Supreme Court Decision Involving Wetlands Helpful to Developers
On June 25th, 2013 the Supreme Court of the United States expanded the circumstances under which the government may be liable for overreaching in making demands from a property owner as conditions for a permit approval. The Court has now clarified in Koontz v. St. Johns River Water Management Dist., 2013 WL 3184628, __ S.Ct. __ (2013),that the government can be held liable for overreaching demands regardless of whether the permit is granted with conditions or denied because the property owner refused to accept the conditions. The Court also said in Koontz that a condition in the form of a payment of money is subject to scrutiny for potential government overreach.
Previously, it had been thought that only a permit that is granted with overreaching conditions can result in potential government liability. An extreme example: the government tells a property owner it can have its conditional use permit for a 10-acre development, provided it dedicates to the public 50 acres of land for a new civic center. The constitutional standard for government demands from a property owner in exchange for a land use permit, is that government may not condition the grant of a land use permit on the owner’s relinquishment of part of the property unless there is some connection and some proportional relationship (referred to as “nexus” and “rough proportionality”, respectively) between the government’s demand and the expected effects of the land use proposed by the property owner. (the so-called Nollan and Dolan standards, named after two earlier U.S. Supreme Court cases). Where the government condition overreaches, the U.S. Supreme Court has held that it is an unconstitutional taking for which the property owner is entitled to just compensation. Until Koontz, the Court had never settled whether Nollan and Dolan apply when a land use permit is denied – as opposed to approved with an excessive exaction – because the owner refuses to give up part of their land. Nor had it been settled whether government’s demand for money in lieu of dedicating land requires analysis under Nollan and Dolan.
In Koontz, the Supreme Court definitively determined that Nollan and Dolan apply regardless of whether the government conditions approval of the application, or denies an application because the property owner has refused to comply with the government’s demands. In addition, Koontz holds that a government’s demand for money in exchange for a land use permit must also satisfy the nexus and proportionality tests of Nollan and Dolan. Koontz should be viewed as a win for property owners since it expands the situations where the constitutional tests of nexus and rough proportionality will be applied in determining whether there is government overreach in exacting a price on a property owner as a condition for a permit approval.