Supreme Court decision will impact land-development projects nationwide

by Saul Ewing Arnstein & Lehr LLP
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Summary

In a decision that will impact land-development projects nationwide, the U.S. Supreme Court held this week that the government may not condition a land-use permit on mitigation requirements that do not have an essential “nexus” and “rough proportionality” with the impact of the land development proposal. The decision opens the door for potential challenges to environmental mitigation and other exactions that devalue the land sought to be imposed by federal, state, and local governments in the land-development context unless the land owner is compensated for the taking.

What was the case about?

Koontz v. St. Johns River Water Management District involved a dispute over conditions that a local Florida government agency sought to impose on a land development permit. The St. Johns River Water Management District informed Koontz (the applicant) that it would approve construction of his project if he agreed to one of two concessions: (1) reduce the size of his development and increase the size of a proposed conservation easement, or (2) proceed with development as proposed, but also pay to make improvements to District-owned land several miles away, enhancing approximately 50 acres of wetlands. Koontz filed suit in state court under a Florida statute, arguing that the District’s conditions constituted a taking without just compensation.

What was the Supreme Court’s decision?

The Court ruled that the Fifth Amendment’s Takings Clause can be violated even when there is not an actual taking of property. The Court stated that “extortionate” demands for property (including demands for monetary exactions) in the land-use permitting context run afoul of the Takings Clause because “they impermissibly burden the right not to have property taken without just compensation.”

The decision seeks to remedy scenarios in which the government may use its substantial discretion in land-use permitting to pursue governmental ends that lack an “essential nexus” and “rough proportionality” to the effects of a land-development project, noting that such uncontrolled discretion can result in diminishing the value of the property without justification. The decision makes it clear that conditions sought to be imposed in land-development permits can violate the Takings Clause if they lack an essential nexus and rough proportionality to the effects of the proposed use of the property. This is true even when the government denies a permit application on grounds that an application does not acquiesce to the conditions, and even when the condition only requires the payment of money.

What is the impact of the decision?

The decision protects land owners from permit conditions sought to be imposed by government agencies that do not have an essential nexus to a proposed land development project. To be clear, the decision does not prevent the government from mitigating the impacts of a proposed development. It simply states that if the government requires mitigation or monetary exaction, such mitigation or exaction must have an essential nexus and rough proportionality to the impact of the proposed development. This opens the door for challenges on a federal level where state statutes or case law would not have required the application of an essential nexus and rough proportionality test. The decision can be expected to spur challenges to conditions imposed in land-development projects on grounds that the conditions lack an essential nexus to the development project.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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