Of course, this brings up the interesting question of the applicability of Nollan v California Coastal Commission and Dolan v City of Tigard. Nollan requires an essential nexus between any such condition involving real estate development; Dolan mandates that there be a rough proportionality between the amount of the condition and any negative impact the development might have.
In the world of land use planning law, these issues come up almost all the time in the context of subdivision applications. It is indeed a rare subdivision which does not require either a dedication of real property or some mandatory exaction.
However, in both Nollan and Dolan, not only was the required condition the dedication of real property, but also those cases both involve situations where the application was granted subject to the condition. In Koontz, the condition was that money be paid for off-site improvements, and the application was turned down when Mr. Coons indicated that he would not make the payments. In the federal courts, there was a division of authority. The Supreme Court took care of that.
First, with regard to the distinction between a monetary exaction and the dedication of real property, the court found that to be a difference without any meaning. From the perspective of the majority, an administrative agency can always substitute a monetary exaction in lieu of a real property dedication and in that way avoid the constitutional impropriety at any time.
Second, with regard to the distinction between granting approval with the condition and turning it down, the court also found that to be a distinction without any real significance. Once again, the administrative agency could clearly trapped its findings as a denial of the application if that was all it would take to render the decision constitutional. The court did not find that granting an application subject to the condition, as opposed to denying the application because the condition would not be complied with, had any significant; the real point is that the owner is deprived of a property right without just compensation either way.
Remember that under Nollan and Dolan, the burden of proof is reversed: the property owner does not have the burden of demonstrating that there is an essential nexus and rough proportionality; rather, the administrative agency must articulate why there is an essential nexus and rough proportionality at the time of the agency decision. Under the Koontz’s decision, it is now clear that the same reversal of the burden of production and persuasion applies whether the condition is for money or real property, and whether or not the application was granted or denied. Ultimately, all planning commissions should required the staff to prepare such justifications for every case in which a dedication or exaction is involved. Without some evidence in the record to justify the condition, there is a significant possibility of the decision being overturned on appeal.
As the court noted:
Nollan and Dolan involve a special application of this [unconstitutional conditions] doctrine that protects the Fifth Amendment right to just compensation for property the government takes when owners apply for land-use permits . . .
Land-use permit applicants are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than property it would like to take. By conditioning a building permit on the owner's deeding over a public right-of-way, for example, the government can pressure an owner into voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation. So long as the building permit is more valuable than any just compensation the owner could hope to receive for the right-of-way, the owner is likely to accede to the government's demand, no matter how unreasonable. Extortionate demands of this sort frustrate the Fifth Amendment right to just compensation, and the unconstitutional conditions doctrine prohibits them.