Forced Sale of a Public Nuisance Property is Not a Taking

Brad Kuhn and Jillian Friess Leivas authored the article “Forced Sale of a Public Nuisance Property is Not a Taking” (subscription required) for the Daily Journal, California’s leading legal newspaper. The article expands on a blog post originally published on our California Eminent Domain Report.

Usually, when the government forces a property owner to sell private property, it is done through an eminent domain action (a direct taking), and the government is required to pay just compensation. But what if the forced sale is because the property is a public nuisance (for example, if the property is dilapidated and has code violations) – does that constitute a taking requiring the use of eminent domain? According to a recent Court of Appeal decision, the answer is no: the forced sale of private property based on public nuisance grounds is within the government’s police powers.

In City of Fontana v. United States Bank (2022 Cal.App. Unpub. LEXIS 2127), a residence was in disrepair and the City sent the owners and their lender a notice and order to repair and abate; no action was taken to address the violations, and the City filed a petition with the court to appoint a receiver to sell the house, with an express condition that any buyer must repair the violations. The house was ultimately sold, and the proceeds first went to pay the receiver, then the City’s attorneys’ fees and costs, finally followed by any remaining proceeds going to the lender. The lender lost several hundred thousand dollars and challenged the City’s priority of payment, arguing that the bank should have had priority and the City’s subordination of the loan resulted in a taking under the state and federal constitutions, or the City should have used its eminent domain powers to acquire the property so that the bank’s lien did not become subordinate. The trial court rejected the lender’s arguments, and the lender appealed.