![\"Untitleds\"](\"https:\/\/live-journal-of-law-and-public-policy.pantheonsite.io\/wp-content\/uploads\/2015\/11\/Untitleds.png\")
\n\nWhat happens when New York City throws a landmark Supreme Court decision out the window? A $1.1 billion lawsuit<\/a>.\n\nOn September 28, 2015, the owner of Grand Central filed suit against New York City for allegedly taking $475 million in property rights preserved from Penn Central v. New York City<\/em><\/a> and giving them away for free to the city\u2019s largest landlord.\n\nFor those who have not read the legendary Penn Central<\/a><\/em> case, here is what happened: New York City\u2019s Grand Central Terminal was designated a historic landmark in 1967, which completely foreclosed its owner\u2019s plans to construct an office tower above the terminal. The owner, Penn Central, filed suit against the city alleging an unconstitutional regulatory taking.\n\nAt issue in the case was the city\u2019s power to take private property for public uses. In what is known as the \u201cTakings Clause<\/a>,\u201d the Constitution of the United States<\/a> provides that \u201cprivate property shall not be taken for public use without just compensation.<\/em>\u201d Penn Central argued that by restricting the vertical development of their property, the city had taken valuable \u201cair rights,\u201d thus the city was required to compensate Penn Central. The case ultimately went to the Supreme Court where the Court allowed the city\u2019s restrictive regulations on the basis that Penn Station received adequate compensation in the form of transferable development rights (\u201cTDRs\u201d). The TDRs allowed Penn Central to transfer unused development rights to adjacent properties, thereby providing a marketable asset in place of monetary compensation.\n\nUnfortunately for Grand Central\u2019s new owner, New York City recently made those \u201cvaluable\u201d TDRs worthless.\n\nAccording to the lawsuit\u2019s complaint<\/a>, when Andrew Penson\u2019s company (\u201cMidtown\u201d) purchased Grand Central in 2006, the TDRs were worth $475 million\u2014over 85 percent of the property\u2019s sale value. Midtown\u2019s investment-backed expectation was to be able to sell the TDRs to the developers of adjacent property. Sure enough, when SL Green\u2014the largest commercial landlord in New York\u2014purchased 1.2 million square feet of property adjacent to Grand Central<\/a> in 2011with plans for development<\/a>, Midtown entered into negotiations with SL Green for the sale of TDRs.\n\nThen things went wrong for Midtown. After allegedly confidential meetings between SL Green and the de Blasio administration, the city passed a resolution<\/a> rezoning the area around Grand Central Station on May 27, 2015. Prior to the rezoning, SL Green would have had to purchase Grand Central\u2019s TDRs to develop the area as planned. However, the rezoning waived the requirment\u2014effectively making the TDRs worthless. Essentially, Midtown\u2019s complaint<\/a> alleges that the city\u2019s rezoning took \u201cthe entire value of the Grand Central TDRs and transferred over $475 million of that value to SL Green, for no purpose other than to reduce SL Green\u2019s costs and increase its profits in constructing an office tower that it was going to build anyway<\/em>.\u201d This supports the contention, as Harvard law professor Lawrence Tribe testified<\/a>, that the rezoning amounts \u201cto an unconstitutional taking.\u201d\n\nIndeed, the entire Penn Central<\/em> decision was predicated on the marketable value of the TDRs. Now, the rezoning has effectively eliminated that value, reducing the \u201cjust compensation\u201d to nothing and eliminating 85 percent of the property\u2019s value.\n\nAs another Supreme Court case noted<\/a>, if property regulations go \u201ctoo far,\u201d they can amount to a taking. Whether a regulation goes \u201ctoo far\u201d often depends on what exactly was taken in proportion to the entire property\u2019s value (see <\/em>Lucas v. South Carolina Coastal Council<\/em><\/a>, citing Keystone Bituminous Coal Assn. v. DeBenedictis<\/em>). In this case, 85 percent is a very significant proportion of the property\u2019s value. It matters especially because it represents a 100 percent loss of the owner\u2019s investment-backed expectations. Penn Central<\/em> itself established the right to those expectations, and Lucas<\/em> affirmed that a regulation cannot deprive an owner of the right to earn a reasonable return on the investment in the property.\n\nHowever, the bottom line may be one of fairness. According to the Supreme Court<\/a>, the purpose of the Takings Clause is to prevent the government from \u201cforcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.\u201d The complaint asks whether it is fair for the city to transfer the value of Midtown\u2019s TDRs to SL Green for free, offering a huge windfall while forcing Midtown to bear an 85 percent loss, representing hundreds of millions of dollars.\n\nUnfortunately for Midtown, while fairness is always cited by courts, it\u2019s not a factor that has won cases in the past<\/a>. Instead, benefits to public use and economic development<\/a> often trump equitable arguments. In this battle, Midtown faces SL Green\u2019s promise of $220 million worth of improvements to public transportation<\/a> in the area.\n\nWhile it is unclear how the court will decide, it is clear that the controversy surrounding Penn Central<\/em> is back\u2014and Property professors might need to update their casebooks accordingly.","protected":false},"excerpt":{"rendered":"What happens when New York City throws a landmark Supreme Court decision out the window? A $1.1 billion lawsuit. On September 28, 2015, the owner of Grand Central filed suit against New York City for allegedly taking $475 million in property rights preserved from Penn Central v. New York City and giving them away for…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18,19],"tags":[],"class_list":["post-2000","post","type-post","status-publish","format-standard","hentry","category-feature","category-feature-img"],"acf":[],"_links":{"self":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/2000","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/comments?post=2000"}],"version-history":[{"count":0,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/posts\/2000\/revisions"}],"wp:attachment":[{"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/media?parent=2000"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/categories?post=2000"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/publications.lawschool.cornell.edu\/jlpp\/wp-json\/wp\/v2\/tags?post=2000"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}