PLF and the history of unconstitutional conditions

December 07, 2023 | By DEBORAH LA FETRA
Nollan case page, pivotal in property rights.

“Your money or your life!” The armed bandit’s classic demand offers no good options—handing over your wallet in this circumstance would never be a voluntary act, and laws treat both the threat and the theft as criminal acts.

But what if the bandit wears an Uncle Sam mask? What if the government itself makes demands beyond its authority? This is the basis of the “unconstitutional conditions” doctrine, which enforces limits on the government’s ability to demand that private property owners hand over land or money.

As the Supreme Court explained nearly 100 years ago in Frost v. Railroad Commission of State of California,

[T]he power of the state . . . is not unlimited; and one of the limitations is that it may not impose conditions which require relinquishment of constitutional rights. If the state may compel the surrender of one constitutional right as a condition of its favor, it may, in a like manner, compel a surrender of all. It is inconceivable that guarantees embedded in the Constitution of the United States may thus be manipulated out of existence.

This admonition didn’t prevent governments from trying. In the 1940s to 1950s, some states conditioned benefits (such as tax exemptions and government jobs) on applicants taking a loyalty oath. In the 1960s and 1970s, states conditioned access to unemployment benefits and other social benefit programs upon the waiver of religious freedoms, free speech, the right to travel, and other individual rights. The Supreme Court applied the unconstitutional conditions doctrine to invalidate these laws.

In the 1980s and 1990s, land use cases again brought the unconstitutional conditions doctrine to the forefront. At that time, coastal states in particular saw rapid increases in land values that discouraged local governments from purchasing private property with its power of eminent domain. Lacking funds, but not ambition, these governments lit upon the building permit process as a potential source of acquired lands.

This led to PLF’s first significant Supreme Court victory in a takings case: Nollan v. California Coastal Commission (1987). In that case, Patrick Nollan sought to remodel his family’s modest beach-front home in Southern California. When he applied to the Coastal Commission for permission, the government said he could remodel his home only if he dedicated an easement along the private beach, ostensibly to reduce the “psychological barrier” presented by a home between the road and the ocean. PLF sued, arguing in state courts that the commission unconstitutionally demanded Nollan’s private beach in exchange for a standard building permit for a project that had no effect whatsoever on access to the beach. The California courts rejected his claims, but the Supreme Court reversed, holding that the government may not approve a land-use permit with conditions that bear no “essential nexus”—no fundamental relationship—to the impact of the project. That is, if a property owner’s proposed use of the land would produce some public harm, then the government may condition its permission on the owner’s mitigation of that harm. But when there’s no practical connection between the owner’s proposed use and the mitigation demanded, the Court said, the condition is nothing more than “an out-and-out plan of extortion.” The commission couldn’t demonstrate any nexus between the Nollans’ home remodel and “psychological barriers” to public beach access, and therefore the government’s condition that they dedicate an easement across their beach was unconstitutional.

Local governments, momentarily shaken but undeterred, continued to place conditions on building permits, but, after Nollan, they gave lip service to the nexus requirement, manufacturing connections as necessary to obtain property without paying for it.

In the early ’90s, Oregonian Florence Dolan sought a building permit to expand her plumbing and electrical supply store, but the City of Tigard would allow it only if she dedicated some of her land for flood-control and traffic improvements—namely, a bike path.

She refused the conditions and sued the city, alleging that the requirements were unconstitutional and violated the Takings Clause. Unsuccessful in the state courts, Dolan took the case to the Supreme Court, where PLF supported her as amicus curiae.

As PLF urged, the Court in Dolan v. City of Tigard (1994) held that the City could not assert merely any connection between the permit conditions to satisfy the constitutional nexus requirement. Even when there is an “essential nexus” between the impacts and the condition, the government must show “rough proportionality” between the dedication of land demanded and the projected impact of the proposed development. Rough proportionality requires an “individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.” The City could not show this rough proportionality, and Dolan successfully expanded her store without the unconstitutional conditions.

Over the next couple decades, government agencies found new ways to evade these constitutional requirements. First, instead of approving a permit with conditions (as in Nollan), some governments instead asked the property owner to agree to satisfy certain conditions before approving the permit. If the property owner refused, the government simply denied the permit.

The government believed that without an approved permit, there were no conditions, and therefore no constitutional problem. Second, because both Nollan and Dolan involved conditions that required dedication of land, government began demanding money instead. That is, to get a land use permit approved, a property owner would be required to pay for public-improvement projects that often had nothing to do with the proposed development.

In 2012, the Supreme Court held in Koontz v. St. Johns River Management District that these government maneuvers were too clever by half. Coy Koontz, Sr. owned property in Orange County, Florida, and wanted to develop 3.7 acres of his 15-acre lot. Because the land was designated as being within a wetlands area, Koontz had to submit his building permit application to the River Water Management District to prove that his lot didn’t contain wetlands or offer mitigation if it did.

The district required a public hearing on the matter. The 3.7 acres had no evidence of viable wetlands or habitat, but the district nonetheless conditioned its approval on Koontz dedicating the remainder of his property to the government as “conservation.” Weighing the cost of fighting the condition against his desire to get moving on the project, Koontz reluctantly agreed.

Then, the night before the hearing on his permit application, the district added a new condition, that Koontz pay up to $150,000 to improve state-owned lands located miles away, by filling in ditches and replacing culverts. This was too much. Koontz refused, and the district denied his permits outright. Koontz sued in the Florida courts under the unconstitutional conditions doctrine as expressed in Nollan. He won in the lower courts, which held that the off-site mitigation requirement bore no connection to his project. But the Florida Supreme Court reversed, holding that Nollan doesn’t apply where (1) a permit is denied (as opposed to approved with conditions), and (2) the exaction is for money instead of land. PLF then stepped in and took Koontz’s case to the Supreme Court.

The Koontz family prevailed on both points. First, the Supreme Court held that there’s no constitutional difference between the government denying a permit when an owner refuses to submit to an extortionate condition and the government approving a permit subject to an extortionate condition. In either event, the government must show an “essential nexus” between the condition and the impact of the proposed use of the land. Even the dissenting Justices agreed on this point. Second, the Supreme Court held that the unconstitutional conditions doctrine applies to demands for land, as well as for money. This holding offered relief to property owners across the country as governments had been imposing an ever-increasing number of monetary exactions as part of the permit process.

Again, local governments were chastened, but not for long. With the Constitution limiting how government could extract land and money from property owners during the permit process, government officials settled on a new tactic: Rather than conditioning individual permits, they passed laws or regulations that conditioned all permits. Does the unconstitutional conditions doctrine apply to conditions that are imposed by generally applicable legislation? Lower courts disagree. PLF believes that it does and, for over a decade, filed a series of petitions with the Supreme Court asking it to address this question. PLF represented landowners in California, Maryland, and Washington, as well as many states in between on petitions for writs of certiorari.

In 2016, Justice Clarence Thomas wrote a statement highlighting the importance of this issue while concurring with the Court’s denial of certiorari in PLF’s case, California Bldg. Indus. Ass’n v. City of San Jose. There, the California courts upheld the City of San Jose’s “inclusionary zoning” ordinance that requires developers of new residential housing (in developments of 20 units or more) either to sell 15 percent of the homes at below-market prices to low-income buyers or pay $122,000 per unit. He wrote:

Until we decide this issue, property owners and local governments are left uncertain about what legal standard governs legislative ordinances and whether cities can legislatively impose exactions that would not pass muster if done administratively. These factors present compelling reasons for resolving this conflict at the earliest practicable opportunity.

The ship has sailed on the “earliest practicable opportunity,” but better late than never. This year, the Court finally agreed to resolve the question in Sheetz v. El Dorado County. PLF, along with counsel of record, former PLFer (and current partner at FisherBroyles, LLP) Paul Beard, argue that a government’s demand that property owners surrender their constitutional rights to obtain a development permit is not exempt from the nexus and proportionality requirements simply because the legislature—rather than some other branch of government—imposes the condition on everyone.

And just in case the issue isn’t fully resolved in Sheetz, PLF has other cases in the pipeline, such as Preserve Responsible Shoreline Management v. City of Bainbridge Island, in which our pending cert petition asks the Court to apply the unconstitutional conditions doctrine to a regulation imposing across-the-board conservation buffers on all shoreline property owners who seek to make any use of their property.

If the Supreme Court rules that, indeed, government may violate the unconstitutional conditions doctrine via legislation as well as through its treatment of building permit applications, we can expect significant benefits from both a legal and a policy perspective. As a matter of constitutional law and longstanding American legal principles, a victory for Sheetz furthers the purpose of the Fifth Amendment, to ensure that private property owners are not singled out to bear the costs of public goals. As a policy matter, reducing the costs of development makes it much easier for property owners to develop new housing at affordable prices, which is in desperate need throughout many states.

For decades, state and local governments have relied on legislatively imposed fees extracted from housing developers to fund public programs and facilities that should be funded by taxes. Developers pass these fees on to purchasers, pushing more housing out of reach of middle- and lower-income families. Faithful application of the unconstitutional conditions doctrine ensures that government may collect fees necessary to offset the impacts that a new development might have on public resources, while eliminating the burden of impact fees and other permit conditions that bear no demonstrable relationship to proposed development.

Here is the full list of cert petitions PLF has filed over the past three decades challenging legislative violations of the unconstitutional conditions doctrine:

Preserve Responsible Shoreline Mgmt. v. City of Bainbridge Island (2023)

Ballinger v. City of Oakland (2022)

Cherk v. County of Marin (2019)

Dabbs v. Anne Arundel County (2018)

Olympic Stewardship Fndn. v. State of WA Environmental and Land Use Hearings Office (2018)

616 Croft v. City of West Hollywood (2017)

Common Sense Alliance v. San Juan County (2016)

California Building Industry Assn v. City of San Jose (2015)

Kitsap Alliance of Property Owners v. Central Puget Sound Growth Mgmt. Hearings Bd (2011)

Mead v. City of Cotati (2010)

Action Apartment Assn v. City of Santa Monica (2009)

Drebick v. City of Olympia (2006)

Agencia La Esperanza Corporation v. Orange County Board of Supervisors (2002)

Homebuilders Assn of Northern Cal. v. City of Napa (2001)

Commercial Builders of Northern California v. City of Sacramento (1992)