The U.S. Supreme Court’s decision in Koontz v. St. Johns River Water Management District injected significant confusion into negotiations over land development approvals. The principal source of this confusion is the majority’s unwillingness to clarify when and how a proposed condition offered in a negotiation becomes a demand that triggers heightened scrutiny under the Takings Clause of the Fifth Amendment. The Court decided that government demands made prior to a later denial must be evaluated in the same manner as conditions imposed as part of an approval. Specifically, conditions designed to mitigate harmful development impact that are demanded from an applicant prior to a denial must now satisfy the heightened-scrutiny requirements of Nollan v. California Coastal Commission and Dolan v. City of Tigard instead of the relatively deferential Penn Central Transportation Co. v. New York City takings test. This heightened scrutiny will likely cause land use boards to be more rigid, and therefore less creative, in the development approval processes.
While not fatal to land use negotiations, this expansion of the Nollan– Dolan scrutiny will have consequences. Because Koontz now requires government offers in negotiations to meet this more exacting standard, the practical effect of Koontz is that land use boards get more favorable judicial review by denying noncompliant proposals without suggesting mitigating conditions. This will lead prudent boards to favor denials over negotiation as a way to preserve their advantage if a property owner challenges their decision in court as an unconstitutional taking without just compensation.
This Article explains why Koontz makes land use negotiations less efficient and describes several ways land use boards can protect themselves while still taking advantage of opportunities in negotiation. Part I looks at the law of exactions in light of Koontz. Part II discusses the important role of negotiation in the land use approval process. Part III explores the consequences of Koontz on future land use negotiations and explains how courts can help maintain the efficiency of land use negotiations in the face of the challenges created by Koontz. Part IV suggests that land use boards have the following options when approving land use developments: avoid negotiation; facilitate negotiation without participating; negotiate without making proposals; negotiate; or attempt to insulate negotiations.