.3d 1237/(Fed. Cir., 09/18/2001) per se taking

The court holds that the Emergency Low-Income Housing Preservation Act's (ELIHPA's) and the Low-Income Housing Preservation and Resident Homeownership Act's (LIHPRHA's) mortgage prepayment restrictions did not effect a per se taking of residential apartment building owners' property. The Acts prohibit the prepayment of owners' federally subsidized mortgage loans after 20 years without pre-approval from the Department of Housing and Urban Development (HUD). Arguing that the Acts abrogated their contractual rights to prepay their mortgages and, thus, to convert their federally regulated housing into market-rate residences, the owners sued the United States for breach of contract and for just compensation under the Takings Clause of the Fifth Amendment. The contract claims were ultimately dismissed for lack of privity. As for the owners' takings claims, the trial court ruled that the owners were required to request permission from HUD to prepay their mortgages, thereby exhausting their administrative remedies, before their takings claims would be justiciable.

The court first holds that the owners' takings claims were ripe for review as this case falls squarely within the futility exception. Because the trial court's findings during the damages trial of the breach of contract action, as well as U.S. housing data, conclusively establish that HUD would have had no discretion under the statutory requirements of ELIHPA and LIHPRHA to permit the owners to prepay their mortgages, it would have been futile for the owners to file prepayment requests with HUD. The court, however, then holds that the application of ELIHPA and LIHPRHA to this case does not constitute a per se taking. The prepayment restrictions are merely intended to enhance an existing tenant's possessory interest and do not authorize a permanent physical occupation of the owners' property.

Counsel for Plaintiffs
Evertt C. Johnson Jr.
Latham & Watkins
1001 Pennsylvania Ave. NW, Ste. 1300, Washington DC 20004
(202) 637-2200

Counsel for Defendants
John E. Kosloske
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Michel, J. Before Rader and Linn, JJ.