Supreme Court Affords Landowners Protection From “The Dangers of Governmental Coercion” In Land-Use Permitting Decision

Last month, the Supreme Court completed its trifecta of Fifth Amendment land-use permitting decisions by issuing its opinion in Koontz v. St. Johns River Water Mgmt. Dist., a decision resting firmly on the backs of the court’s earlier Nollan v California Coastal Comm’n, 438 U.S. 825 and Dolan v. City of Tigard, 512 U.S. 374, opinions. Where Nollan and Dolan restrain a government from conditioning its 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, Koontz clarifies that this same restraint applies in circumstances where a government denies a land-use permit because the applicant does not acquiesce to its demands.

The permit applicant in Koontz sought to develop roughly four acres of property near Orlando, Florida. Because the intended development had the potential to impact water resources of Florida, the applicant applied for a Management and Storage of Surface Water permit from the local Water Management District, the entity authorized to regulate and issue permits for “construction that connects to, draws from, drains water into, or is placed in or across waters of the State.” Under Florida’s Wetlands Protection Act, permit applicants wishing to build on wetlands must off-set the resulting environmental damage by creating, enhancing, or preserving wetlands elsewhere.

The Water Management District made clear that it would not approve the permit application unless the applicant agreed to reduce the size of the intended development down to one acre or agree to finance improvements to a District-owned parcel of wetlands located miles away. When the landowner refused to agree to the government’s conditions, the Water Management District denied his permit, and the landowner filed suit.

Finding that there was no Fifth Amendment taking because the landowner’s refusal of the government’s conditions resulted in the permit being denied, thus “no property of any kind was ever taken,” the Florida Supreme Court reversed a lower court finding and held that the permit denial was a lawful exercise of government discretion. In so holding, the Florida Supreme Court further distinguished between a demand for an interest in real property (such as the easements at issue in Nollan and Dolan) and a requirement to spend money, which it likened to a tax assessment.

Writing for a 5-4 majority, Justice Alito’s opinion reversed the Florida Supreme Court’s holding on both grounds. In an opinion laced with references to the “misuse of [government] power of land-use regulation” and the “dangers of government coercion,” Justice Alito recognized that Nollan, Dolan and Koontz all “reflect an overarching principle, known as the unconstitutional conditions doctrine, that vindicates the Constitution’s enumerated rights by preventing the government from coercing people into giving them up.” Under Koontz, 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 property or denies a permit because that applicant refuses to do so.”

Crucially, the remedies available to a landowner whose permit has been denied or burdened with unconstitutional conditions depends upon the cause of action the landowner chooses to pursue against the government entity. The Supreme Court acknowledged that only the taking of land, and not an unconstitutional demand alone, will require just compensation under the Fifth Amendment. Instead, “[i]n cases where there is an excessive demand but no taking, whether money damages are available is not a question of federal constitutional law, but of the cause of action. . . on which the landowner relies.”

Thus, landowners dealing with permit denials or excessive and unreasonable permit conditions imposed by a government entity should be mindful of the protections now afforded to them under Koontz, and should seek to maximize their chances of recovery against the government entity by ensuring that the stated cause of action pursued provides for appropriate relief.