Yesterday the United States Supreme Court issued its long-awaited decision in Koontz v. St. Johns River Water Management District (pdf).  The court split 5-4 along the usual lines.  According to the dissent, this decision may have a significant impact on real estate developers and the boards and commissions that regulate them.A1029221.jpg

The plaintiff, Koontz, wanted to develop 3.7 acres of his almost 15-acre parcel.  The development site included wetlands regulated by the defendant Water Management District.  The District gave Koontz two options to have his project approved, one of which was to pay money for off-site mitigation work on public lands.

The majority opinion, authored by Justice Alito, finds no distinction between governmental approval of a permit on the condition that the applicant turn over property, and denial of a permit because the applicant refuses to do so.  Therefore, even though the District could deny the permit outright, there are limits on the conditions it can attach to an approval. 

The majority relies on two earlier Supreme Court cases:  Nollan v. California Coastal Commission, and Dolan v. City of Tigard.  Those cases require a “nexus” and “rough proportionality” between the property demanded by the government in exchange for a permit and the impacts of a proposed development, and prevent “extortionate demands” that diminish the value of land and “frustrate the Fifth Amendment right to just compensation . . . .”

The majority also observes that the Fifth Amendment requires just compensation only for takings.  Nevertheless, it holds that the same principles may apply when a permit is conditioned on the payment or expenditure of money.  However, it declines to elaborate on whether money damages are generally available for a Nollan-Dolan unconstitutional conditions violation, instead remanding the case to the Florida Supreme Court for consideration of a damages claim asserted by Koontz under a Florida statute.

The dissent, authored by Justice Kagan, agrees that the Nollan-Dolan standard applies to the denial of permits.  However, it takes issue with the part of the majority opinion holding that this standard applies to monetary exactions.

The dissent emphasizes that the District never actually demanded money or anything else in exchange for a permit, but only communicated certain options to Koontz as acceptable routes to an approval.  The dissent raises the concern that this decision will discourage permitting bodies from engaging in any communication with landowners about how to improve their application – and that the only safe approach for the government might be to simply deny applications until the landowner gets it right.