The “Takings Clause” of the Fifth Amendment of the United States Constitution provides property owners with certain rights: that the government shall not take private property “for public use, without just compensation.” This can occur when the government uses eminent domain to take private property, but can also happen through the use of government regulations and permit requirements. Traditionally, a regulatory taking involves a physical intrusion onto private property (such as through an easement), the loss of all economically beneficial use of the property, or a significant impact on the owner’s reasonable, investment-backed expectations. However, in recent decades, the Supreme Court has broadened the scope of regulatory takings, requiring that there must be a “nexus” between the property demanded by the government and the societal costs of the owner’s proposal,1 and that any taking be “roughly proportional” to the impact of the proposed project.2 These requirements are at the heart of a recent Supreme Court decision on property rights. This ruling strengthens property owners’ protections against governmental takings by permitting them to challenge oppressive conditions placed on land use.
A June 2013 decision from the United States Supreme Court, Koontz v. St. Johns River Water Management District, No. 11-1447, has enlarged the scope of regulatory takings to include situations where government demands money instead of property and a permit has been denied. In Koontz, a Florida landowner applied for a permit to develop 3.7 acres of a 14.9 acre tract of land, proposing to grant the local water management district a conservation easement over the remaining 11.2 acres. The district refused his offer, informing Mr. Koontz that his development permit would be denied unless he either (1) financed the restoration of 50 acres of wetlands that he did not own or (2) developed only 1 acre of his property and deeded the remaining 13.9 acres to the district. Mr. Koontz declined both options, and his permit was denied. He subsequently filed a lawsuit in state court, arguing that the proposed conditions amounted to a taking without just compensation. The lower courts agreed with Mr. Koontz, but the Florida Supreme Court held that there was no violation of the Takings Clause.
In a sharply divided 5-4 opinion, the United States Supreme Court overruled the Florida Supreme Court. The Court reasoned that the government cannot coerce citizens into giving up their constitutional rights, and that oppressive demands regarding property violate the Fifth Amendment because they impermissibly burden property owners’ use of land without just compensation. The Court held that the “nexus” and “rough proportionality” requirements do not require an actual physical invasion of land or requirement of the dedication of real property.
The dissent argued that the decision would transform local land use regulations into constitutional questions, and that the district was merely negotiating with Mr. Koontz, rather than making demands. The dissent further contended that this ruling would cause confusion over what is a permissible tax versus an impermissible extraction. The case was sent back to the lower courts to determine whether the district’s demands on Mr. Koontz satisfied the “nexus” and “rough proportionality” requirements.
The full impact of the Koontz decision is uncertain, but it is nonetheless a resounding win for property owners. The decision gives property owners additional protections against regulatory takings, allowing property owners to challenge onerous conditions placed on development permits even where the conditions do not involve the physical invasion of land. Moreover, it will require permitting bodies to be more restrained in imposing restrictions on development permits. However, the decision may make local government officials less likely to negotiate permits or offer guidance on mitigation, as this could be viewed as unconstitutional coercion. To that end, property owners seeking a development permit from local, state or federal government should carefully develop a negotiation strategy in light of this ruling.
If you have any questions concerning Koontz v. St. Johns River Water Management District, or would like further information on regulatory takings, please contact a member of our Real Estate Practice Group.
1 Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987).
2 Dolan v. City of Tigard, 512 U.S. 374 (1994).