In oral arguments this week, the Colorado Supreme Court will take a look at a 63-year-old case in Colorado’s eminent domain law to figure out how broadly it applies. At issue is a Court of Appeals decision that interpreted the precedent’s peculiar fact pattern as a sweeping application of an exception to the takings clause. The key question: Does a restrictive covenant that bars certain uses of property create a compensable property interest if a government declares eminent domain on it?
In 2018, the Court of Appeals ruled the application of a 1956 Supreme Court decision, Smith v. Clifton Sanitation District, is not limited to its fact pattern. In that case, property owners enacted a restrictive covenant against the use of their land as sanitation disposal after negotiations with a sanitation district to buy property for that purpose fell apart. The property owners’ clear goal was to prevent the sanitation district from declaring eminent domain to getting the land for its intended purpose, and the Supreme Court ultimately said the covenant did not create a property interest for compensation.
This new case on appeal from the Court of Appeals, formerly known as Town of Monument v. State of Colorado, involves a parcel Monument bought in a residential area to build a municipal water storage tank. A restrictive covenant that applies to all the subdivision’s property lots bars such structures. Monument filed a case to use its eminent domain power, but other property owners said because the covenant benefits all the subdivision’s property, Monument can’t have an exception to the covenant without compensating each property owner.
The Court of Appeals ruled in favor of Monument. The court read the Smith precedent broadly to mean a restrictive covenant does not create a property interest that a government has to compensate. The court acknowledged the fact pattern in Smith is unusual, but said the decision didn’t depend on on the property owners’ intent when they enacted the restrictive covenant.