Published on: September 2, 2001
Make it two in a row for property rights advocates. On the heels of the U.S. Supreme Court’s ruling in Palazzolo v. Rhode Island giving a landowner a limited but significant victory in a takings case, a Massachusetts Superior Court has ruled that telecommunications companies do not have the unlimited access they claimed to enter office buildings and multifamily dwellings in order to provide services to tenants.
The ruling came in a suit filed by the Greater Boston Real Estate Board (GBREB) and a coalition of other real estate industry organizations, challenging regulations issued by the Massachusetts Department of Telecommunications and Energy (DTE) that required office and apartment building owners to provide access to any telecom company from which a tenant requested service. (For some reason, the rules exempted condominiums.)
The DTE and the telecom providers, represented by the Smart Buildings Policy Project, argued that the state had a legitimate interest in providing access (which they termed “open” access) to ensure that tenants received the lower costs and breadth of services that competition among varied telecom companies would bring. The real estate interests argued that the unrestricted access the DTE rules mandated (which they termed “forced” access) constituted an unconstitutional taking of private property without compensation. The court sided unequivocally with the property owners.
The Taking Standard
In a carefully reasoned decision, Suffolk Superior Court Justice Mitchell Sikora, Jr. ruled that the state had no right to require building owners against their will to allow companies to install telecom equipment on the owners’ property. The decision turned largely on the question of what constitutes a “taking” in the context of the wires, cables, and conduits telecom providers seek to install. The DTE argued that the installations occupied relatively little space, had only a minimal impact on owners, and produced an important public benefit – namely, broad public access to telecom services for office building and apartment tenants. As such, DTE said, while the rules might amount to a regulatory taking (restricting the owners’ use of their property), they fell short of a “physical” taking requiring compensation.
Relying heavily on a 1982 U.S. Supreme Court decision (Loretto v. Teleprompter Manhattan CATV Corp.), Judge Sikora reached the opposite conclusion. Loretto involved a not dissimilar challenge of a New York state law requiring a landlord to permit the installation of cable television equipment on an apartment building roof, for a fee to be determined by the state regulatory agency. The Supreme Court held that this constituted a taking “without regard to whether the action achieves an important public benefit or has only minimal economic impact on the owner.”
A Little Taking is Still a Taking
Seeing many parallels between Loretto and the DTE case, Judge Sikora found that the level of “intrusion” mandated by the DTE regulations did in fact amount to a physical taking of the owner’s property, notwithstanding DTE’s effort to characterize “access” as somehow different from and lesser than an attachment. A taking by any other name is still a taking, Judge Sikora insisted, regardless of the amount of space involved or the financial impact produced.
“A landowner is entitled to absolute and undisturbed possession of every part of his or her premises, no matter the size of the space invaded,” he asserted in a 20-page opinion. Quoting from the Loretto decision, Judge Sikora added, “Whether the installation is a taking does not depend on whether the volume is bigger than a breadbox.”
DTE had argued that building owners had the option of denying access to all companies; the rules required open access, the department noted, only if an owner had already granted access to another provider. Adding wires to a conduit already in place, the department suggested, did not occupy any additional space. But according to Judge Sikora, “DTE’s equation does not work. A landowner’s grant of space to one licensee does not equal a grant of space to all other licenses wanting access to his tenants…Even a piggy-back rider needs his own space,” Judge Sikora noted. To argue otherwise, he said, “ignores the fact that the required installation of second and subsequent attachments uses space that belongs to the landowner. …There is no distinction in degree or principle, between (a) authorizing physical occupation of space by attachment of wires to poles; and (b) authorizing physical occupation of space by attachment of wires within a conduit or duct. Occupied space is occupied space.”
Some Key Distinctions
Judge Sikora did not dispute DTE’s contention that the access rules benefited tenants. But the regulations also benefit the telecom providers, he pointed out. He also rejected DTE’s effort to equate its telecom regulations with other recognized government initiatives (rent control, lead paint regulations and fair housing laws) designed to protect tenants. If the access rules created an illegal taking, DTE argued, so did other landlord-tenant restrictions. But Judge Sikora saw a clear and compelling distinction between the state’s interest in protecting tenants and its interest in protecting telecom providers. Rejecting the telecom rules, he said, “in no way alters the state’s broad powers to regulate housing conditions in general and the landlord-tenant relationship in particular without paying compensation for all economic injuries that such regulations entail.”
The decision makes another important distinction between the “access” the DTE regulations mandated and the Federal Communication Commission’s (FCC’s) “OTARD” (Over-The-Air-Reception-Devices) rules, allowing apartment tenants and condominium owners to install reception devices in areas where they exercise “exclusive use or control.” A Washington, D.C. appellate court recently dismissed a suit filed by property owners’ groups challenging that rule (Building Owners and Managers Association, Intl. V. FCC) – a decision that, DTE and SBPP said, supported their argument for open access here. But again, Judge Sikora saw a crucial difference. The FCC’s OTARD rule, he noted, specifically prohibits tenants from placing reception devices on common property or in restricted areas, allowing them to install equipment only in areas where they have exclusive use or a leasehold interest.For more information about the FCC’s OTARD Rules
The tenants in the DTE case, he said, have no comparable leasehold interest or exclusive use claim to the conduits, wires, cables, etc. installed in owners’ buildings; neither does the telecommunications carrier that is granted initial access, which, the judge said, “merely has a leasehold interest in an attachment.” And unlike the OTARD rule, Judge Sikora concluded, the DTE regulations “compel physical invasion of property.” Consequently, it is the takings standard in Loretto, not the access principle in the BOMA case that applies.
Because this is a Superior Court decision, it does not establish a binding precedent in Massachusetts or anywhere else. But the rule is attracting considerably more attention that lower court decisions typically generate. Property owners’ groups in other states that have enacted or are contemplating similar open access rules have been watching the Massachusetts case closely and will undoubtedly use the decision to mount or threaten challenges of their own. The decision also seems likely to influence – one way or another – the final decision on a pending FCC proposal that would extend to multi-family dwellings an existing FCC rule prohibiting commercial property owners from negotiating exclusive contracts with telecommunications providers.
A decision to extend that rule would clearly face an immediate challenge that probably would cite the Massachusetts case. Building owners also might use Judge Sikora’s opinion as a basis for challenging the existing FCC rule. The commission can give the Massachusetts decision as much or as little weight as it chooses, and last year, it probably would have ignored the case entirely. But given the free market bias of a Republican Administration and the new FCC chairman (Michael Powell), it’s not at all clear what the commission will do.
The scenario in Massachusetts isn’t much clearer. In news reports, officials representing a telecommunications trade association have said the industry plans to appeal. But only the plaintiffs in the case – the DTE and the SBPP – can contest the ruling, and they have not yet done so.
Alternatively, the DTE could revise its rules to require telecom companies to compensate owners of properties in which they install equipment. That would address the constitutional argument. But Phil Lapatin, general counsel for the Greater Boston Real Estate Board (GBREB) and one of the lead attorneys in the case, has suggested that the DTE may need legislative authority to add a compensation requirement; if so, the legislature may not be all that anxious to oblige. While lawmakers here certainly have a long history of siding with tenants in landlord-tenant disputes they may not put expanding the market share of telecom providers in quite the same category as protecting children from lead poisoning or prohibiting discrimination in housing.
Whatever future course the open access dispute takes in Massachusetts, there is no question that the DTE decision represents a huge victory for property owners in the state. As Mr. Lapatin suggests in a recent analysis for the GBREB, at least for now, “we can all bask in the knowledge that property rights are still taken seriously in an era of extensive government regulation and intrusion.”