In 1987 the U.S. Supreme Court ruled against a California regulatory agency for trying to force homeowners to grant the government a right-of-way over their land in exchange for a necessary building permit. This requirement, the Court held in Nollan v. California Coastal Commission, was “not a valid regulation of land use but ‘an out-and-out plan of extortion.’”
Several years later, in the case of Dolan v. City of Tigard (1994), the Supreme Court nullified a similar regulatory shakedown from Oregon. In that case, local officials told a business owner she would not be allowed to expand her store unless she also handed over part of the property to the city for a totally unrelated public use. Thankfully, the Supreme Court put a stop to the scam. “Government may not require a person to give up a constitutional right—here the right to receive just compensation for a public use,” Chief Justice William Rehnquist held for the majority, “in exchange for a discretionary benefit conferred by the government where the benefit has little or no relationship to the property.”
Taken together, these two decisions stand for the rule that when land-use agencies impose conditions on the issuance of a permit, those conditions must bear a close relationship to the intended use of the property and its expected impact on the environment. In legal terms, Nollan requires an “essential nexus” between permit conditions and property use while Dolan requires a “rough proportionality” between the two.
Or at least that’s what the Supreme Court has had to say about it. The St. Johns River Water Management District of Florida has a different view of the matter. Since 1994, that agency has refused to permit the commercial development of a small piece of property located in Orange County, Florida, unless the owner first agrees to transfer the title to 75 percent of the lot to the government for conservation purposes and also fund costly and unrelated improvements to 50 acres of public land located between 4.5 and 7 miles away. The owner, Coy Koontz Sr. (now deceased), agreed to the first condition but balked at the second. Had Koontz agreed to fund the uncompensated upkeep of state land, the agency admits, “the exact project [he] proposed would have been permitted.”
But Koontz refused to pay what he saw as an extortionate demand and instead brought suit, charging the Florida regulators with violating Nollan and Dolan while also dodging the Takings Clause of the 5th Amendment, which requires the government to pay just compensation when it takes private property for a public use.