Federal Circuit Continues to Struggle with Taking Claims of Low Rent Apartment Owners

    In Cienega Gardens v United States, WL 2778687 (C.A.Fed 2007), a 7-judge panel of the United States Court of Appeals for the Federal Circuit again reversed and remanded to the trial court a multi-million dollar judgment for the taking of 8 apartment owners’ contract right to begin charging market rent on their apartments at the end of 20 years. The apartments were built in the 1970’s under agreements that HUD would insure the mortgage and control the rents for 20 years, after which the HUD regulation would cease and the owners could begin charging market-level rents. In 1990, however, Congress passed a statute canceling this contract right, resulting in numerous taking suits like the present one. In reversing, the Court of Appeals held that the trial court erred in its method of calculating the statute’s economic impact, and in determining the extent to which the owners relied on the 20-year provision when they entered into the agreement with HUD.

    Judge Newman dissented, stating: “The Constitution assures that when the government changes its obligations to private entities with which it has entered into contractual and other specific relationships, the government is as responsible for its direct violation of those relationships as would be any private person . . . .  It is singularly unfair to these plaintiffs to require them to start again, after thirteen years of judicial process.”

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