The theory underlying the argument that postenactment purchasers cannot challenge a regulation under the Takings Clause seems to run on these lines: Property rights are created by the State. See, e. g., Phillips v. Washington Legal Foundation, 524 U. S. 156, 163 (1998). So, the argument goes, by prospective legislation the State can shape and define property rights and reasonable investment-backed expectations, and subsequent owners cannot claim any injury from lost value. After all, they purchased or took title with notice of the limitation.
Such a rule would work a critical alteration to the nature of property, as the newly regulated landowner is stripped of the ability to transfer the interest which was possessed prior to the regulation. A State may not by this means secure a windfall for itself. See Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U. S.155, 164 (1980) ('[A] State, by ipse dixit, may not transform private property into public property without compensation'); cf. Ellickson, Property in Land, 102 Yale L. J. 1315, 1368-1369 (1993) (right to transfer interest in land is a defining characteristic of the fee simple estate). The proposed rule is, furthermore, capricious in effect.
The ...