Nashville business sues local government for “land banking” property through endless permit delays

In the spring of 2022, Tennessee-based property development company SW Nashville bought a four-acre lot in the city of Nashville, planning to tear down the only dilapidated building on the lot and construct an apartment complex. The project was fully compliant with all local zoning laws. When the company applied for standard construction permits, however, the local government announced an indefinite hold on any projects. The Metro Government of Nashville said it might one day build a road in the area and could use some of SW Nashville’s property in that potential project. Based on that hypothetical, city bureaucrats refused to issue any permits to develop the property. This refusal left SW Nashville with all the obligations of property ownership—including taxes, maintenance, and insurance—while prohibiting the company from doing anything with the property.

Rather than pay for the land it wants, the government tried to keep the property available for its own future use for free by locking SW Nashville into an indefinite building moratorium. Years later, the government continues to refuse to issue permits, just in case it wants to seize the land in the future. Now, SW Nashville is on the hook for over $8.2 million—and counting—in taxes and maintenance fees for property it cannot use or sell.

A blanket prohibition on using your property is not just some administrative headache—it’s a taking that requires just compensation under the Fifth Amendment. If the government wants your property, it can buy that property from you to use for a defined public good through eminent domain. However, the Constitution prohibits the government from taking your property without paying you just compensation. What’s more, the government cannot evade its constitutional duty to pay you for a taking by indefinitely delaying standard processes.

SW Nashville filed a lawsuit to challenge the government’s unconstitutional attempts to “land bank” private property without paying for it. The District Court for the Middle District of Tennessee dismissed the lawsuit, claiming that the government hadn’t made a “final decision” on the permits because it could one day allow SW Nashville to do something with the property—even though, as SW Nashville argues, an indefinite, ongoing ban on all development is, in all practicality, final.

After the District Court issued its decision, SW Nashville joined with Pacific Legal Foundation to file an appeal urging the U.S. Court of Appeals for the Sixth Circuit to overturn the lower court’s decision and affirm Tennesseans’ rights to just compensation, due process, and to make use of their own property.