On June 25, 2013, in Koontz v. St. Johns River Water Management District, the U.S. Supreme Court ruled that a Florida regulatory agency placed unreasonable demands on a landowner who sought building permits to develop his land. Viewed as a significant victory for property rights advocates, the case clarifies when a condition of development approval constitutes a "taking" under the Takings Clause of the U.S. Constitution. In a 5-4 decision authored by Justice Alito, the Court addressed the following: (1) whether a land use agency can be held liable for a "taking" when it refuses to issue a permit on the sole basis that the applicant does not agree to a permit condition that, if applied, would violate the essential nexus and rough proportionality tests set out in Nollan v. California Coastal Commission and Dolan v. City of Tigard, and (2) whether the nexus and proportionality tests apply to land use exactions that take the form of government demands that the applicant dedicate money or other types of personal property to a public use.
In Koontz, a property owner applied for a permit to develop his property. Because the property owner wanted to build on wetlands, Florida law required that he offset the resulting environmental damage. The property owner offered to mitigate the environmental effects by deeding to the permitting entity a conservation easement on nearly 75 percent of his property. The permitting entity rejected the proposal and informed him that it would approve construction only if he (1) reduced the size of the development and deeded to the permitting entity a conservation easement on the additional undeveloped portion or (2) hired contractors to make improvements to wetlands owned by the permitting entity. The property owner believed these demands violated the essential nexus and proportionality tests set forth in Nollan and Dolan and filed a takings action against the permitting entity.
The state trial court held that the permitting entity violated Nollan and Dolan, reasoning that the government may not condition the approval of a land use permit on the owner's relinquishment of a portion of his property unless there is a nexus and a rough proportionality between the government's demands and the effects of the proposed land use. The state court of appeals affirmed, but the state supreme court reversed on the grounds (1) that, unlike in Nollan and Dolan, the permitting entity denied the application and (2) that a demand for money cannot give rise to a claim under Nollan and Dolan.
The U.S. Supreme Court reversed. The Court held that the government's demand for property from a land use permit applicant must satisfy the Nollan and Dolan requirements even when the government denies the permit. The Court reasoned that "regardless of whether the government ultimately succeeds in pressuring someone into forfeiting a constitutional right, the unconstitutional conditions doctrine forbids burdening the Constitution's enumerated rights by coercively withholding benefits from those who exercise them." The Court went on to note that "[e]xtortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation." The Court made clear that "it make[s] . . . [no] difference . . . that the government might have been able to deny . . . [the] application outright." In other words, "there is no relevant difference between a consummated taking and the denial of a permit based on an unconstitutionally extortionate demand."
The Court also held that the government's demand for property from a land use permit applicant must satisfy the Nollan and Dolan requirements even when the government's demand is for money, if the demand for money burdens a specific parcel of land.
Although the Court did not opine on whether the property owner's claim was actually meritorious, the Koontz decision has the potential to significantly expand property owners' ability to challenge local land use decisions and conditions of approval.
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