To what extent may the state regulate private property

To what extent may the state regulate private property for environmental purposes? A comparative study* ELMIEN DU PLESSIS**

1 Introduction Environmental conservation is becoming increasingly important. With many of the environmental resources in the hands of private individuals, the state is continually confronted with the question of how to regulate private property for environmental purposes. Regulatory limitations of property, such as environmental conservation, are allowed insofar as they are legitimate and necessary and not arbitrary or un1 2 fair. Where expropriation is undertaken in terms of the state’s public powers, regulatory deprivation refers to the instances where the state, through exercising its police power, restricts or causes some loss to owners, but is not required to pay compensation. The distinction is made between deprivation and expropriation, because the state should be enabled “to regulate the use of property for the public good, without the fear of incurring liability to owners of rights affected in the course of 3 such regulation”. 4 Under the Expropriation Act compensation is due only upon expropriation of 5 property and not upon mere deprivation of property by the state. Expropriation authorised by an act must be executed in terms of that act. If expropriation is not clearly authorised by statute, it can be difficult to determine whether or not the deprivation of property amounts to an expropriation. In many jurisdictions, a deprivation of property that severely limits or destroys property rights without a formal transfer of ownership to the state is seen as a form 6 of expropriation and referred to as constructive expropriation. Constructive ex-

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Conference paper delivered at the 25th Annual Property Law Conference held at UNISA, 29 Oct 2010. Senior Lecturer, University of Johannesburg. Van der Walt Constitutional Property Law (2005) 13. Gildenhuys Onteieningsreg (2001) 9. Steinberg v South Peninsula Municipality 2001 4 SA 1243 (SCA). 63 of 1975. Examples of deprivation by the state that do not require compensation are forfeiture, tax and confiscation. For an interesting discussion of why taxation cannot be said to be an expropriation, see the German case BVerfGE 115, 97 (2006) (Halbteilungsgrundsatz). In Germany the decisions of the federal constitutional court (BVerfGE) are merely cited with reference to the volume number and page number, eg BVerfGE 58, 300. Some cases have names, like the Naßauskiesung, given to them by the media. For ease of reference, the case names will be added where possible. The year in which the case was decided will also be added to put it into historical context. Gildenhuys (n 2) 137.

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propriation is mostly a constitutional property law issue, and was therefore not 7 known in South Africa before 1994. The constitution brought new debates on whether or not this form of expropria8 tion should also be recognised in South Africa. This is also a question in the context of regulation of private property for conservation purposes, and the question that this article aims to answer is to what extent the state may regulate private property for environmental purposes. The article will start with two case studies that sparked interest in the topic. After a brief introduction to the legal position regarding expropriation and deprivation in South Africa, an overview of the position in the United States of America and Germany will be given for comparative purposes. The possibility of a doctrine of constructive expropriation in South Africa will then be considered. This will enable a discussion on the issue of state regulation of private property for environmental purposes. This is again a comparative discussion with reference to two very recent decisions in the United States of America and Germany. In conclusion, lessons from the United States of America and Germany will be used in order to provide a preliminary answer to the question of to what extent the state may regulate property for environmental purposes. The United States of America provides an extensive range of literature on when 9 compensation should be paid, due to the unique nature of its regulatory takings law. Germany, by contrast, does not recognise compensation for excessive regulation and serves as an interesting example of how to clearly distinguish between deprivation and expropriation. The German example is also interesting insofar as it does not refer to deprivation, but to the state having the power to determine the content and limits of property rights. This means that when the state determines the content and limits, compensation is not due. Furthermore, the Junktim-Klausel requires the authorising act to provide for compensation, which means that the question of when 10 compensation is due is not left to the court, but is made by the legislature. While dealing with these jurisdictions, one must be mindful of the differences in order to do a valuable comparison. The United States of America takings jurisprudence (which is seemingly unique to the United States), for instance, must be regarded in the proper economic background in which it developed, and cannot be transplanted 11 without regard to the economic background of South Africa. The German example is perhaps the closest to South Africa, since the South African property clause was partly based on the German equivalent.

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For pre-1994 examples of cases that look like constructive expropriation, see Pretoria City Council v Blom 1966 2 SA 139 (T). See also Sandton Town Council v Erf 89 Sandown Extension 2 (Pty) Ltd 1988 3 SA 122 (A), where compensation was awarded because the installation of a drainage system that led to monetary damage was described as something akin to expropriation. Cf Apex Mines Ltd v Administrator, Transvaal 1986 4 SA 581 (T) where the court refused to compensate the holder of mineral rights whose rights were diminished by the proclamation of a road that prohibited the mine from mining within 100 metres of the road. In Tongaat Group Ltd v Minister of Agriculture 1977 2 SA 961 (A) 974 the court found that in the absence of an express indication by legislation, compensation would not be paid for damage that was not caused by the expropriation per se. See Van der Walt “Moving towards recognition of constructive expropriation?” 2002 THRHR 459. Van der Walt (n 1) 216. Van der Walt (n 1) 129; BVerfGE 58, 300 (1981) (Naßauskiesung). Van der Walt (n 1) 216.

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2 Case studies 2.1 The Oudekraal case Oudekraal is a piece of private property on the slopes of Table Mountain. In 1954 land surveyors applied for township rights, disregarding the Muslim graves, or kramats, on the property. The plans were approved in 1961, but the property was never developed. In 1996, Oudekraal Estates submitted engineering plans to develop the property. Under public pressure from the Muslim community and environmental groups the City of Cape Town asserted that the approval granted in 1961 lapsed because the general plans for such development were not submitted in the required 12 13 time. There were a total of four cases, of which the last case was an appeal to the high court to set aside the decision made in 1961. In the review application, the court had to consider whether the city’s delay in bringing such an application was unreasonable, and, even if so, whether it was competent for the court to condone the late application. The court found the delay unreasonable but thought it could condone it, taking into account the consequences of the administrative decision to approve the township for the general public. The court ruled that if the decision would stand, it would not only have undesirable consequences for the Muslim community in the Cape, but would also be a threat to an environmentally significant area, also for the public at large, thus infringing constitutional rights. The supreme court of appeal confirmed the decision of the court a quo, basing its decision on the interest of the broader community, stressing the floral significance of the area, and pointing out that approval of the decision would mean ignoring the presence of the graves – which would be inconceivable in the new constitutional 14 dispensation. What is of interest about the case is the fact that Oudekraal Estates’ entitlement to develop the property (and back in 1961 with valid approval from the City of Cape Town to do so) was limited 50 years later, because the changing interest of the community required such a restriction. 2.2 Vredefort dome In the Vredefort dome commercial farmers and people who want to build big houses on their riverfront property have similar problems. The Vredefort dome was declared a world heritage site in 2005. It is the oldest astrobleme (meteorite impact 15 structure) found on earth and a site critical to the earth’s geological history. The rural and natural landscape of the dome add to the significance of the place – it clearly highlights the impact of the meteorite. High density development on the land will detract from its significance, and possibly destroy very valuable geological 16 heritage material. Rumour has it that there are farmers who refuse to scale down

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Oudekraal Estates (Pty) Ltd v City of Cape Town 2010 1 SA 333 (SCA) par 20 and 27. City of Cape Town v Oudekraal Estates (Pty) Ltd 2007 ZAWCHC 53. Oudekraal case (n 12) par 85. http://whc.unesco.org/en/list/1162 (27-01-2011). This information was conveyed by a landowner in the Vredefort dome. There were some concerns in proclaiming it a world heritage site: Tempelhoff “Vredefortkoepel glo gou geproklameer” Volksblad (02-03-2010) http://www.volksblad.com/Suid-Afrika/Nuus/Vredefortkoepel-glo-gougeproklameer-20100301 (03-05-2011). See also the “Vredefort dome conservancy strategic development and management plan” http://www.contourprojects. co.za/area_planning/index.html (03-052011).

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their commercial farming activities, and landowners who cannot understand why they cannot erect big Tuscan-style structures in the world heritage site. 3 Deprivation and expropriation 3.1 South Africa In South Africa a property owner is protected from an arbitrary deprivation in so far as such deprivation must be done in terms of a law of general application, and the deprivation may not be arbitrary. The constitution permits expropriation of property if the property is expropriated in terms of a law of general application, for a public purpose or in the public interest. All expropriations are subject to the payment of just and equitable compensation. First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service; First National Bank of SA Ltd t/a/ 17 Wesbank v Minister of Finance laid down an interpretative framework for section 25 of the constitution. The court in essence ruled that the overriding purpose of section 25 is to strike a 18 “proportionate balance” between protecting existing property rights and promoting the public interest, by prescribing an interpretation mechanism to achieve this 19 end. The problem with the framework mentioned in this decision is that once the court decided that the interest at stake is constitutionally protected property, the inquiry moves on to the question of whether there was a deprivation of such property. Ackermann J gave a wide definition of deprivation, implying that this stage of the in20 quiry will not receive too much attention in most cases. Instead, the focus will be 21 22 on “the level of intrusiveness of the deprivation” (the so-called arbitrariness test ) 23 to determine whether the requirements of section 25(1) have been met. Ackermann J further stated that expropriation is a form of deprivation. Therefore, if a law allows for the expropriation of property, it will first be treated as a deprivation. This means that a law that allows for expropriation must fulfil the requirements of section 25(1) before it will even be treated in terms of section 25(2) and (3). The implication of the FNB case is that a court will in the future first test for compliance 24 with section 25(1) before moving on to sections 25(2) and (3). If a court finds that a deprivation was arbitrary in terms of section 25(1), the inquiry will stop there, and the potential of compensation as a balancing factor will 17

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2002 4 SA 768 (CC). For a discussion on the lien issues raised in the case, see Sonnekus “Minder deurdagte uitsprake van die grondwetlike hof oor die materiële privaatreg verdien nie klakkelose navolging nie” 2002 TSAR 802 and Rautenbach “Die reg op eiendom – arbitrêre ontneming, proporsionaliteit en die algemene beperkingsbepaling in konteks” 2002 TSAR 813. par 50. For a general discussion on the means-end rationality, see Rautenbach “Means-end rationality in constituitonal court judgments” 2010 TSAR 768. Roux “Property” in Woolman et al (eds) Constitutional Law of South Africa (2006) 46–18. Roux (n 20) 46–18. The test for arbitrariness is not clear either. The level of scrutiny lies on a continuum. On the one end, it amounts to mere rationality review as in Geyser v Msunduzi Municipality 2003 3 BCLR (N) 235 and on the other end, it tends more towards proportionality. Roux (n 20) 46–24 is of the opinion that, where a claimant is totally deprived of all his/her rights in land or a corporeal movable, then the law would probably only be constitutional if it provides for market value compensation. Also, when only some rights are affected in comparison to the purpose it wishes to achieve, especially if the aim is land reform, then it is unlikely to be found unconstitutional. See Roux (n 20) 46–25. Roux (n 20) 46–3. Roux (n 20) 46–18.

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not be considered. Even if the court considered the fact that compensation is offered (in cases where it was clearly an expropriation), it would have to do so after it considered the deprivation question first. The inquiry into the amount, time and manner of payment of compensation would effectively be consumed by the arbi26 27 trariness test. This is what Roux calls the “arbitrariness vortex”, where every step of the constitutional inquiry is subject to the arbitrariness test. South Africa has not yet developed a “doctrine” of constructive expropriation. It is uncertain whether such a doctrine will or even can be incorporated, but it seems unlikely. I will first look at the position in the United States of America and Germany, before evaluating the situation in South Africa and providing reasons for my view that the incorporation of such a doctrine is not possible. 3.2 United States of America In the United States of America expropriation, or a taking, is referred to as the state’s power of eminent domain, while deprivation usually refers to the state’s police or regulatory power. The requirements for a valid expropriation are public use, due process and compensation. The compensation requirement serves as a strong protection for property, leading to the United States of America courts concentrating on the question of when a regulation goes too far and constitutes a 28 taking that requires compensation. The compensation requirement serves as a strong protection for property, leading to the American courts concentrating on the question of when a regulation goes too far and constitutes a taking that requires compensation. The courts in the United States advocate the idea that an individual should not be expected to carry the bur29 den where the state exercises its power in the public interest. The takings debate is therefore very much about the question of when such an individual would be carrying an unfair burden. 30 In Pennsylvania Coal Co v Mahon Holmes J ruled that police power and the power of eminent domain are different ends of a continuum. This implies that the 25

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Roux (n 20) 46–19. In a subsequent constitutional court decision, Mkontwana v Nelson Mandela Metropolitan Municipality; Bissett v Buffalo City Municipality; Transfer Rights Action Campaign v MEC, Local Government and Housing, Gauteng (Kwazulu-Natal Law Society and Msunduzi Municipality as Amici Curiae) 2005 1 SA 530 (CC) the court was again confronted with the question whether a deprivation for fiscal purposes was a valid deprivation under s 25(1). The court applied a low level of scrutiny and asked only whether the regulatory measure was rationally related to a legitimate government function; see Van der Walt “Retreating from the FNB arbitrariness test already?” 2005 SALJ 75 82. Van der Walt views this as a departure from the FNB decision, in that the Mkontwana case requires not only a lower level but also a substantially different kind of scrutiny. See also Offit Enterprises (Pty) Ltd v Coega Development Corporation (Pty) Ltd 2011 1 SA 293 (CC) 307B, where the court per Skweyiya J stated that “I am in agreement with the Mkontwana judgement that there must at least be ‘substantial interference’ in order to warrant consideration by this court in this matter of whether there has been an unconstitutional infringement of section 25(1)”. Roux (n 20) 46–20. See Roux “The ‘arbitrary deprivation’ vortex: constitutional property law after FNB” http://www. saifac.org.za/ docs/res_papers/RPS%20No.%2039.pdf (22-01-2011) for a thorough discussion of the vortex effect of the arbitrariness test. See Singer and Beermann “The social origins of property” 1993 Canadian Journal of Law and Jurisprudence 217 221; Michelman “Property, utility and fairness: comments on the ethical foundations of ‘just compensation’ law” 1967 Harvard LR 1165 1183-1193; Sax “Takings and the police power” 1964 Yale LJ 36; Sax “Takings, private property and public rights” 1971 Yale LJ 149 for criticism of these factors. Keystone Bituminous Coal Association v DeBenedicitis 480 US 470 (1987). 260 US 393 (1922) 415.

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state has police power to regulate property, but if an exercise of this power “goes too far” it would constitute a taking. The Pennsylvania Coal case was the first of many 31 court cases that sought to determine when a regulation would amount to a taking. 32 The test was altered in Penn Central Transportation Co v City of New York, where it was held that such a test is an open-ended contextual test that must be decided from case to case. The Penn Central test relied on the ad hoc factual inquiries to provide a structure that will guide the courts to identify when a government action amounts to a taking. The test developed is also referred to as the three-factor test, which provides for three factors to be considered in determining whether the regulation 33 amounts to a regulatory taking. The first factor to consider is the character of the government action, the second factor the extent to which such an action interferes 34 with the claimant’s investment-backed activities and the third is the economic 35 impact of governmental action on the claimant. “Investment-backed activities” 36 is a term coined by Michelman that refers to the diminution in value caused by 37 the taking. “Economic impact of government action” is not concerned with the diminution in value, but rather with what proportion of the original value of land 38 has been destroyed by the regulation. Mere diminution in value will not amount to a taking, if there is still some economically viable use of the land. 39 Two years later in Agins v City of Tiburon the court set out a two-part regulatory takings test, although it is uncertain how this test blends in or complements the Penn 40 Central three-factor test. In the Agins case the court ruled that zoning law would amount to a taking if “the ordinance does not advance legitimate state interests” or 41 it “denies an owner economically viable use of land”. The first part of the test was equated to a minimum rationality standard that was ignored in later cases, and the 42 “no economic viable use” test was used as the only test in the DeBenedicitis case. It states that when the government interferes with property to such an extent that the owner has no economically viable use of the property afterwards, it will be regarded as a taking. The open-ended contextual approach was abandoned in Loretto v Teleprompter 43 Manhattan CATV Corp. The court developed a “per se” rule for permanent physical occupation of land, stating that permanent physical occupation will always amount to a taking since it is a serious invasion of an owner’s interest.

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Van der Walt Constitutional Property Clauses: A Comparative Analysis (1999) 401. 438 US 104 (1978) 124. 124. For a criticism of investment-backed expectations and economically viable uses in takings analysis, see Oswald “Cornering the quark: investment-backed expectations and economically viable uses in takings analysis” 1995 Washington LR 91. For criticism of this test see Peterson “The takings clause: in search of underlying principles part I” 1989 California LR 1299 1315; Van der Walt (n 31) 437. Michelman (n 28) 1213. Oswald (n 34) 102. Peterson (n 35) 1326. 447 US 255 (1980). 260. Agins v City of Tiburon 447 US 255 (1980) 260. Peterson (n 35) 1330. 458 US 419 (1982).

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The “per se” taking rule was extended in Lucas v South Carolina Coastal Coun44 cil with the court adding a second category, namely that a regulation would amount to a per se taking when the regulation prevents the plaintiff all economically benefi45 46 cial use of his land. Hodel v Irving added the third “per se” rule by stating that regulation that destroys the core of property rights will also amount to a taking. First English Evangelical Lutheran Church of Glendale v County of Los Ange47 les re-ignited the debate surrounding the takings issue when the court ruled that a regulation that prohibited all use of property could amount to a regulatory taking 48 that needs to be compensated. Shortly thereafter, the court in Nollan v California 49 Coastal Commission again had to rule on whether a regulation that restricts a 50 landowner’s use is a taking for purposes of the Fifth Amendment. This case set a new standard of review for land use regulation by requiring that such a regulation must bear a “substantial relationship” to a legitimate state purpose in order to 51 invoke the just compensation requirement. Many American scholars have tried to set up a formula for answering the question when a taking is compensable, trying to determine context-neutral rules for the courts’ decisions. It seems that the courts first try to establish whether one of the three “per se” takings categories is present, namely physical occupation, denial of economically viable use or destruction of a core property right. If none of these categories is present, the open-ended contextual 52 inquiry of Penn Central will apply. In such an open-ended contextual inquiry, the three-factor test applies with the courts looking at the nature of the government action, the diminution of value that results from the regulation and the extent to which 53 regulation interferes with reasonable, investment-backed expectations.

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505 US 1003 (1992). The courts had to rule whether an act promulgated after Lucas purchased a certain beachfront property amounted to a taking. The act precluded Lucas from developing the property the way he expected to develop it when he purchased the land, namely to build a house for himself and to keep the other piece for investment purposes. Since the land was good only as a camping ground, which would be a negative value to Lucas, he argued that the property was deprived of all of its economic value. The court’s justification for adding this to the list of instances where a regulation would be regarded as regulatory taking is by distinguishing regulation that merely regulates nuisances from other instances. Since ownership is in any case subject to the principle of nuisance law, and therefore always subject to such regulation, that would not amount to a taking. Garvey and Aleinikoff Modern Constitutional Theory (1994) 363. 481 US 704 (1987). 482 US 304 (1987). In this case the county, after heavy floods, enacted an ordinance that prohibited development in the flood-protected area. The church, as property owner, argued that this ordinance prohibited all use of the property. The court ruled that it was a taking that the government must compensate. This was overturned in the appeal court in First English Evangelical Lutheran Church v County of Los Angeles 482 US 304 (1989) on the basis that it was a valid safety measure enacted by the county for a reasonable period. 483 US 825 (1987). In this case the state granted the Nollans a permit to rebuild their home, but on the condition that they had to allow an easement on the property to the public over a portion of their beach frontage. Here the court rejected the condition since it found that there is not an essential nexus between the public purpose and the conditions of such a permit. If the state wanted to provide public access to the beach, it had to expropriate the property and pay just compensation for it. See Sullivan “Eminent domain in the United States: An overview of federal condemnation proceedings” in Erasmus (ed) Compensation for Expropriation: A Comparative Study (1990) 180. In reaction to this the government issued Executive Order 12630 in 1988, requiring federal agencies to comply with the principles established in those two decisions. See Sullivan (n 50) 180-182. Van der Walt (n 31) 437. Van der Walt (n 31) 437.

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Michelman reduced the court’s doctrine to a series of categorical “either-or’s”. He states that “either (a) the regulation is categorically a taking of property because (i) it entails a permanent physical occupation (however practically trivial) of private property by the government, or, perhaps, specifically undermines a ‘distinct investment-backed expectation’, or (ii) it totally eliminates the property’s economic value or ‘viability’ to its nominal owner, or (b) the regulation is categorically not a 55 taking.” 56 Peterson summed it up in four tests that a court can choose from when determining when an interference amounts to a taking. They are the three-factor Penn Central test, the two-part Agins test, the “no economically viable use” test and the Loretto per se rule. For Tribe, it will not be a taking when the regulation advances a public interest, does not destroy one of the core elements of property in the bundle of property rights, leaves much of the commercial value of the property intact and in57 cludes some reciprocity of benefit. These are not hard rules, but rather guidelines as to why a court might find that a regulation amounted to a compensable taking. 3.3 Germany 58 In Germany the situation seems clearer. The courts draw a distinction between 59 constitutional expropriations and other similar forms of limiting property. Enteignung (expropriation) refers only to the instances that meet the requirements 60 of article 14.3 GG, and the Junktim-Klausel makes compensation in the authorising law a prerequisite for a valid expropriation. Compensation for expropriation is due only once all the article 14.3 GG requirements are met. In German law, a regulation that places an unfair burden on the individual without paying compensation can only be attacked for constitutional invalidity but it cannot be used to found a compensation claim similar to that in the United States. Compensation is due only when the authorising statute makes provision for it. This is due to the Junktim-Klausel in the property clause. This implies that an owner who was unfairly burdened by a regulation cannot claim compensation for expropriation in terms of article 14.3 of the constitution, but must ask for the regulation to be declared unconstitutional in 61 terms of article 14.1.2. In general, article 14 GG is characterised by the tension between the liberal view of property that emphasises the individual’s rights as justified by natural law, and the social function of property according to which property rights are created 62 and restricted in the social context. If there is an infringement of the individual’s 54 55 56

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Michelman “Takings” 1988 Col LR 1600. Michelman (n 54) 1622. Peterson (n 35). See also Van der Walt (n 31) 428-440, where he discusses the same rules, in a different sequence. Tribe American Constitutional Law (1988) 597. See Mostert “Engaged citizenship and the enabling state as factors determining the interference parameter of property: a comparison of German and South African law” 2010 SALJ 238, where she argues why the German system can be used for comparative research because the nature of the law applicable to the regulation of property is similar, even if the structure and process of the rules differ. Büchs Handbuch des Eigentums- und Entschädigungsrechts (1996) 5. BVerfGE 58, 300 (1981) (Naßauskiesung). (n 60). Van der Walt (n 31) 122. See also Alexander “Constitutionalising property: two experiences, two dilemmas” in McLean (ed) Property and the Constitution (1999) 88 93-96 for a discussion of the dualistic nature of property in the German property clause and a comparison with the United States.

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property right such as regulation or expropriation, a balancing of the individual’s 63 interest against that of the society needs to take place. To determine whether regulation of property is fair, the German courts have developed the doctrine of Sonderopfer (individual sacrifice), according to which a regulation that singles out a property owner unfairly to bear a disproportionate burden of regulation that benefits the broader public is invalid. It will be disproportionate if it disturbs the equitable balance between the interest of the individual and the social interest. If the individual is singled out to carry the burden, and the burden cannot be said to be one that a reasonable owner is expected to bear in the larger society, the regulation will 64 be invalidated as being unconstitutional. An interesting practice in German law regarding the payment of compensation in this context is the so-called Ausgleichsanspruch (equalisation payment). This fills the gap between securing property by requiring compensation for expropriation and uncompensated regulation, but does not amount to compensation for a regulatory taking, as in the United States. In cases of regulatory excess that result in an unusual sacrifice (Sonderopfer), a special kind of compensation could be paid to alleviate the burden of uncompensated state interference with property, potentially solving the problem of disproportional distribution of the burden imposed by otherwise legitimate government regulation. These payments are not compensation for expropriation (Enteignungsentshädigung), but payments to reduce the burden of the 65 individual property holder (Ausgleich payment) or “equalisation payments”. 3.4 The possibility of constructive expropriation in South Africa As in both jurisdictions discussed, the rationale for compensation in South Africa also seems to rest on the idea that the individual should not be singled out by an expropriation. In the United States, however, compensation is due when a regulation “goes too far” in interfering with the property in a physical sense, depriving all economically viable use of the property or taking away the core of property rights, even if nothing was acquired. It seems unlikely that South Africa will follow such an approach, since the notion of regulatory takings is a unique “incomprehensible muddle” and strongly connected to the liberal notion of property that is so prevalent in the United States. A modified German example might be more appropriate. In Germany there is a categorical distinction between deprivation (the determination of content and limits) and expropriation. Even though the FNB decision seems to have 66 closed the possibility of a clear distinction between deprivation and expropriation, it seems to correlate with the German approach: when a deprivation places an undue burden on an individual, it might be arbitrary (therefore unacceptable) and declared 67 unconstitutional and invalid. In the FNB framework, therefore, a deprivation that “goes too far” would not pass the section 25(1) test, and therefore cannot be considered as an expropriation. The German practice of Ausgleich payments might also find application in the South African context, since they might be useful in lessening the burden caused 63

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Kleyn “Constitutional protection of property: a comparison between the German and the South African approach” 1996 SAPR/PL 402 412-413; Van der Walt (n 31) 344. Mostert (n 58) 248. Van der Walt (n 31) 144. This is one instance where the German approach can be distinguished from the American approach. In the United States, compensation for expropriation is sometimes paid for a regulation that “goes too far”. (n 17). (n 17).

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by a statutory intervention that an otherwise constitutional law places on a single 68 owner. South African case law does not help in answering the question. In Steinberg v 69 South Peninsula Municipality, decided before the FNB case, the court remarked obiter that “[d]espite the clear distinction made in s 25 of the constitution between deprivation and expropriation, there may be room for the development of a doctrine akin to constructive expropriation in South Africa”, but then later in the same paragraph showed its reservations about such an approach by stating that it “may be undesirable both for the pragmatic reason that it could introduce confusion into the 70 law” and theoretically because it might hinder land reform. In Reflect-All 1025 CC v MEC for Public Transport, Roads and Works, Gau71 teng Provincial Government, decided after the FNB case, the court pertinently had to answer the question of whether a regulation deprived owners of property contrary to section 25(1), in that it amounted to expropriation without compensation. The court remarked that “courts should be cautious not to extend the meaning of expropriation to situations where the deprivation does not have the effect of the 72 property being acquired by the State”. The court also remarked that the Steinberg obiter dictum, that there might be room for the development of a narrow doctrine of constructive expropriation, might not be appropriate in our constitutional order, 73 without really giving reasons why this might not be desirable. The court just found that the present regulation is not an instance of constructive expropriation, and that “[i]f regulation in cases such as the present were to be characterized as amounting to expropriation, government would be crippled in discharging its obligations in 74 regulating the use of private property for public good”. 4 Regulation of private property for environmental and heritage conservation: recent cases in the United States of America and Germany 4.1 Introduction Based on the above discussion the question can therefore be asked: to what extent may the state regulate property for environmental (or heritage conservation) purposes? What follows is a discussion of the most recent case law in the US and Germany; therafter I assess the situation in South Africa. 4.2 The United States of America Stop the Beach case Stop the Beach Renourishment Inc v Florida Department of Environmental Pro75 tection raised the question whether certain measures taken under the Beach and Shore Preservation Act, 1961 Florida, amounted to a (judicial) taking of the property without just compensation. Most of the case hinged on the issue of judicial takings and the relationship between state and federal courts when

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as in President of the Republic of South Africa v Modderklip Boerdery (Pty) Ltd (Agri SA, Amici Curiae) 2005 5 SA 3 (CC). (n 3). (n 3) par 8. 2009 6 SA 391 (CC). par 64 – own emphasis. par 65. par 65. (2010) 130 S Ct 2592.

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adjudicating on substantive law issues, but the facts of the case raise interesting questions. The Beach and Shore Preservation Act was passed to combat beach erosion. Municipalities are authorised to restore the beach front by adding sand to create a temporary buffer against erosion. Normally, when sand is added gradually to the land (accretions), the owner of the beach will become the owner of the added beach. However, under the act an erosion control line is set, usually on the high water mark that divides public property from private property. This replaces the common law in that land cannot accrete to the private property, nor be decreased by erosion. Fixing the line in terms of the act, the beachfront owner’s land can no longer expand, and the strip of land created between the erosion control line and the water becomes public property. This means that the littoral owners were suddenly faced with an expanded beachfront, but with the high water mark remaining on the erosion control line and overriding the common-law high water mark and a substantial part of that beachfront being public property. Upon an interpretation of the effect of the act, the Florida supreme court ruled that as beachfront owners they lost the right to receive accretions to their property due to an “avulsion 76 event”. This means they also lost the right to have their property’s contact with water remain intact. This infringement of their riparian rights, Stop the Beach argued, amounted to an unconstitutional taking. They claimed this on the basis that the court recharacterised private property as public property. In the words of one of the owners: “They add 100 feet of sand, so you no longer own waterfront 77 property, you own beachfront property”. 78 The Florida first district court of appeal held the statute to be unconstitutional on the face of it, because it divested the owners of their common-law rights to become owners of accretions. Since the state becomes owner of the strip between the erosion control line and the mean high water mark, the district court further found that the common-law rights would be severed. The Florida supreme court reversed this ruling, as Florida had a duty to protect the beaches and the act merely helped to fulfil that duty. The court ruled that the right to contact with water supplements the right to access to water. Since the owners lost the right to contact but still had access to the water, the court found that this did not deprive the landowner of the core of property rights and was therefore not a taking. The owners viewed the interpretation of the doctrine of avulsion that the court used to come to its conclusion as amounting to a judicial taking. They claimed this on the basis that the court recharacterised private property as public property. The supreme court upheld the Florida supreme court’s decision. It seems from this case that environmental regulation of property that merely deprives the owner of access to “a waterfront property” does not infringe on ownership to such a degree that the court is willing to rule that it is a compensable taking. The emphasis placed on the environmental need to preserve the beaches might have frustrated the landowner’s claim.

76 77

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2595. Rice “A stake in the sand” New York Times Sunday Magazine (21-03-2010) http://www.nytimes. com/ 2010/03/21/realestate/keymagazine/21KeyBeachfront-t.html?_r=1 (23-01-2011). Fla Ct App 1st Dist (2006).

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4.3 The German Denkmalschutz case 79 The 1999 Denkmalschutz case of the federal constitutional court challenged the 80 constitutionality of the Monument Protection Act of Rhineland-Palatinate. The claimant was the owner of a villa built in the Grunderzeit (mid-nineteenth century). The villa was protected under the act and the state’s permission had to be obtained to demolish the building. The owner was not allowed to use the building as an apartment or for any non-residential purposes, and had to pay money just to own the building. The owner tried to sell the building, but could not find a buyer. The upkeep of the building became too expensive, and the owner applied for a demolition order. His application to demolish the building was denied because, according to the act, only the public interest and not the owner’s interest had to be taken into account when the owner applies for a demolition order. The federal constitutional court found that the restriction amounted to a regulation and not an expropriation, and the only remedy available was to rule that the statute should be invalid. The court made a categorical distinction between regulation and expropriation, and found that the regulation was invalid as no meaningful possible use of the building remained. This heavy burden in effect deprived the 81 owner of ownership. In April 2010 the federal constitutional court of Germany was faced with a similar problem. The claimant in this case was also an owner of a building that is pro82 tected under the Monument Protection Act of Rhineland-Palatinate. The claimant owned land with a chapel protected under the Monument Protection Act. Part of the chapel was used for commercial purposes, and the claimant through the years made some renovations to the chapel, which the monument protection service ordered him to remove and restore to its previous state. He subsequently applied for a demolition order, which the monument protection service rejected. The claimant objected to this, stating that keeping the monument was not reasonable: as owner of the chapel he could sustain his maintenance duty with the money that he made from the use of the chapel as it stood. It needed renovations and maintenance work of about €195 000, while the profitability of the land was at most €50 000 per annum. The claimant argued that the ability to generate a benefit from the property and the right to alienate the property was part of his property right guaranteed in article 14.1 GG. The federal constitutional court did not agree. It found that the rejection of the application to grant permission to demolish the chapel was a concretisation of the determination of the content and limitation of the property clause as per article 14.1.2 GG. It acknowledges that by refusing the permit it limits the owner’s entitlement, but that this limitation is not disproportional. The court found that it was not disproportional because protection of monuments is ranked highly within the framework of the common good, and therefore justified. The public interest in protecting monuments, the court found, can only be achieved by putting a burden on the claimant. This means that his property had an increased social obligation that resulted from a factual situation, namely the location and condition of the property. The court furthermore ruled that article 14.1 GG does not protect the most profitable use of the property. Since the general usability of the property was not affected, article 14.1 GG had not been contravened.

79 80 81 82

BVerfGE 100, 226 (1999) (Denkmalschutz). Denkmalschutz- und -Pflegegesetz or DSchPflG. C I 1. Denkmalschutz- und -Pflegegesetz or DSchPflG.

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5 Conclusion: to what extent may the state regulate private property for environmental purposes in South Africa? South Africa had a similar case to the German Denkmalschutz case in 2007 that gives us an indication of the routes that the courts may possibly follow in such in83 stances. Qualidental Laboratories (Pty) Ltd v Heritage Western Cape concerned 84 the interaction between the National Heritage Resources Act and the impact of certain provisions of the act on the traditional notions of ownership. The applicant wanted to develop certain immovable property and in the process applied for a demolition permit. The demolition of part of the building was approved, but not of the “villa”. Despite the building plans not being approved, the applicant went ahead with the development, contrary to the conditions in the permit. Heritage officers, after conducting a site visit, issued a stop works order. The landowner subsequently brought an application to have the stop works order set aside, and to have the condi85 tions in the demolition order deleted. The applicant’s argument was such conditions would “erode the very ownership rights of applicants”. The court dismissed this argument: “[O]wnership in South African can no longer be characterised as an absolute and individualistic right without any qualification attached thereto. … [I]n our constitutional democracy an increased emphasis has been placed upon the characteristic of ownership that entitlements can only be exercised in accordance with the social function of law and in the interest of the community. Inherent responsibilities of ownership towards the community in the exercise of entitlements have been increasingly emphasised. A balance must be struck between the protection of ownership and the exercise of entitlements of the owner regarding third parties on the one hand, and the obligation of 86 the owner to the community on the other”.

The court in this instance viewed the restriction of cultural preservation legislation as “deprivation”, and from the discussion it is clear that it was, in this instance at 87 least, non-arbitrary. Without going into a discussion about it, the court actually applied the FNB case’s arbitrariness test by concluding that “[a] purposive interpretation of [the sections in the act] promotes the clear objectives of the Act without, in any way, unfairly restricting the concept of ownership as it is now to operate within 88 South Africa”. The white paper on the conservation and sustainable use of South Africa’s biolog89 ical diversity supports this assumption. The white paper makes a few statements about the regulation of property for the conservation and sustainable use of biodiversity. It acknowledges that property rights are recognised in the constitution, and that biodiversity is often found in private ownership. It maintains, however, that the state always had the authority to control private property, and that through deprivation and expropriation the state is able to regulate properties to achieve conservation and sustainable use of biodiversity. In the Consolidated Environmental Implemen-

83 84 85 86 87 88

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2007 4 SA 26 (C). 25 of 1999. 30. (n 83) 37A-E – own emphasis. Van der Walt “Constitutional property law” 2007 Annual Survey of South African Law 249. Qualidental case (n 83) 37F-G. This seems to be a rationality test, where the regulation is found to be rationally related to a government function. In Qualidental Laboratories (Pty) Ltd v Heritage Western Cape 2008 3 SA 160 (SCA) the supreme court of appeal held that the court a quo had been correct to dismiss the application and the appeal was dismissed. GN 1095 (28-07-1997) par 4.3.2.

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tation and Management Plan it is acknowledged that the constitution guarantees compensation in the event of expropriation, but denies that this protects property 91 per se. This implementation plan states that a landowner has certain obligations set by the state in respect of land use and in the interest of sound environmental management. Such regulation of property is not an expropriation. The constitution, the plan claims, defines the contents and rights of ownership, and the obligations of owners are included in the legal concept of ownership. Also, the concept of ownership has implications beyond the sphere of the private individual, since a healthy environment impacts beyond just a single parcel of land. This means it is not (only) the landowner and direct neighbours that suffer from the effects of injudicious land use, it is also the broader public. No rights, the plan states, are absolute – and this includes ownership. The United States sees infringements of property rights on a continuum. On the one end is expropriation, which requires compensation, and on the other end deprivation, which does not require compensation. Sometimes, however, regulations “go too far” and amount to a compensable taking. As discussed, it is not always clear when. The Stop the Beach case did not shed too much light on the question of when an environmental regulation will amount to a compensable taking. If one considers the Loretto case, where the court ruled that a relatively minor physical interference with private property rights amounted to a taking, then it seems almost unfair that direct access to beachfront property that substantially reduces the value of the property is not a compensable taking. Might it be because the Stop the Beach case involved an environmental question? In Germany the situation is clearer. When a heritage conservation regulation deprives the owner of some use of the property, even the most profitable use, such a regulation will not be declared unconstitutional. Ownership entails certain social obligations. It seems that the higher the aim of the act ranks in the framework of the “common good”, the more will be expected from the owner. South Africa seems more likely to follow the German than the American route. The Consolidated Environment Implementation and Management Plan’s use of words such as “content and rights of ownership” and “obligations of owners” also echoes the German idea of property in the constitutional law sense. The German route might indeed be the more desirable route. The constitution already requires that expropriation of property must be done in terms of a law of general application, and most of the expropriation statutes provide for compensation. If a statute that regulates private property does not provide for compensation and has the effect of unduly burdening a single property owner, then something similar to “equalisation payments” can be considered. If a statute unfairly burdens property rights in general, then it may be declared unconstitutional. When deciding upon the constitutionality of such a provision, the social obligation of the owner should be taken into account. This social obligation should be flexible to allow for changes in society – such as the increasing importance of environmental protection. A ranking system of things that are in the common good, as was suggested in the 92 second Denkmalshutz case, may be helpful. This will mean that when it comes 90 91 92

GN 920 of 15 Sep 2000. GN 920 of 15 Sep 2000 par 1.6. Mostert (n 58) looks at the ranking system in the context of citizenship, and also concludes that “[t]he layering of resources and/or interests according to their social importance greatly aids decisions about the extent to which interferences upon particular property interests are permissible and should be tolerated, and the purposes justifying such interferences” (272).

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to environmental protection, a bigger interference with property rights may be warranted. How does this impact on the examples given in the beginning? In the Oudekraal case the court indeed weighed up the interest of the community against the interest of the landowner. It took into account that the landowner’s rights were already limited by the Muslim people entering the property to visit the graves. My feeling is that the refusal to approve the plans in this instance was a reasonable regulation of the property due to the significance of the parcel of land. As for Vredefort, it seems that the limitations placed on the owners are also fair. Using the reasoning of the second Denkmahlschutz case, restricting commercial farming activities or refusing permission for owners to build horrendously big houses in a UNESCO world heritage site does not deprive the owner of all, but only some, of the use of his/ her property. And it is restricted for a valid reason: to protect the environment. This will, to quote the court, “[strike a balance] between the protection of ownership [on 93 the one hand], and the obligations of the owner to the community on the other”. SAMEVATTING DIE REGULERING VAN PRIVAAT EIENDOM VIR OMGEWINGSDOELEINDES: HOE VÊR MAG DIE STAAT GAAN? ’N VERGELYKENDE STUDIE Die omgewingsreg raak al hoe belangriker. Baie van die omgewingsbronne is egter in die hande van private individue. Dit dwing die staat om privaat eiendom te reguleer vir omgewingsdoeleindes. Die staat is gemagtig om dit te doen in soverre die vorm van regulering geoorloof, nodig en nie arbitrêr of onregverdig is nie. Regulering verwys na die gevalle waar die staat, deur middel van sy polisiëringsmagte, eiendomsreg beperk of ’n verlies van eiendomsreg veroorsaak, sonder dat die staat so ’n beperking of verlies hoef te vergoed. Die onderskeid is belangrik vir soverre dit die staat magtig om privaat eiendom te reguleer tot voordeel van die publiek, sonder om vergoeding te betaal. In party jurisdiksies sal ’n ontneming van eiendom wat eiendomsreg streng beperk of vernietig sonder ’n formele oordrag van eiendomsreg na die staat, gesien word as ’n vorm van onteiening. Daarna word verwys as “konstruktiewe onteiening”. Die grondwet het die debat laat ontstaan: behoort so ’n vorm van onteiening in Suid-Afrika erken te word? Dit is ’n pertinente vraag ook in die konteks van regulering van privaat eiendom vir omgewingsbewaringsdoeleindes. Die outeur bespreek in die artikel in watter mate die staat eiendom mag reguleer vir omgewingsdoeleindes. Dit word gedoen deur twee onlangse sake uit die Verenigde State van Amerika en Duitsland te bespreek om vas te stel of dit ’n riglyn vir Suid-Afrika kan wees. Daar word geargumenteer dat die Duitse roete waarskynlik die beste roete is. Dit is omdat die Suid-Afrikaanse grondwet vereis dat onteiening van eiendom moet geskied in terme van algemeen geldende reg, en omdat die meeste onteieningswette vergoeding voorsien. Indien wetgewing eiendom reguleer en nie vergoeding voorsien nie maar die effek het om een eienaar onregverdig te belas, dan kan iets soortgelyk aan die “equalisation payments” van die Duitsers oorweeg word. Indien wetgewing eienaars oor die algemeen onregverdig belas, kan dit ongrondwetlik verklaar word. Wanneer die grondwetlikheid van so ’n bepaling oorweeg word, moet die sosiale plig wat op eienaars rus in ag geneem word. Hierdie sosiale plig moet buigsaam genoeg wees om die verandering in die samelewing in ag te neem, veral in die konteks van omgewingsbewaring.

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Qualidental case (n 83) 37.

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