## Facts

- New York City enacted a Landmarks Preservation Law empowering a commission to designate landmarks and require approval for exterior alterations.
- Grand Central Terminal and its parcel were designated a landmark and “landmark site,” limiting certain development changes.
- Penn Central, the Terminal’s owner, leased airspace rights to a developer to construct a multistory office tower above the Terminal, consistent with underlying zoning.
- The Landmarks Preservation Commission denied Penn Central’s tower proposals as incompatible with the Terminal’s historic and aesthetic features.
- The zoning framework allowed owners of landmark sites to transfer unused development rights to nearby parcels, mitigating lost development potential.
- Penn Central sued, alleging that the denial effected a taking without just compensation and violated due process.

## Issues

1. Whether application of New York City’s Landmarks Preservation Law to deny construction of an office tower above Grand Central Terminal constituted a taking requiring just compensation under the Fifth and Fourteenth Amendments.
2. Whether the denial and designation arbitrarily deprived Penn Central of property without due process.

## Decision

- The Supreme Court affirmed the state high court and held that no compensable taking occurred.
- The Court applied an ad hoc, multifactor approach considering: (1) economic impact, (2) interference with distinct investment-backed expectations, and (3) the character of the governmental action.
- The Court evaluated the “parcel as a whole” and rejected treating the air rights above the Terminal as a separate property segment for takings purposes.
- The law did not interfere with the Terminal’s existing uses; Penn Central could continue operating the railroad terminal with associated commercial uses.
- Penn Central’s asserted expectation to construct a new tower was not treated as the kind of settled, primary investment-backed expectation that the Takings Clause protects.
- The Landmarks Law was characterized as a general land-use program adjusting benefits and burdens to serve the public good, not a physical occupation or appropriation.
- Evidence that the Terminal could continue to provide a reasonable return, along with the availability of transferable development rights, supported the conclusion that the regulation did not go “too far.”

## Legal Principles

- Regulatory takings claims are generally assessed through a fact-specific inquiry focusing on economic impact, interference with distinct investment-backed expectations, and the character of the governmental action.
- Takings analysis considers the property interest as a whole; courts generally do not divide a parcel into discrete segments to find a taking of one segment.
- A taking is more likely where government action resembles a physical invasion; it is less likely where the action is a broadly applicable program regulating land use for public welfare.
- Preservation and zoning-type restrictions that leave economically viable use and do not appropriate property typically do not require compensation.
- Mitigating mechanisms such as transferable development rights may be relevant in evaluating the regulation’s overall economic effect.

## Conclusion

The Court upheld New York City’s landmark restrictions on Grand Central Terminal, holding that denying a proposed office tower was not a compensable taking because the property retained viable use and the regulation, assessed under an ad hoc multifactor test and viewed as part of a general land-use program, did not impose a burden requiring just compensation.


Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (1978)