Oregon 30-Hour Real Estate Law Practice Test

Which situation may lead to inverse condemnation?

1. Property values increase in a neighboring area.

2. Property values decrease due to neglect.

3. Property values decrease because adjacent property was rezoned.

4. Property values are unaffected by external factors.

The correct answer is: Property values decrease because adjacent property was rezoned.

Inverse condemnation occurs when a government action significantly reduces the value of private property, prompting the owner to seek compensation because they believe that the government has effectively “taken” their property without formally invoking the power of eminent domain. In this context, when adjacent property is rezoned, it can lead to significant changes in the use and thus the value of surrounding properties. For example, if a neighboring area is rezoned from residential to commercial, it may result in increased traffic, changes in noise levels, or alterations in the character of the neighborhood. Such changes can negatively impact the desirability and market value of nearby residential properties, leading those owners to argue that their property has been effectively taken or diminished in value due to the government's actions. This is a classic scenario for inverse condemnation claims, as property owners may feel that their rights were infringed upon without adequate compensation for the changes imposed on their property’s value. Consequently, the condition involving adjacent property being rezoned serves as a catalyst for property owners to consider filing an inverse condemnation claim, as it signifies direct governmental action that alters the economic landscape of their properties without the formal process traditionally associated with eminent domain.