Real Estate Law Blog

The Supreme Court’s recent ruling in Koontz v. St. Johns River Water Management District, adds to the evolving jurisprudence on property takings in the context of a proposed real estate development.

In Nollan v. California Coastal Commission [1] and Dolan v. City of Tigard, [2] the Supreme Court previously set limits on the government’s ability to impair property interests with land use regulations by requiring an “essential nexus” and “rough proportionality” between the government’s demand and the effects of the proposed land use.  In Koontz, Court extended the Nollan/Dolan standard to demands for property (1) even when the permit has been denied and thus no conditions attached; and (2) even when the demand was for money.  Both denials of permits and monetary exactions are now subject to the higher scrutiny under the Nollan/Dolan standard, and the government bears the burden to prove that its actions bear an “essential nexus” and “rough proportionality” to the project’s impact on the community. 

While all nine Justices agreed that the Nollan/Dolan standard applies to denial of permits, four Justices disagreed that it applies to monetary exactions.  The dissent argued that the second part of the holding will result in (1) difficulty in distinguishing impermissible land-use exactions from property taxes, and (2) substantial amount of additional litigation that will undermine local efforts to regulate land use.

Notably, the Court expressly reserved judgment on whether Koontz’s claim was actually meritorious.  As a result, the decision left at least two essential questions unanswered.  First, the Court did not address when a mitigation alternative becomes a demand for property.  As the dissent noted, government agencies may now be inclined to simply deny a permit – without any discussion – rather than risk litigation of conditions.  Second, the Court left open the question of appropriate remedy under federal law for a denial of a permit. Instead, the two issues were remanded to the Florida courts for resolution under Florida state law.

While the extension of Nollan/Dolan to the denial of permits seems perfectly logical (and supported by all nine Supreme Court Justices), the ruling as to the extension to monetary issues will require the government agency to make a case by case decision on “rough proportionality” and the realization that no matter what they decide, a court could later disagree.  Read a summary of Koontz here.

[1] 483 U.S. 825 (1987).
[2] 512 U.S. 374 (1994).

* Ellie Kravsova, a law clerk with Olshan, researched and assisted with the drafting of this post.