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Governmental Restrictions on Land Use Permits as Takings of Private Property Rights

Local governments often attempt to impose requirements on property owners who seek approval of development plans. In response to a claim that such requirements constituted an unconstitutional "taking" of private property rights, the U.S. Supreme Court issued a decision in 1994 that was widely interpreted to significantly restrict this power of government. This article reviews that Supreme Court decision and subsequent state and federal court decisions.

In Dolan v. City of Tigard, a five justice majority of the Supreme Court concluded that the City of Tigard, Oregon effected a taking of Florence Dolan's property by requiring that she dedicate the "portion of her property lying within the 100-year floodplain for improvement of a storm drainage system" and "dedicate an additional 15-foot strip of land adjacent to the floodplain as a pedestrian/bicycle pathway" in exchange for granting her permit application to increase the size of her plumbing and electric supply store from 9,700 to 17,000 feet and to pave a 39 space parking lot on her property.

As required by Nollan v. California Coastal Comm'n, (1987), the Court began its analysis by examining whether the permit conditions had an "essential nexus" to legitimate state interests. The Court found the conditions had the required nexus: the floodplain dedication directly related to the prevention of flooding and the pathway dedication related to reducing traffic congestion.

The Court then considered the sufficiency of the connection between the permit conditions and the impacts of the proposed development. Holding that permit conditions that require a dedication of property constitute a taking unless they are roughly proportional in both nature and extent to the impact of the proposed development, the Court concluded that because the city had failed to put forth evidence demonstrating that the dedications at issue in the case were roughly proportional to the impact of the development, the conditions constituted a taking of Ms. Dolan's property. Although the precise holding of Dolan is limited to situations in which the state seeks to condition some type of use permit on the applicant dedicating some of her land to the state, many early commentators feared that lower courts applying the case would require the government to demonstrate an essential nexus and rough proportionality in a broad variety of regulatory taking cases. However, almost two years after the decision, it appears that Colorado courts will read and apply Dolan narrowly.

For instance, in the only significant Colorado post-Dolan takings decision, State Dept. of Health v. The Mill, (1994), the Colorado Supreme Court failed to mention Dolan. In The Mill, the owner of a contaminated uranium mill site argued that the Colorado Department of Health had taken his property without just compensation by imposing use restrictions on the site that decreased the rental value from 7,000 to 700 dollars per month. The court disagreed and held that the regulation of the site did not constitute a taking because the property owner had no reasonable investment backed expectation of being able to use the property free of substantial regulation related to the uranium contamination.

Although The Mill is a standard regulatory taking case rather than an exaction or dedication case, the court's failure to mention Dolan indicates that the court views Dolan narrowly and may only apply the "essential nexus" and "rough proportionality" tests to cases in which the state conditions some type of development approval on the developer's dedication of some portion of her land to the state.

Support for such a narrow construction of the Dolan decision exists in the opinion itself (distinguishing the case from other taking cases because Tigard required Dolan to actually deed property to it), and in the Tenth Circuit's recent decision in Clajon Production Corp. v. Petera, (1995). In Clajon, the Tenth Circuit rejected the petitioners claim that a Wyoming law providing for only two additional hunting licenses to owners of tracts of land over 160 acres took the property of very large landowners by forcing them to forego the right to hunt on their land. After concluding that the Wyoming law failed to destroy all economically beneficial use of the petitioner's land and did substantially advance the state's legitimate interest in conserving game, the court concluded that the "essential nexus" and "rough proportionality" tests are limited in application to "the context of development exactions where there is a physical invasion or its equivalent", and, therefore, that the law did not effect a taking of the petitioner's property.

The decisions of many other courts also support limiting the application of the "essential nexus" and "rough proportionality" tests to cases in which the state conditions approval of some sort of development on the transfer of property to the state. See Board of Supervisors v. United States, (Fed. Cir. 1995) (refusing to apply Dolan to "proffers" that county required of developer, that required the developer to provide open space and protect tree coverage in his development, because the proffers bound the developer but failed to transfer the property to the county); Home Builders Ass'n v. Scottsdale, (Ariz. App. 1995) (refusing to apply Dolan to development fee ordinance that required developers to pay fixed fees to compensate city for cost of providing water to area as a condition of obtaining building permits); McCarthy v. Leawood, (Kan. 1995) (holding Dolan inapplicable to impact fee ordinance); S.E. Cass Water Resource Dist. v. Burlington Northern R.R., (N.D. 1995) (refusing to apply Dolan to statute requiring railroad to pay for drainage improvements made necessary by its track). But see Schultz v. Grants Pass, (Or. Ct. App. 1994) (using Dolan tests to invalidate city's conditional grant of building permit where one condition was grant of a right of way on the property); Nat'l Ass'n of Home Builders v. Chesterfield County, (E.D. Va. 1995) (applying Dolan to a county policy requiring cash proffers in connection with residential zoning requests).

Thus, based on the Colorado Supreme Court's treatment of the takings issue in The Mill, the Dolan opinion, and the many decisions, including Clajon, limiting the application of Dolan, it is likely that Colorado courts will only require local governments to satisfy the nexus and proportionality tests when they condition the approval of some sort of development application on the developer's dedication of land to the government.

Moreover, even in those cases where courts might require an essential nexus and rough proportionality, the courts may regularly find that local governments have sufficiently demonstrated the nexus and proportionality requirements. See Kottschade v. Rochester, (Minn. App. 1995) (finding that subdivision approval condition that developer dedicate land for street improvements satisfied Dolan ); Sparks v. Douglas County, (Wash. 1995) (upholding conditional approval of plat application where county conditioned approval on developer dedicating rights of way for road improvements).

Thus, Dolan may have a limited effect in the courts of this state, and judges may continue to allow local governments the flexibility to achieve land use goals by conditioning development permits and changed use permits on concessions from property owners that benefit the government. In the legislative arena, however, Dolan and the issues it raised appear to have been the impetus for several bills that were introduced in the last legislative session in an attempt to restrict governmental power in this area. One of those bills, Senate Bill 69, was passed by both houses, only to be vetoed by Governor Romer. Further attempts to pass such legislation are likely, however, and the future may hold greater protection for property owners in Colorado.

Copyright © 2008 Fairfield and Woods, P.C., ALL RIGHTS RESERVEDNational Law Review, Volume , Number 203



About this Author

Charlton Carpenter, Fairfield and Woods, Corporate attorney

Charlton H. Carpenter concentrates his legal practice in business, corporate and real estate transactions. He has practiced in the areas of land use, development transactions, residential and commercial lending, construction law, foreclosures, mechanic’s lien litigation, real estate purchases, sales, exchanges, leases, and condominiums. He has had a very broad spectrum of real estate representations and also has served as an expert witness, arbitrator, and mediator in many business related transactions. He represented the developer of the Prime Outlets Mall in Castle Rock, Colorado, in its...