Amid many other cases handed down last week, including striking Section 5 of the Voting Rights Act and holding the Defense of Marriage Act unconstitutional, the Supreme Court of the United States also handed down a decision having enormous impact on property owners and the land use agencies that regulate them. The case, Koontz v. St Johns River Water Management District, involved a landowner of 14.9 acres of property, primarily wetlands, east of Orlando, Florida. The property was purchased in 1972 by Coy Koontz, Sr., who passed away before the litigation was concluded and whose estate passed to his son, Coy Koontz, Jr., who now owns the property.
As in most states, under Florida law, anyone seeking to dredge or fill wetlands must apply for a special permit. Land use agencies whose duties require them to issue those permits can require property owners to offset any environmental damage before granting their permit application.
Koontz offered to conserve the rest of his land from development in exchange for a permit to develop 3.7 acres of his land. The St. Johns River Water Management District (“SJRWMD”) found this offer insufficient; proposing that Mr. Koontz develop only one acre and conserve the rest, or that he pay for contractors who would make improvements to the other government-owned wetlands within the same watershed but several miles away. The two options proffered by the SJRWMD were unsatisfactory to Mr. Koontz, who filed suit under a state law (Fla. Stat. section 373.617(2)) that provides money damages for any agency action that is an “unreasonable exercise of the state’s police power constituting a taking without just compensation.”
The Fifth Amendment Just Compensation clause states that private property shall not be taken for the public use without just compensation. The specific legal issue in this case was whether the SJRWMD violated Mr. Koontz’s property rights when it denied him a permit when he wouldn’t agree to the District’s conditions to develop his land.
The trial court found the District’s actions unlawful because they failed the requirements of Nollan v. California Coastal Comm’n, 483 U.S. 825, and Dolan v. City of Tigard, 512 U.S. 374. These former Supreme Court cases hold 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 rough proportionality between the government’s demand and the effects of the proposed land use. The District Court of Appeal affirmed but the State Supreme Court reversed finding, (1) That unlike in Nollan or Dolan, in this case the District denied the application, and (2) that the demand for money cannot give rise to a claim under Nollan and Dolan.
The Supreme Court reversed, finding that the government’s demand for property from a land-use permit application must satisfy the Nollan/Dolan requirements even when it denies the permit. Secondly, the Court held that the government’s demand from a land-use permit applicant must satisfy the Nollan/Dolan requirements even when its demand is for money.
As to the first holding, the Court explained:
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 the property or denies a permit because the applicant refuses to do so. We have often concluded that denials of governmental benefits were impermissible under the unconstitutional conditions doctrine. (Citations omitted) In so holding, we have recognized 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.
A contrary rule, the court noted, would be “especially untenable” in that it would “enable the government to evade the limitations of Nollan and Dolan simply by phrasing its demands for property as conditions precedent to permit approval.” In response to the question of how the government’s demand for property can violate the Takings Clause even when no property has been taken, the Court noted that the under the Unconstitutional Conditions doctrine, extortionate demands for property in the land use permitting context run afoul of the Takings Clause because they “impermissibly burden the right not to have property taken without just compensation.”
As to the Court’s second holding, (that monetary exactions must satisfy the nexus and rough proportionality requirements of Nollan and Dolan), the Court explained:
Because the government need only provide a permit applicant with one alternative that satisfies the nexus and rough proportionality standards, a permitting authority wishing to exact an easement could simply give the owner a choice of either surrendering an easement or making a payment equal to the easement’s value. Such a so called ‘in lieu of’ fees are utterly commonplace (citations omitted), and they are functionally equivalent to other types of land use exactions.
The Court noted that the demand for money at issue in this case operated upon an identified property interest by directing the owner of a particular piece of property to make a monetary payment. This burdened the petitioner’s ownership of a specific parcel of land, the Court wrote, and “in that sense, this case bears resemblance t our cases holding that the government must pay compensation when it takes a lien– a right to receive money that is secured by a particular piece of property.”
This case is an extremely important victory for permit applicants nationwide and will undoubtedly displease many land-use agencies whose permitting process it will directly affect.