Although Missouri property owners received bad news after the state Supreme Court ruled that small cities in the state can use eminent domain for economic development, a bit of good news came from the Supreme Court this week.
The court ruled that the owners of a suburban Kansas City mall could sue the city for lost income and property value the mall’s owners believe were caused by the city’s blight designation. Although the property was declared “blighted” in 2003, five years later the city still has not condemned the property–officially, anyway.
Although the case concerns inverse condemnation, the effective taking of property through government over-regulation, the fact that property owners can proceed in court to argue that the threat of eminent domain, which comes from a blight designation, is enough to qualify as over-regulation is significant.
The shopping center in question was declared blighted in 2003. According to the Associated Press the business owners’ suit argues that the designation has destroyed their businesses:
But Gladstone has never adopted a subsequent ordinance approving a specific redevelopment project, which would trigger a five-year time limit to take the property through eminent domain, the Supreme Court said.
The lawsuit contends that as a result of the delay, numerous retail tenants have not renewed their leases. The suit also contends the city has harassed the shopping center with inspections and code violations and has discouraged prospective tenants from locating there – allegations denied by the city.
The lawsuit claims the city’s actions have diminished the shopping center’s value by more than $5 million and resulted in at least $1.5 million in lost rental income and increased operating costs.