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U.S. Supreme Court Broadens Property Owners Right to Sue Over Permit Conditions

U.S. Supreme Court Broadens Property Owners Right to Sue Over Permit Conditions

[vc_row][vc_column][vc_column_text]On June 25, 2013, the Supreme Court handed down its 5-4 decision in Koontz v. St. Johns River Water Management District, holding that when the government, including local land use agencies and other lower level authorities, uses its authority to regulate land-use, including by denying a permit or demanding payment as a condition for a permit, the government must show that there is a nexus and rough proportionality between its demand on the landowner and the effects of the proposed land use. The case reversed a ruling by the Florida Supreme Court that gave more deference to the local water management district and ultimately broadens property owners’ rights to bring constitutional challenges to land-use decisions.

The developer here wanted to develop a portion of his property, which was located in the Florida wetlands. As part of his development proposal and permit request, he offered to grant a substantial conservation easement to the St. Johns River Water Management District (the “District”). The District said that it would deny him a permit unless he agreed to do one of two additional things: (1) scale back his planned development and give the District a larger conservation easement; or (2) maintain the development, but also hire contractors to make improvements to separate land owned by the District, essentially mandating that the developer spend money unrelated to the specific development at issue.

The developer thought the District’s permit conditions were unreasonable, so he sued under a Florida law that permits property owners to recover money damages in the event of an unconstitutional taking. He argued that under the Supreme Court’s past takings decisions, the District’s proposed permit requirements did not have a proper “nexus” and “rough proportionality” to the effect his development would have on land use. After a trial and appeal, the Florida Supreme Court held that the suit must be dismissed because a takings claim was not an appropriate response to the District’s imposition of permit conditions. Specifically, the court held that the previous takings cases did not apply here for two reasons: (1) those cases dealt with land use conditions where a permit was approved, while here, the permit was denied; second, this case did not involve a taking of actual physical property interest, rather would have required the developer to simply pay money (to the contractors).

The United States Supreme Court reversed the Florida Supreme Court on both counts. The Court first explained that the “unconstitutional conditions” doctrine, which prohibits the government from coercing people into giving up their constitutional rights, applies in this case because the conditions the District sought to place on the permits would constitute an unconstitutional “taking” without “just compensation.” The Court explained that previous takings cases have held that the Constitution protects property owners from takings that occur in connection with applications for land-use permits, but at the same time permits the government to attach conditions in order to mitigate the public harms caused by certain land uses so long as there is a “nexus” and “rough proportionality” between the proposed development and the mitigation or conditions attached to the permit.

The Court held that this line of reasoning applies not only when a permitting authority approves an application, but also when a permit application is denied because a developer refuses to accept the conditions to be attached to approval of the application. This concept was endorsed by all nine Justices. However, the Court also noted that when a permit is denied and no condition is therefore attached because no development occurs, the Constitution does not guarantee monetary compensation.

The Court then held that a taking is not limited to the classic case of a permit condition that compels a property owner to give up physical property, but that the concept of takings also applies where a permit condition requires only the expenditure of money. This aspect of the decision could have vast implications, as almost every requirement that property owners pay over money (for example, property taxes or use fees that are routinely and commonly attached to development permits), might now be subject to challenge as a taking. The Court attempted to limit this by emphasizing that the “fulcrum this case turns on is the direct link between the government’s demand and a specific parcel of real property,” (as opposed to a general fee or tax) making it substantially the same as actually taking that particular piece of property. The Court also attempted to diminish the concern that taxes and other fees would face constitutional takings challenges by noting that courts have managed to distinguish these types of payments in the past – although it did not articulate a clear rule that would help courts maintain such distinctions going forward in the face of this new interpretation.

If you have any questions or concerns regarding a development project or permit and how it might be impacted by this recent Supreme Court decision, please contact Steve Pace or Kelly Cwiertny and we would be happy to provide more information and guidance.[/vc_column_text][/vc_column][/vc_row]

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