U.S. Supreme Court’s Koontz Decision Favors Developers in Land Use Permit Negotiations

July 2013Advisories

The U.S. Supreme Court’s ruling in Koontz v. St. Johns River Water Management District strengthens protections for landowners from inappropriate demands made by government authorities for money during the course of approving land use permits. 

In previous decisions, the Court established that governments may condition a land use permit on an exaction, such as an easement for public access, only if there is a “nexus” between the impacts of the proposed development and the exaction, and the required exaction is “roughly proportional” to those impacts.

The Koontz decision expanded these limitations on exactions in two notable ways:

  • First, the Court held that the government cannot circumvent these limitations on exactions by proposing to deny a permit (even though it had full authority to deny) unless certain exactions are paid. Even where such exactions are never expressed as conditions, the nexus and rough proportionality test must be satisfied.
  • Second, the Court held that these protections extend beyond governmental demands for specific property rights (such as an easement) to also include demands for monetary payments that are directly linked to a land use permit, and hence, to a specific parcel of land.

In the Koontz case, a Florida water authority denied wetlands permits because the property owner would not either (a) significantly reduce the footprint of his development and its consequent wetlands impact by incorporating an expensive subsurface drainage system and retaining walls in place of a surface detention pond or (b) make a cash contribution to the improvement of off-site wetlands to meet the “offset” requirement of the wetlands statute. The Court concluded that the Florida water authority could not avoid the requirement of a “nexus” or “rough proportionality” between the wetlands permit and its demands, even though the exaction was never a permit condition (because the permit was denied) and even though the demand was for money rather than a property interest.

Importantly, Koontz does not prohibit local governments from proposing or demanding monetary exactions in the permitting process. It does, however, require that government demands for off-site improvements and monetary contributions must bear the required proportional connection to impacts of the proposed development—particularly when those demands are made on individual property owners on an ad hoc basis during the land use approval process. 

Goulston & Storrs continues to follow developments regarding the issues raised by the Koontz decision, as well as other issues important to developers and private property owners. Check your email for an invitation to a panel event we are planning for clients on these topics soon.

This advisory was authored by David Avitabile, Peter CorbettPhil Feola, and Matthew Kiefer, attorneys in the firm's Development/Land Use group. For questions or additional information on this topic, please contact David at [email protected], Peter at [email protected], Phil at [email protected], or Matthew at [email protected].

Pursuant to IRS Circular 230, please be advised that, this communication is not intended to be, was not written to be and cannot be used by any taxpayer for the purpose of (i) avoiding penalties under U.S. federal tax law or (ii) promoting, marketing or recommending to another taxpayer any transaction or matter addressed herein.

This advisory should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and any specific legal questions you may have.

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