COA Gives Broad Application to Eminent Domain Precedent

Court finds restrictive covenants are not compensable property interests

In Town of Monument v. State of Colorado, the Court of Appeals ruled a key state Supreme Court precedent has broad application. Under the decision, a restrictive covenant on certain uses of property is not a compensable property interest in an eminent domain case.

In the original case, the Town of Monument bought a parcel of land intending to build a municipal water storage tank. But a restrictive covenant prevents such structures, and it applies to all property lots in the subdivision. Monument filed to use its eminent domain authority to have the court order its property exempted from the covenant. 

But some other property owners who acted as intervenors in the case claimed Monument would have to pay each of them for the loss in their property’s value because the covenant benefitted all property in the subdivision. In addition, the State Board of Land Commissioners said Monument’s property lot couldn’t be exempted from the restrictive covenant because it is a compensable property interest and because eminent domain power can’t be invoked against the state.

The Court of Appeals’ decision turned on whether a 1956 Colorado Supreme Court decision, Smith v. Clifton Sanitation District, should have broad application or is limited to its fact pattern. The precedent involved a restrictive covenant clearly imposed by property owners to block a public entity’s acquisition of property for a public purpose, and the court ruled the covenant was not a compensable property interest. But the Court of Appeals decided the Supreme Court in Smith had made a rule of law that reaches beyond that type of situation. The decision overturned the district court’s ruling that the covenant is a compensable interest, which sided with the state.

To read this story and other complete articles featured in the October 15, 2018 print edition of Law Week Colorado, copies are available for purchase online.