The United States Supreme Court Holds That The Denial Of A Land Use Permit Can Be A Violation Of Constitutional Law When The Denial Is Based On An Invalid Demand For Money

Author(s): Kenneth B. Bley, Andrew K. Fogg, Michael H. Zischke

Source: CCN Client Alert

6/25/2013

On June 25th, the United States Supreme Court issued a significant land use property rights cases that has the potential to significantly expand the Fifth Amendment’s breadth in dealing with exactions associated with land use permits.  In Koontz v. St. Johns River Water Management District, the Supreme Court clarified that long-established rules requiring both a “nexus” and “rough proportionality” between the impacts of development and the mitigations imposed by the permitting agency apply both to monetary exactions and instances in which the permit was denied because the applicant refused to consent to an unconstitutional condition.  While many questions remain to be answered and the application of this expanded review will be determined in subsequent cases, Koontz may provide developers with a new arrow in their quiver to defend against overreaching agencies. 

It has long been established that cities and counties can legitimately demand that new development mitigate the impacts that it creates.  Examples of permissible mitigations include dedicating land to widen a street to mitigate traffic impacts, paying fees to provide schools necessary to serve the new development, or providing services such as paving a street in an existing right of way.  However, previous Supreme Court cases, Nollan v. California Coastal Commission and Dolan v. City of Tigard, have placed limits on these powers when the mitigation condition requires dedication of an interest in land by requiring both a nexus between the impacts created and the mitigation demanded and the mitigation demanded be roughly proportional to the impacts created.  What hadn’t been addressed previously was whether the limitation on the government’s demands applied when the mitigation condition required the payment of money or when a land use permit was denied when the applicant refused to accede to unreasonable mitigation demands.  Today, the Supreme Court answered these questions by confirming that Nollan and Dolan apply to both demands for money and denial of a permit until the applicant accedes to unconstitutional conditions. 

The Koontz opinion does not answer every possible question that might be asked.  For instance, both Nollan and Dolan involved the dedication of easements through conditions imposed on an administrative land use permit.  We don’t yet know if these rules apply when the dedication condition is embodied in a generally applicable ordinance.

The Supreme Court remanded the Koontz case back to the Florida Supreme Court for further analysis under Florida law.  One of the issues to be resolved by the state courts is whether an applicant must first seek judicial review to determine whether the mitigation demanded was invalid before damages could be sought.  That is similar to California law which requires an examination of a condition before a takings case can be brought, which, if successful, would result in the payment of just compensation.

Finally, the Supreme Court held that the denial of a permit because of the applicant’s refusal to accede to the imposition of an invalid mitigation condition, while it violated the ban against the imposition of unconstitutional conditions, did not constitute a taking.  Thus, the court declined to address what remedies might be available.

Taken as a whole, while there are still many questions to be answered, Koontz has the potential to provide a powerful tool to developers seeking to resist unconstitutional exactions as a condition of development.