Fair Disclosure and Airport Impact Statements in Real Estate Transfers (2012)

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15 classic taking.”142 There is no use by the government of “its own property in such a way that it destroys pri- vate property….”143 An airport disclosure act neither would deprive an owner of all “economically beneficial use of his property,”144 nor would the act cause a tak- ing by recharacterizing “as public property what was previously private property.”145 Furthermore, an airport disclosure law is not a re- striction on the use of property, nor does it have any effect on the level of airport noise affecting a prop- erty’s value. Whatever noise impact there is remains the same regardless of whether a seller is required to disclose the presence of an airport. As Justice Scalia stated in SBR, “the property owner continues to have [what] he previously had.”146 IV. EFFECT OF AIRPORT DISCLOSURE STATEMENT ON A LATER CLAIM FOR NOISE DAMAGES A. Whether an Airport Disclosure Statement Precludes a Buyer’s Later Claim for Airport Noise Damages An airport disclosure act could require either that an airport disclosure statement be recorded as part of a deed or that the deed include a provision disclosing an airport in the vicinity of the property. The enactment of an airport disclosure act places a prospective buyer on notice of an airport’s proximity to property either be- cause of the receipt of a disclosure statement or because a disclosure statement has become part of the deed and, therefore, of the title to the property. In Biddle v. BAA Indianapolis, LLC147 the issue was whether the Fakes, two homeowners who had pur- chased a residence with knowledge that their sellers had been compensated for airport noise, could main- tain a later inverse condemnation action because of airport noise.148 The Indiana Court of Appeals affirmed the trial court’s dismissal of the Fakes’ claim. The court agreed that the language in the purchase agreement and warranty deed through which the [Fakes] took possession of their residence precluded a claim for inverse condemnation be- cause the language acted as a contractual agreement by which the sellers of the residence were compensated and 142 Id. (quoting Lingle, 544 U.S. at 539, 125 S. Ct. 2074, 161 L. Ed. 2d 876). 143 Id. (citing United States v. Causby, 328 U.S. 256, 261– 62, 66 S. Ct. 1062, 90 L. Ed. 1206, 106 Ct. Cl. 854 (1946) (air- port-related noise). 144 Id. at 2601, 177 L. Ed. 2d at 196 (citing Lucas, 505 U.S. at 1019, 112 S. Ct. 2886, 120 L. Ed. 2d 798). 145 Id. (citation omitted). 146 Id. at 2613, 177 L. Ed. 2d at 208. 147 830 N.E.2d 76 (Ind. Ct. App. 2005), aff’d in part, super- seded in part, 860 N.E.2d 570 (Ind. 2007). 148 Biddle, 830 N.E.2d at 79. the [Fakes] accepted the home with the noise and all other effects of the Airport.149 Furthermore, the Court of Appeals held that the Indianapolis Airport Authority (IAA) was a third party beneficiary of the agreement between the Fakes and the sellers.150 An addendum to the purchase agreement stated: The Real Estate described herein is located in the Sales Assistance Program area as defined in the Indianapolis Airport Authority's Part 150 Noise Compatibility Study Update dated October 9, 1998. The Sales Assistance Pro- gram is a voluntary Program and Sellers have elected to avail themselves of the Sales Assistance Program bene- fits and obligations pursuant to which seller may receive a payment from the Indianapolis Airport Authority sub- ject to the terms of paragraph of the Participation Agreement Residential Sales Assistance Program of ten percent (10%) of the Contract Sales Price as specified in the Purchase Agreement or Closing Statement, whichever is less, in exchange for the placement of a Noise Disclosure Statement in the Deed of Conveyance and such other documents transferring an ownership or fee interest in the Real Estate to Purchaser (emphasis supplied).151 Furthermore, the Fakes’ deed, which also gave notice of the airport noise, stated that the Fakes were pur- chasing the property “with full knowledge and accep- tance of the noise.”152 In commenting on the Court of Appeals’ affirmance of the trial court’s dismissal of the Fakes’ claim the Su- preme Court of Indiana said nothing about the sellers having received compensation for noise. Rather, the Indiana Supreme Court merely stated that the noise disclosure statement in the Fakes’ purchase agreement and deed “specifically gave notice of the noise from airport operations” and that the disclosure statement was intended “to prevent the Fakes from seeking com- pensation from IAA.”153 As one court has stated, “[i]f a grantor sells his property with restrictions which he intends are for the benefit of his neighbor, the neighbors, as beneficiaries, may enforce the benefit- ing restrictions.”154 Of course, an airport disclosure act could provide that airports and airport authorities are third party beneficiaries of airport disclosure state- ments. In Biddle, as stated, the Fakes’ sellers were com- pensated for noise impact by the IAA pursuant to the Sales Assistance Program. It is possible, however, for a seller’s property to have been taken by airport noise 149 Id. at 85–86. 150 Id. at 86. 151 Id. at 86–87. 152 Id. at 87. 153 Biddle, 860 N.E.2d 570, 574 n.6 (Ind. 2007). The Indiana Supreme Court affirmed the trial court’s dismissal of the other homeowners’ claims on the basis that there had not been a taking caused by noise associated with the airport. 154 Se. Toyota Distributors, Inc. v. Felton, 212 Ga. App. 23, 25, 440 S.E.2d 708, 711 (1994).

16 without any compensation because of the doctrine of adverse possession. For example, in Baker v. Burbank- Glendale-Pasadena Airport Authority,155 in which the plaintiffs’ inverse condemnation claim was based on airport noise, smoke, and vibration, the court held that the claim was barred by the law of adverse possession and the statute of limitations. In California, “[p]rescriptive easements are acquired by open and no- torious use, hostile to the true owner, under a claim of right, and continuous for the statutory five-year period. Continuity of use is not broken by change in own- ership of the dominant tenement.”156 Although the court held that the airport authority was not required to compensate the plaintiffs for an easement taken by prescription, the evidence also established that the air- port’s takeoffs and landings and related flight paths were unchanged during the period about which the plaintiffs complained.157 Just compensation for a taking is payable to the per- son who owns the property at the time of the taking whether the taking is by a direct condemnation action or by inverse condemnation.158 If an owner sells the property after the taking but before receiving compen- sation for the taking, the right to compensation “‘does not run with the land but remains a personal claim’” of the former owner.159 If the government takes possession of an owner’s property prior to the owner’s sale of the property, the original owner is the one who is entitled to any award of compensation.160 [T]he government effects a taking when it requires the landowner to submit to the physical occupation of her land. Thus, where there is an entry into possession by the condemning authority prior to formal commendation proceedings, the taking which occurs at the entry must be considered the taking for all purposes.… [T]he right to compensation remains with the vendor of the land unless the contract of sale specifically provides to the contrary.161 155 220 Cal. App. 3d 1602, 270 Cal. Rptr. 337 (1990). 156 Id. at 1609, 270 Cal. Rptr. at 340 (citing CAL. CIV. CODE § 1007; CAL. CIV. PROC. CODE § 321; Connolly v. McDermott, 162 Cal. App. 3d 973, 976, 208 Cal. Rptr. 796 (1984); Applegate v. Ota, 146 Cal. App. 3d 702, 708, 194 Cal. Rptr. 331 (1983); Twin Peaks Land Co. v. Briggs, 130 Cal. App. 3d 587, 593, 181 Cal. Rptr. 25 (1982). 157 Baker, 220 Cal. App. 3d at 1606, 270 Cal. Rptr. at 339. See also Biddison v. Chicago, 1989 U.S. Dist. LEXIS 9048 (N.D. Ill. 1989). 158 Argier v. Nev. Power Co., 114 Nev. 137, 139, 140 n.2, 952 P.2d 1390, 1391, 1392 n.2 (1998). 159 Id. at 139, 952 P.2d at 1391 (quoting 2 JULIUS SACKMAN, NICHOLS ON EMINENT DOMAIN § 5.02[3] (1997); United States v. Dow, 357 U.S. 17, 78 S. Ct. 1039, 2 L. Ed. 2d 1109 (1958); Brooks Investment Co. v. City of Bloomington, 305 Minn. 305, 232 N.W.2d 911 (1975)). 160 Argier, 114 Nev. at 140, 952 P.2d at 1392 (citing Brooks, 232 N.W.2d at 918). 161 Id. at 141, 952 P.2d at 1392 (citations omitted). Thus, the well recognized rule is that if an owner acquires property, for example, after a government regulation effects a taking of an interest in the prop- erty, a property owner “‘cannot base a taking claim upon an interest he never owned. The relevant prop- erty interests owned by [the property owner] are de- fined by those State laws enacted and in effect at the time he took title….’”162 A buyer has no claim for a prior taking because a buyer has “actual or construc- tive notice of all the information he needed to estimate what the land was worth at the time he bought it.”163 Nevertheless, there may be a taking after a buyer’s acquisition of property near an airport. Even if an airport disclosure statement may pre- clude a claim for a taking occurring prior to a buyer’s acquisition of property, it is not clear that a disclosure statement would bar a later claim if there has been a substantial increase in airport noise resulting in a taking after the owner’s acquisition of the property. The Biddle court’s opinion at least implies that a home buyer who has received a disclosure statement may have a claim for a future taking when there is a sufficient increase in airport noise to result in a taking, even if there had been a taking prior to the buyer’s acquisition of the property.164 Even if there has been an earlier, permanent taking because of airport noise, the first taking is not an automatic bar to a claim for a second, comparable permanent taking.165 A new cause of action may accrue when “aircraft noise jumps markedly.”166 The introduction of larger, heavier, nois- ier aircraft may constitute a taking of an additional easement even though the noisier aircraft do not violate the boundaries of an earlier easement.167 Thus, a prop- erty owner may establish an additional loss because of 162 Gregory M. Stein, Who Gets the Takings Claim? Changes in Land Use Law, Pre-Enactment Owners, and Post-Enactment Buyers, 61 OHIO ST. L.J. 89, 91 (2000), hereinafter cited as “Stein” (quoting Gazza v. N.Y. State Dep’t of Envtl. Conserva- tion, 89 N.Y.2d 603, 615, 679 N.E.2d 1035, 1040 (1997)). 163 Id. at 118 (citations omitted). 164 Biddle, 830 N.E.2d at 87, n.13 (stating that “[o]nly if the scope of the activities [were to] significantly change could the landowner possibly be entitled to compensation for a further taking”). 165 Melillo v. New Haven, 249 Conn. 138, 732 A.2d 133 (1999) (Air Wisconsin’s operation of commercial jet service out of Tweed-New Haven Airport between Feb. 15, 1985, and Dec. 1986 held not to be another taking of the subject property that was first taken sometime between 1967 and 1975); Giuliano v. State, DOT, 2007 Conn. Super. LEXIS 3467, at *24–25 (Conn. Super. Ct. 2007) (Unrept.) (finding no taking). 166 Institoris v. City of L.A., 210 Cal. App. 3d 10, 18, 258 Cal. Rptr. 418, 423 (1989) (holding that a cause of action ac- crues “when the flights interfered with the use and enjoyment of plaintiffs” properties and resulted in a diminution of their market value”); Aaron v. City of L.A., 40 Cal. App. 3d 471, 115 Cal. Rptr. 162 (1974). 167 Branning, 228 Ct. Cl. at 259, 654 F.2d at 100 (citing Avery v. United States, 165 Ct. Cl. 357, 330 F.2d 640 (1964)).

17 the increase in noise.168 It is not clear in such a situa- tion that an airport disclosure statement, even one re- corded in the land records, would bar a claim for a later taking. Nevertheless, the Biddle case appears to be the only precedent holding that an airport disclosure statement, which is recorded as part of a buyer’s deed, may serve to bar a later action for compensation for airport noise, particularly when the prior owners received compensa- tion for airport noise. However, it is unclear whether a seller who provides a buyer with a required air- port disclosure statement must have received compen- sation for noise in connection with the disclosure statement, or whether the disclosure statement, standing alone, is sufficient to bar a buyer’s later in- verse claim against the airport for a taking caused by noise. There is other authority holding that a transferee’s knowledge of a taking or potential taking may have an effect later on the landowner’s “right to challenge un- reasonable limitations on the use and value of land.”169 Although not involving an airport, the deci- sion in Schooner Harbor Ventures, Inc. v. United States170 demonstrates that a property owner’s knowl- edge of matters affecting the valuation of property, such as a regulation restricting or affecting develop- ment of the property, may impair an owner’s claim that there has been a taking. In Schooner Harbor, the plaintiff brought an inverse condemnation action, alleging that land use restrictions imposed by Section 7 of the Endangered Species Act had resulted in a tak- ing of his property.171 The trial court dismissed the plaintiff’s claims, in part because the plaintiff was found to have constructive knowledge of land-use re- strictions that affected the land’s development at the time the plaintiff acquired the land. In reversing and remanding, the Federal Circuit required that the trial court analyze the plaintiff’s case based on the Penn Central factors, such as “the economic impact on the plaintiff of the regulations, the impact on Schooner Harbor’s reasonable, investment-backed expectations, and the nature of the government action….”172 How- ever, the court also stated that “Schooner Harbor’s knowledge of the regulation…is a factor that may be considered, depending on the circumstances.”173 168 Id. at 259, 654 F.2d at 100. 169 Palazzolo v. Rhode Island, 533 U.S. 606, 627, 121 S. Ct. 2448, 2463, 150 L. Ed. 2d 592, 613 (2001). 170 569 F.3d 1359 (Fed. Cir. 2009). 171 16 U.S.C. § 1536(a)(2) (2006). 172 Schooner Harbor, 569 F.3d at 1366. 173 Id. On remand, the Court of Claims held that the takings claim was not ripe for adjudication, because the plaintiff no longer owned the property and, therefore, had no present right to develop it or “ability to seek an incidental take permit” from the United States Department of the Interior, Fish and Wild- life Service. Schooner Harbor Ventures, Inc. v. United States, 92 Fed. Cl. 373, 384 (2010). In the Biddle case, the Fakes had been given notice of airport noise prior to the Fakes’ purchase. Similar to the opinion in Schooner Harbor Ventures, the Indiana Supreme Court in Biddle pointed out that the trial court granted summary judgment against the Fakes on the basis “that their seller accepted payment for dam- age to value done by airport noise, and provided the requisite formal notice of this fact to the Fakes as buy- ers.”174 Furthermore, the court stated that “[t]he Fakes are owners who purchased at a reduced price, with the knowledge that the bargain rate existed because of air- port noise.”175 The Fakes, therefore, had been compen- sated already in the form of a reduced price for the property. Thus, there was no interference with any in- vestment-backed expectation that the purchasers’ land would not be subject to disturbance caused by the air- port.176 If a buyer in an inverse condemnation case has received an airport disclosure statement, the evidence also may reveal that the buyer purchased the prop- erty at a reduced price because of airport noise. B. The Effect of an Airport Disclosure Act on Compensation for Noise Damages Even if an airport disclosure statement or the re- cording of one as part of the deed does not preclude a later claim for noise damages, a disclosure statement could affect the amount of compensation awarded for noise damages. First, an airport disclosure law is not a restriction on the use or development of property. Even assuming that an airport disclosure act were to be construed as such a restriction, it has been held that if a con- demning authority takes property that is burdened by a restriction in the title or by a restriction created by a statute or ordinance, then compensation “is limited to the value of the property with the restricted use.”177 Moreover, as stated, a buyer may have purchased prop- erty subject to airport noise at a reduced price, or there may have been a prior taking by adverse posses- sion. 174 Biddle, 860 N.E.2d at 582. 175 Id. 176 Id. 177 4 NICHOLS ON EMINENT DOMAIN § 12C.02, at 12C-57 (cit- ing, e.g., S. Cal. Fisherman’s Ass’n v. United States, 174 F.2d 739 (9th Cir. 1949); John C. McDonald, Note, Eminent Domain: Valuation Where Property Use Restricted by Deed, 21 OHIO ST. L.J. 123 (1960)). See United States v. 480.00 Acres of Land, 557 F.3d 1297, 1301–1302 (11th Cir. 2009) (affirming a district court judgment that used the following instruction: “If, at the time of the taking, the property was subject to zoning restric- tions, license regulations, or other land use restrictions those factors must be considered in evaluating the property….”); Nat’l R.R. Passenger Corp. v. Certain Temporary Easements Above the R.R. Right of Way, 357 F.3d 36 (1st Cir. 2004) (Al- though Amtrak contended that because of use restrictions in a deed to the property part of the property had no permissible use until much later, Amtrak’s own appraisal of the parcel did not reduce the value of the parcel because of the restrictive covenant contained in the 1990 deed.).