California already in line with decision; major impact expected in other states

By a 5-4 vote, the conservative wing of the United State Supreme Court answered two big questions in favor of the landowner, changing the way local government can condition development permits across the country. In the Koontz case, a Florida water management district rejected a development permit application because the landowner refused to reduce the size of the project or pay for off-site wetland mitigation. After trial, the lower court awarded damages to the landowner. The Florida Supreme Court reversed, holding that taking claims cannot be brought for permit denials or monetary exactions.

The United States Supreme Court, in an opinion authored by Justice Alito, reversed on all counts, holding:

  • Permit approvals and denials are both subject to the same the “rational nexus” and “rough proportionality” requirements of the Nollan-Dolan test;
  • Monetary exactions are subject to the same Nollan-Dolan test as property exactions.

The Court did not decide whether permit denials based on unconstitutional, i.e. excessive or unrelated, conditions can give rise to damages under federal law, but suggested that another remedy would be appropriate since no property or money was actually taken by the local government. The Court remanded to the Florida courts to decide whether damages are available under state law. There was a spirited dissent by Justice Kagan, joined by three other justices.

Local government groups had warned that subjecting fees and other monetary exactions to the Nollan-Dolan test would prevent them from negotiating individually with landowners in the approval context. While a number of large states, like California and Texas, already required fees to meet the Nollan-Dolan test, many others limited it to real property. The Koontz case will require them to rethink fee programs and negotiated exactions, and will give landowners another tool to fight unreasonable exactions.