Lost in the media’s attention on affirmative-action, voting-rights and same-sex marriage cases, the United States Supreme Court issued a significant decision on unconstitutional takings on June 25, 2013, in Koontz v. St. Johns River Water Management District. In that case, the issue before the Court was whether the Nollan/Dolan takings analysis can be applied when a permit is denied, or when a permit is conditioned on the payment of money rather than on the deeding of land to the public.

The Nollan/Dolan analysis (named after major takings cases previously decided by the Supreme Court) typically applies when government issues a development permit conditioned on the owner’s dedicating land to the public for public use without just compensation in order to address an impact of development. Before imposing the condition under this analysis, the permitting authority must show that the permit condition is related to an impact of the development (nexus) and that the condition will lessen the impact only to the extent necessary (rough proportionality). For instance, a new subdivision will create more traffic along the street that serves it so that the permitting authority may require the developer to deed land in order to widen the street. To test the lawfulness of the condition, the questions to ask are these: Does the street improvement relate to the new development (nexus)? And will it alleviate traffic impacts without requiring the developer to make an improvement in excess of what is needed for the development (rough proportionality)? If the answer to both questions is yes, the condition is lawful and the developer must deed the land to the public without compensation.

In Koontz, the Court considered whether the government can require an owner to pay money and provide labor to a public wetlands mitigation project as a condition of receiving a development permit. The specific issue in Koontz was whether the Nollan/Dolan analysis applies (1) when the alleged exaction consists of imposition of a monetary obligation rather than a dedication of an interest in real property as a condition of a permit, or (2) if the permit is denied because the applicant refuses to comply with the condition. In a 5-4 opinion, split along predictable ideological lines, the Court ruled that: (1) the government’s demand for property from a land-use permit applicant must satisfy the Nollan/Dolan requirements even when it denies the permit; and (2) the government’s demand for property from a land-use permit applicant must satisfy the Nollan/Dolan requirements even when its demand is for money. The Court explained:

It makes no difference that no property was actually taken in this case. Extortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation.

The benefit of using the Nollan/Dolan analysis to challenge permit conditions or denials is that it sets a relatively high bar for the government to prove that a condition attached to development is lawful.