SUPREME COURT WIN FOR PROPERTY OWNERS
BIG US SUPREME COURT WIN FOR PROPERTY OWNERS
On Tuesday, June 25th, the United States Supreme Court published its opinion in Koontz vs. St. John's River Water Management District clarifying and expanding the protection of property owners from excessive development conditions. The Supreme Court reiterated the protections previously granted in the landmark 1980's cases of Nollan v. California Coastal Commission and Dolan v. City of Tigard, providing that land-use exactions must have an essential nexus between the impact of a development and the conditions imposed by the government, and that the burden of such conditions must be "roughly proportionate" to the impact of the development.
Apart from the Court's clear language warning of the threat of excessive governmental exactions and extortionate behavior, the Court clarified its jurisprudence on "unconstitutional conditions" - that unlawful conditions cannot be imposed on a property by either conditions of approval, or the outright denial of a project - and that conditions imposing limitations on the development of the property, or requirements to pay money, are both governed by the Nollan nexus and Dolan rough proportionality standards.
While the Koontz decision contains numerous clarifications which are of more interest to land-use attorneys than property owners, its broad impact will be to establish for property owners, developers and homebuilders the notion that all exactions and dedications are subject to the following:
- Development conditions/exactions must bear an essential nexus between the condition/exaction and the burden generated by the development (Nollan);
- The burden of development conditions/exactions must be roughly proportionate to the impact of the development (Dolan);
- [New] Reiterated Nollan's "strict scrutiny" of development conditions, and reaffirmed the change from the pre-Nollan "rational relationship" standard of review;
- [New] That the Nollan/Dolan standard applies whether or not the unlawful condition is connected with the approval or disapproval of a project;
- [New] The Nollan/Dolan standard applies whether or not the exactions/dedications are imposed on the property, or by way of monetary exaction such as in lieu fees;
- [New] The Nollan/Dolan standard applies to the project actually proposed by a property owner, not some alternative proposed by the government;
- [New] Excessive land-use conditions must meet Nollan/Dolan and cannot pass Constitutional muster under the label of a tax.
The Court did not take the easy way out and dismiss the property owner's claims on procedural grounds, but rather took the opportunity to clearly elucidate the protections of the United States Constitution against excessive/extortionate governmental behavior in the land-use process. The Court clearly enunciated the "unconstitutional conditions doctrine" stating that a local government cannot condition the giving of one governmental benefit (a land-use approval) while coercing a property owner to give up another (property/money).
The Koontz decision has clear application to the California land-use permitting process, for example, affordable housing in lieu fees, and the tactic often used by local agencies to avoid liability - the simple denial of a project after a property owner's objection to excessive conditions imposed incident to CEQA mitigation.
Poor Mr. Koontz died before his appeal was heard by the Court 19 (nineteen!) years after his original application.
Mr. Koontz sought to develop 3.7 acres of his 17 acre parcel and the local agency ("District") sought to limit him to either 1 acre of development, or 3.7 acres plus the payment of substantial fees to improve other, off-site property owned by the District. The District then denied his permit completely when he did not accede to what he submitted was an extortionate demand. The Supreme Court of Florida denied his claims on procedural grounds including the fact that his project had simply been denied and that he had been given the opportunity to pay money which could not, under prior law, constitute a taking. Rather than run from the issue on procedural grounds the U.S. Supreme Court took the opportunity to clearly enunciate the protection of property owners in the land-use process under the United States Constitution. Ironically even after these long 19 years, poor Mr. Koontz (his estate) was sent back to the State of Florida for determination of whether the original actions in fact violated his constitutional rights under the Court's new ruling.
SUPREME COURT QUOTES (JUSTICE ALITO)
"Nollan vs. California Coastal Commission (cite omitted) and Dolan vs. City of Tigard (cite omitted) provide important protection against misuse of the power of land-use regulation".
"Our decisions in those cases [Nollan, Dolan, etc.] reflect two realities of the permitting process. The first is that land-use permit applicants are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than property it would like to take. By conditioning a building permit on the owner's deeding over a public right-of-way, for example, the government can pressure an owner into voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation (citing Nollan) so long as the building permit is more valuable than any just compensation the owner could hope to receive for the right-of-way, the owner is likely to accede to the government's demand no matter how unreasonable. Extortionate demands of this sort frustrate the Fifth Amendment right to just compensation and the unconstitutional conditions doctrine prohibits them."
"Under Nollan and Dolan the government may choose whether and how to permit a permit applicant is required to mitigate the impacts of a proposed development, but it may not leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts." Emphasis added.
"Extortionate 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."
"This case implicates the central concern of Nollan and Dolan; the risk that the government may use in substantial power and discretion in land-use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue thereby diminishing without justification the value of the property." Emphasis added.
The dissent in Koontz urged the overturning of Nollan and Dolan (ugh…can you imagine) but the majority expressly and clearly upheld Nollan and Dolan: "mindful of the special vulnerability of land-use permit applicants to extortionate demands for money, we do so (uphold Nollan/Dolan) again today." Emphasis added.
Gregory N. Weiler is a partner in the Real Estate Practice Group with 30 years' experience representing homebuilders , developers and property owners, specializing in advocating the rights of property owners through the development process.