Real Estate Tip – Planning Board Demands: When Are They Unconstitutional?

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Landowners and developers often complain that their property rights have been “taken” from them as the result of conditions of approval imposed by a planning board. After all, the U.S. Constitution’s 5th Amendment enshrines the notion of private property with the words “…nor shall private property be taken for public use, without just compensation.”

Last summer, the U.S. Supreme Court added an important new chapter in the debate over whether planning boards’ demands result in the applicant’s property being “taken” without just compensation. The implications of last summer’s case for municipalities, developers and landowners is dramatic and significant.

Here’s an abbreviated history of the law in this area:

  • 1926: U.S. Supreme Court decides that zoning generally does not necessarily result in property being “taken.” Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365 (1926).

  • 1987: U.S. Supreme Court decides that property is taken when the landowner seeking to replace a 504 square foot house with a 2500 square foot house is required to dedicate a 20-year public beach easement to offset the “psychological impediments to beach access” caused by the larger structure. Nollan v.California Coastal Commission, 483 US 825 (1987).

  • 1994: U.S. Supreme Court decides that property is taken when a landowner seeking to enlarge a plumbing and electrical supply store is required to dedicate land to a public pedestrian and bicycle greenway. Dolan v. City of Tigard, 512 U.S. 374 (1994).

  • 1994-2013: The Nollan and Dolan cases above are read together by the courts to create a two-part test for determining whether property is taken by a condition of approval: (1) a relationship between the condition of approval and the legitimate public purpose of the underlying law or ordinance (called an “essential nexus” between the condition and the public purpose) and (2) a relationship between the nature and extent of the impact of the development and the nature and extent of the public benefit (called “rough proportionality” to reflect the need to balance these impacts).

  • 1994-2013: Courts do not apply the “essential nexus” and “rough proportionality” tests to either (1) requests by planning boards for developer concessions before a final application is submitted or (2) demands for payment of money to offset expenses of public remediation or other activity.

  • 2013: U.S. Supreme Court tells us that property rights are taken if a planning board’s requests for pre-approval concessions or demands for money payments do not meet the “essential nexus” and “rough proportionality” tests. Koontz v. St. Johns River Water Management District 133 S.Ct. 2586 (2013).

Next time we’ll look at the Koontz case in greater detail and discuss its implications. If you are involved in a permit application process either seeking or providing concessions or payments that could become conditions of approval, consult with legal counsel experienced in crafting appropriate conditions of approval.