U.S. Supreme Court Says Municipal Permit Concessions Could Be Takings

Published on: August 19, 2013

By Edmund A. Allcock

Developers and their attorneys across the state are ecstatic about a U.S. Supreme Court ruling that reduces the amount of concessions and conditions municipalities can extract in granting permits.

A 5-4 majority in Koontz v. St. Johns River Water Management District held that the U.S. Constitution’s takings clause not only applies to cases in which a project is approved with “extortionate” conditions, but also to those denied when a developer refuses to agree to the coercive demands of the government.

The court granted certiorari because Koontz raised questions of constitutional law on which the lower courts were split.

The case, which prompted the filing of nine amicus (“Friends of the Court”) briefs, seemingly expands the scope of takings law by making it clear that the law’s protections apply to monetary exactions as well as demands for real property by a municipality in a permit context.  Until now, no court had held a landowner could receive a takings award in a case in which a permit application was denied.  The court held that monetary exactions and conditions meet a proportionality test by being reasonably related to the project.  In other words, the town will be hard pressed to request a $50,000 donation to a library for construction of a voluntary project.

 Municipalities approaching a developer’s project with an aggressive mitigation package may now open themselves up to a potential claim for a taking.  Until this ruling, there would not have been any potential liability for situations where there was a denial of an application.

Looking forward, Koontz may strengthen the position of property owners and developers entering the permitting process with municipalities by requiring that permitting bodies meet the nexus and rough proportionality test for monetary conditions instead of benefitting from a lower judicial review standard of reasonableness and deference to actions of local officials absent arbitrary action. A landowner now may more readily consider litigation as a viable tool for challenging an unfavorable special permit condition rather than continue to negotiate with government officials, or at least use the threat of litigation as a negotiation tactic.

 

For a copy of the Decision [click here].