On June 25, 2013, the United States Supreme Court in Koontz v. St. Johns River Water Management District rendered a decision that protects the rights of property owners when seeking construction permits to develop their property. Specifically, the Supreme Court in Koontz held that a governmental agency cannot condition the issuance of a construction permit on the landowner relinquishing or restricting his property, or requiring the landowner to pay money for such permit, unless there is a reasonable connection between the property’s proposed use and the government’s demand.

Background

Cory Koontz (“Koontz”) purchased a 14.9-acre tract of land located in Orlando, Florida. The property was classified as wetlands by the State of Florida. Koontz desired to develop the northern 3.7 acres of his property and applied to the St. John’s River Water Management District (the “District”) for permits to develop the property.1 Since the proposed development involved wetlands, the District required Koontz to show that his construction would be offset by preserving or enhancing other wetland areas. In connection with his proposed development, Koontz offered to grant the District a conservation easement on the remaining 11 acres of his property.

The District rejected this proposal and conditioned the issuance of the permits on:

  1. Koontz reducing the size of his development to 1 acre with a conservation easement granted to the District on the remaining 13.9 acres, or
  2. Koontz proceeding with his development on the 3.7-acre tract and granting the District a conservation easement on the remaining 11 acres, but also agreeing to arrange and pay for specific improvements on other wetlands owned by the District.

Koontz subsequently filed suit alleging that the District’s requirements were excessive and constituted an unconstitutional taking of his property without just compensation.

Supreme Court Ruling

Previously, the Supreme Court in Nollan vs. California Coastal Comm’n (“Nollan”) and in Dolan vs. City of Tigard (“Dolan”) recognized the need to balance the competing interests of potential misuse of land use regulations and coercion by governmental entities since proposed developments are generally more valuable than the property the government is seeking to take or restrict against the reality that many developments impose costs on the public that should be the responsibility of the developer. As such, the Supreme Court in Nollan and Dolan held that “a unit of government may not condition the 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.”

In Koontz, the Florida Supreme Court initially held that because the District denied Koontz’s application due to his refusal to comply—rather than approving Koontz’s application with the condition that he comply with the government’s demands—the requirements of Nollan and Dolan did not apply. The Supreme Court reversed stating that the District could not get around the requirements set forth in Nollan and Dolan simply by structuring the way it handled a permit application; that is, the requirements set forth in Nollan and Dolan apply whether the District denied the permit or approved the permit upon certain conditions being met. The Supreme Court further held that the District’s alternative proposal—that Koontz spend money to enhance other wetlands owned by the District—must also meet the criteria of a direct nexus and a proportionality between the government’s demand and the effects of the proposed land use.

In reaching its decision, the Supreme Court recognized the following:

The risk that the government may use its substantial power and discretion in land use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue, thereby diminishing without justification the property.

Effects of Supreme Court Decision

So what impact does the Supreme Court’s decision in Koontz have on developers? First, it reinforces the decision set out in prior case law that the government cannot pressure or extort a landowner into giving up property rights or unfairly burdening one’s property in exchange for a building permit, unless the condition for the permit to be issued has some reasonable relationship to the proposed land use. This protection now also applies to any monetary condition imposed by the government for a permit. Although this decision provides landowners additional protection against excessive or coercive demands by the government, it also creates potential confusion as any legitimate monetary payment required by a governmental entity—such as a payment for costs relating to sewer, water, traffic or wetlands—now also falls under the same balancing test. That is, such payment must have a direct and reasonable relationship to the proposed land use. This potentially could cause delays in the issuance of permits and could increase litigation for what may be considered excessive requirements for a permit to be issued.