When is an Unconstitutional Condition of a Governmental Land Use Permit a Taking?

December 9, 2013

We all know that the Constitution prohibits the government from taking private property for public use without just compensation. Additionally, the government cannot coerce people into giving up their constitutional rights, such as conditioning a person’s receipt of a governmental benefit on the waiver of a constitutionally protected right.  At what point do unconstitutional conditions of a land use permit constitute a taking, and does it matter whether the permit is issued with conditions or denied because the developer refused to accept the conditions imposed?  The U.S. Supreme Court addressed these issues in a decision earlier this year.

In previous decisions, the U.S. Supreme Court has held that a 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 an essential nexus and rough proportionality between the condition imposed and the public interest.  These are commonly known as the Nollan/Dolan requirements, as they were created in Nollan v. California Coastal Comm’n, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987), and Dolan v. City of Tigard, 512 U.S. 374, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994).

Going one step further, the Court in Koontz v. St. Johns River Water Management Dist., ____ U.S. ____, 133 S.Ct. 2586, 186 L.Ed.2d 697 (2013), applied the Nollan/Dolan requirements to the denial of a land use permit where the denial was due to the failure to comply with conditions.  The Supreme Court noted that, if it just applied the Nollan/Dolan requirements where a permit was granted with conditions (and did not do so where a permit was denied due to failure to comply with conditions), the government could avoid the requirements by simply wording its decision a certain way.  “Denied because the applicant will not agree to the conditions” would evade the limitations of Nollan/Dolan but “approved if the applicant agrees to the conditions” would not.

However, the Court did point out that, while the Nollan/Dolan requirements apply to both situations, both do not result in a taking.  When a land use permit approval is conditioned upon a requirement that is later found to be unconstitutional, a taking has occurred.  But, if the permit is denied because the applicant does not agree to a condition, and that condition is then found to be unconstitutional, there is no taking.  In that instance, the landowner may be entitled to other remedies under the applicable state law, but he is not entitled to compensation for a taking pursuant to the Fifth Amendment.

Thus, the Koontz decision begs the question:  If the manner in which the permit application is decided determines whether or not a taking occurred, wouldn’t the government always deny the permit to avoid a taking?  Conversely, if the relinquishment of a portion of the applicant’s property is a condition of the issuance of a permit, wouldn’t the applicant always try to get his permit approved with that condition in the hopes of later arguing that a taking occurred?

The Koontz Court also decided that a government cannot avoid the Nollan/Dolan requirements by simply asking the applicant to spend money on public lands as a condition of permit approval, reasoning that to conclude otherwise would allow a government to escape the limitations of Nollan and Dolan.  An upcoming post will discuss how this decision affects future monetary extractions and how they are likely to be approached by both sides.