A town bought a parcel of land subject to a restrictive covenant in order to build a municipal water storage tank contrary to a restrictive covenant prohibiting such construction. The town sued for a declaratory judgment that it could violate the covenant without paying just compensation under the fourteenth amendment's takings clause. Relying on an earlier case decided by the Colorado Supreme Court, Smith v. Clifton Sanitation District, 300 P.2d 548 (Colo. 1956), the Colorado Court of Appeals held that covenants are not compensable property rights under the fourteenth amendment. Town of Monument v. State,2018 WL 4781388, 2018 Colo. App. LEXIS 1396 (Colo. Ct. App. 2018).
The court argued (1) that having to compensate every owner who land value may be affected by the government's violating a covenant would make use of the eminent domain power too difficult; (2) owners should not be able to contract to make taking property by eminent domain more difficult; and (3) estimation of damages would be speculative and far more difficult than in the usual eminent domain case.