June 16, 2003

"A serious erosion of private property rights" is how the Texas Building Owners and Managers Association (Texas BOMA) has characterized a June 6^th opinion handed down by the Austin Court of Appeals in Texas BOMA v. the Public Utility Commission of Texas. Texas BOMA, BOMA International, and the Real Access Alliance (which is a coalition of nationwide real estate associations) are the plaintiffs in the lawsuit. All of the plaintiffs are very disappointed by the ruling but will continue to fight and will be appealing the case to the Texas Supreme Court because of the importance of the issue.

The group expressed frustration at the Court of Appeals’ willingness to elevate a legislative policy of promoting competition in the telecommunication industry to a higher level of importance than protecting property rights under the constitution. "Competition among telecommunications companies is fine," said Joe Dobbs of Dallas, president of Texas BOMA, "but those companies should pay for the property they use in their business just like other companies do."

In the suit, Texas BOMA and the other plaintiffs are challenging the constitutionality of a Texas statute that forces owners of office buildings and apartments to allow any telecommunications company to enter upon the owner’s property, install equipment, and string its cables and lines throughout the property, even over the property owner’s objection. The statute provides that owners can be forced by the PUC to grant that right to telecommunications companies.

Texas BOMA alleges that the statute constitutes an unconstitutional "taking" of property because it fails to set out a clearly defined means for compensating the property owner. Astonishingly, the court failed to address the takings issue, which is the very heart of Texas BOMA’s argument. Instead, the court found that the Public Utility Commission has the requisite authority to order forced access and to establish compensation standards and set compensation amounts for a taking of access rights under the statute. In past decisions, Texas courts have held that under the constitution, the legislature must statutorily set compensation guidelines and cannot simply give a state agency a "blank check" to set criteria for compensation. "This is one of the most significant incursions on the protection of private property rights that the real estate industry has ever seen in Texas," said Larry Niemann, long time legal counsel for Texas BOMA. "The court’s opinion basically says that the legislature’s desire for a competitive telecommunications industry is more important than the fundamental constitutional protections afforded property owners under the U.S and Texas constitutions," Niemann added.

The suit is an offshoot of another controversy in which the Public Utility Commission attempted to enforce the statute against a building owner. In September of 2001, Time Warner Telecom of Texas filed a complaint with the PUC, complaining that the owner of a large office building in Houston was demanding excessive compensation for access. The building owner requested $750 per month in access fees because that was the current market rate but Time Warner offered only $250. Later in the PUC case, Time Warner changed its position and claimed that it shouldn’t have to pay anything to the owner for access rights if Time Warner’s equipment is located in areas of the building for which tenants are assessed common area maintenance charges. "We hope that the PUC commissioners will not accept that extreme position; but so far, they have been pretty hard on the building owner in the numerous hearings held in the PUC case," said Dobbs. "If the PUC agrees with Time Warner’s latest theory, it could lead to no compensation at all for building owners when telecommunication companies show up on the owner’s doorstep and demand access."

Concern over the PUC’s apparent bias in favor of the telecommunications industry is what prompted the plaintiffs’ courthouse challenge to the law in the first place. The statute provides no standards for calculating compensation for taking a building owner’s property rights via a PUC order granting forced access to a telecommunications company. "We believe that in these forced access cases, the legislature is constitutionally required to provide statutory criteria for compensation with the same or similar specificity as in condemnation cases," said Don Tait of Austin, past president of Texas BOMA. The absence of those statutory standards has allowed the PUC to develop a regulatory scheme that is tilted heavily in favor of telecommunications companies.

Despite the setback of the Court of Appeal’s decision, representatives of Texas BOMA have vowed to fight on. Texas BOMA will make every effort to convince the Texas Supreme Court that we are right. "Other states are closely watching what happens here in Texas," said Tait. "The constitutional issues are of nationwide significance and are too important to ignore. Serious property right issues are at stake and it’s a cause worth fighting for."