In another decision by a sharply divided Court, on June 25, 2013 the United States Supreme Court issued a ruling very important to land owners and developers.  In Koontz v. St. Johns River Water Management District, No 11-1447, the Court addressed the constitutionality of conditions imposed on real estate development by a governmental unit, and concluded that “a unit of government may not condition the approval of a land-use permit on the owner’s relinquishment of a portion of his property unless there is a ‘nexus’ and ‘rough proportionality’ between the government’s demand and the effect of the proposed land use.”

In 1972, Koontz purchased an undeveloped 14.9 acre tract of land along a state road near Orlando; much of it impacted by power lines and road easements and considered wetlands by the State.  In 1984, after taking into consideration the negative impacts on the land, Koontz proposed to develop a 3.7 acre portion on the northern edge of the property, with an offer of a conservation easement precluding development of the remaining 11.2 acres. The Water Management District instead insisted on a larger conservation easement area or a cash payment to cover the cost of improvements to wetlands miles away from the proposed development site.

The nexus and rough proportionality standards derived from the Supreme Court’s earlier decisions in Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994).  The Florida Supreme Court declined to give effect to these standards as it believed that Nollan and Dolan would only be applicable when the government insists on dedication of interests in real property, not where, as in the Koontz matter, the government instead insisted on the payment of money for off-site improvements.  In addition, the Florida Court maintained that these standards only came in to play when the government unit approved and issued a permit with conditions, not when, as here, the government denied a permit.

The Supreme Court explained “the central concern of Nollan and Dolan [is that] the risk that the government may use its substantial power and discretion in land-use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue, thereby diminishing without justification the value of the property”.  While a government continues to have the right to choose whether and how a permit applicant is required to mitigate the impacts of a proposed development, “it may not leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts”.