By Cale Ehrlich

While much of the nation was focused on the big political decisions coming out of the Supreme Court this week, a decision with important implications for property developers slipped largely under the radar. In Koontz v. St. Johns River Water Management District, No. 11-1447, the United States Supreme Court made it easier for land owners to sue local governments for exacting disproportionate concessions as a condition to approving a proposed development.

In prior cases known as Nollan and Dolan, the Supreme Court held that a government entity may not condition approval of a land-use permit on the owner relinquishing a portion of his property unless there is a nexus between the conditions imposed and the effects of the proposed land use, and the conditions are roughly proportional to the impacts of the proposed land use. Koontz addressed two questions left unanswered by Nollan/Dolan: does the Nollan/Dolan standard apply if the government denies a land-use permit, but states conditions on which it would approve it; and does the Nollan/Dolan standard apply if the government demands only money, rather than relinquishment of real property.

On the first question, the court unanimously held that the Nollan/Dolan standard applies when the government denies a land-use application but states that it would approve it subject to certain conditions. This expands the remedies available to developers, as they need not have a permit application approved subject to unconstitutional conditions in order to have a suit. Instead, developers may refuse to accede to unconstitutional demands, have their permits denied, and sue following the denial.

On the second question, the court held 5-4 that purely monetary conditions on land-use are also subject to Nollan/Dolan. Following Koontz, the government may not condition approval of a land-use permit on payment of a sum of money, unless the payment satisfies the Nollan/Dolan standard of nexus and rough proportionality. This decision does not impact the ability of the government to impose taxes, user fees, or similar laws and regulations in connection with permitting. It remains for the court to determine at what point a permissible "fee" crosses the line and becomes a potential taking subject to Nollan/Dolan.

In sum, Koontz makes it easier for developers to sue government entities for attempting to impose unconstitutional conditions on land-use permits. But property owners should bear in mind that Koontz does not necessarily make it easier for developers to win those cases. The court held only that Koontz had the right to sue, it did not comment on whether he would prevail.

The court's full opinion may be found at http://www.supremecourt.gov/opinions/12pdf/11-1447_6j37.pdf