Supreme Court Limits Conditions

by Manatt, Phelps & Phillips, LLP

The U.S. Supreme Court has issued its opinion in Koontz v. St. Johns River Water Management Agency. The case involved the extent of local government's ability to place conditions on the issuance of land use permits. Although the Court decided in earlier cases that conditions had to have a nexus to the impact of the project on the community (Nollan v. California Coastal Commn.) and that the conditions had to be roughly proportional to that impact (Dolan v. City of Tigard), this case dealt with a slight twist. The government did not issue a permit with conditions. Instead, it told the property owner what the conditions would be and, when he refused, they simply denied the permit. The issue was whether the earlier rule applies in cases of permit denial.

On certiorari from a decision of the Florida Supreme Court in favor of the government, the U.S. Supreme Court reversed. As has become typical with land use/takings decisions by that Court, the decision was left until almost the last possible minute. Only three other opinions from Term now ending remain. Examination of the opinions discloses both substantial agreement and deep disagreement among the Justices. The majority in this 5-4 decision was led by Justice Alito; the dissent by Justice Kagan.

All Justices agreed that the Nollan/Dolan rules apply to all permit conditions, whether they are applied to the grant of a permit or simply held over the applicant's head, saying that the permit will be denied unless the conditions are accepted. None of the Justices thought that local government should be able to evade the rules by the simple expedient of casting the conditions in the negative and then denying the permit.

The majority took the opportunity to expand on the "unconstitutional conditions" doctrine, a rule holding that an agency with the power to grant something (even if the applicant has no right to it) cannot condition that grant on the relinquishment of a constitutional right. Here, the majority concluded that the city was conditioning the permit on relinquishment of the right to just compensation for property taken (as the city wanted the applicant to use his own resources to do restorative work on city-owned property or to radically reduce the size of the project). The expansion came in the form of holding that money is property and the Nollan/Dolan rules apply when the exaction imposed has to do with money, rather than realty.

That last point is where the majority and dissent really differed. The majority analyzed prior Court decisions and concluded that "property" is "property" and money is a form of property. The dissent was more concerned with "slippery slope" issues with a "Chicken Little" twist. The dissent concluded that, once the Nollan/Dolan concept was applied to money alone, then cities would be in the impossible position of having to apply those rules any time they asked anyone for money. They also expressed concern about how the majority's rule would affect taxes (notwithstanding the majority's clear statement that its rule had nothing to do with taxes).

The case will be remanded to the Florida Supreme Court for further litigation. For the rest of us, it sets forth some useful clarity regarding the ability of local government to engage in "extortionate" (a word the majority used three times) actions toward permit applicants.

Mike Berger filed an amicus curiae brief supporting the property owner on behalf of a virtual who's who of the business, real estate, and development communities. Our clients were: National Association of Home Builders, Real Estate Roundtable, Public Lands Council, National Mining Association, National Multi Housing Council, BOMA, NAIOP, National Association of Realtors, National apartment Association, American Farm Bureau Federation, California Building Industry Association, Florida Home Builders Association, International Council of Shopping Centers, National Cattlemen's Beef Association, National Association of Real Estate Investment Trusts, and Chamber of Commerce of the United States of America.

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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