Penn Central Transportation Co. v. New York City

1978-10-02

Headline: Landmark protection upheld: Court rules New York City can restrict Grand Central Terminal changes without paying the owners, limiting their ability to build a large office tower above the station.

Holding: The Court held that applying New York City's Landmarks Preservation Law to Grand Central Terminal did not constitute a taking requiring just compensation because the owners can continue profitable use and receive transferable development rights.

Real World Impact:

Lets cities restrict changes to designated landmarks without paying compensation in many cases.
Limits owners’ ability to build large new towers directly above designated landmarks.
Encourages use of transferable development rights to mitigate owners’ losses near landmarks.

Topics: historic preservation, property rights, urban development, zoning and land use

Summary

Background

A large railroad and property owner sought to build a multistory office tower above Grand Central Terminal after entering a long lease with a developer. New York City, acting through its Landmarks Preservation Commission, designated the Terminal a landmark in August 1967 and denied the owners’ applications to alter the exterior or add the proposed towers. The owners sued, arguing that the landmark rules amounted to a government taking requiring compensation. Lower state courts disagreed with the owners and the city’s decisions were upheld through the New York Court of Appeals.

Reasoning

The Supreme Court addressed whether the landmark rules were a “taking.” The Court reviewed past takings cases and weighed factors such as economic impact, investment-backed expectations, and the character of the regulation. It concluded the law did not take the owners’ property because the designation left the Terminal’s current uses intact, allowed the owners a reasonable return, and provided transferable development rights to nearby parcels. The Court treated the restrictions as land-use regulation tied to a public goal of preservation rather than a government appropriation.

Real world impact

The ruling means that, on this record, cities can enforce landmark controls without paying just compensation when owners can still use the property reasonably and when mitigation (like transferable development rights) is available. The decision rests on the particular facts and the Court noted that relief could follow if the property later becomes economically unviable.

Dissents or concurrances

A dissent argued the designation singled out a few owners to bear large costs, questioned whether transferable rights were adequate compensation, and would have remanded to evaluate compensation more fully.