Goverment Demand for Property or Money from Land Use Permit Applicant Must Satisfy Requirements of Nollan and Dolan, Even When Government Denies the Permit

Koontz v. St. Johns River Water Management Dist.

The United States Supreme Court has recently extended the requirements of Nollan v. California Coastal Comm’n and Dolan v. City of Tigard, which require that a government’s demand for property in exchange for a land-use permit must have a nexus and rough proportionality between the property sought and the effects of applicant’s proposal, to both a government’s demand for money and to when the government denies the land-use permit.

The case arose from a public water district’s (“District”) requirement that permit applicants who want to develop wetlands mitigate environmental damage by “creating, enhancing, or preserving wetlands elsewhere.” The Applicant sought to develop 3.7 acres of his approximately 14.7 acre property and, as mitigation, offered to deed the District a conservation easement over the remaining land. The District responded with two alternatives: 1) Applicant must limit the development to approximately 1 acre and deed the remaining land to the District; or 2) Applicant must finance improvements to District land several miles away. The Applicant refused the District’s requested mitigation as excessive, and the District denied the permit.

The Applicant challenged the District’s demands, alleging that they constituted an impermissible taking without just compensation. The District argued that even if Nollan and Dolan apply when a government denies a permit as opposed to making a conditional approval, the District had not violated the Takings Clause because no real property was taken from the applicant.

The United States Supreme Court first held that the principles of Nollan and Dolan “do not change depending on whether the government approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so.” The Court noted that a contrary ruling would allow governments to circumvent the limitations of Nollan and Dolan, that a government’s demand for property in exchange for a land-use permit must have a nexus and rough proportionality between the property sought and the effects of applicant’s proposal, by simply making the demand a condition precedent, rather than a condition antecedent to permit approval.

The Court next noted that “the impermissible denial of a governmental benefit is a constitutionally cognizable injury” under the unconstitutional conditions doctrine, and that “extortionate” property demands violate the Takings Clause “not because they take property but because they impermissibly burden the right not to have property taken without just compensation.” Based on this rationale, the Court held that a monetary demand in exchange for land-use permit approval is a taking if there is a “direct link between the government’s [monetary] demand and a specific parcel of real property” and the demand lacks an essential nexus and rough proportionality to the applicant’s project.

This decision will be lauded by landowners as it provides limitations on the government’s ability to demand both real property and money as a condition of land-use permit approval. The decision is sure to impact governmental agreements with landowners seeking land-use permits in the future.

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