Recent Federal Court Decisions Open the Door for Developer Takings Challenges to Local Land Use Decisions

Local governments have a broad array of tools in their arsenal when it comes to urban planning and land use regulation. For decades, courts have largely taken a backseat and afforded local governments substantial discretion in employing these tools in their negotiations with developers. But the Supreme Court’s opinion in Knick v. Township of Scott, decided earlier this year, may open the door to greater judicial oversight of local governments’ regulation of private developments.

In Knick, the Supreme Court overruled long-standing precedent that effectively required developers to litigate their takings claims exclusively in state court. Now, developers can bring takings claims directly to federal court instead. The difference in venue is significant because local governments often enjoy home court advantage in state court, while federal courts are perceived as more neutral. Federal court judges also tend to be more familiar with claims under the U.S. Constitution and federal statutes such as the Civil Rights Act.

Developers can now seek refuge in federal court when local governments impose onerous conditions on their property or development applications. Relatively recent case law, such as the Supreme Court’s decision in Koontz v. St. Johns River Water Management District in 2013, provides developers with fresh ammo in these kinds of disputes. In Koontz, the Supreme Court clarified that local governments must meet certain standards before they condition approval of a development permit on the payment of money. Those standards also apply when local governments condition approval of the development on a grant of physical property, such as an easement.

Another recent federal court opinion that could signal more favorable treatment of developers is last year’s opinion from the U.S. Court of Appeals for the 10th Circuit in M.A.K. Investment Group v. City of Glendale. In M.A.K., the 10th Circuit held that Colorado’s urban renewal statute violated the due process clause of the U.S. Constitution because it did not require local governments to give property owners sufficient notice when their property is deemed blighted. Notably, the landowner in M.A.K. did not raise a takings claim. It will be interesting to see how courts handle future challenges to urban renewal statutes, given that a blight determination can potentially devalue the subject property for years to come.

Property owners and developers sometimes face local regulations or conditions that devalue their property or unfairly restrict their right to develop. Federal courts are likely to see an uptick in the number of challenges to such regulations and conditions in the future.