Last month, the Sixth Circuit Court of Appeals issued an important decision in the area of property rights, development exactions, and the Fifth Amendment. In Knight v. Metropolitan Government of Nashville & Davidson County, Tennessee, case number 21-6179, plaintiffs James Knight and Jason Mayes challenged the constitutionality of a City of Nashville's "sidewalk" ordinance, which imposes sidewalk-related conditions on landowners who seek building permits.
Specifically, to obtain a building permit, the City requires the developer to either grant an easement across its land and agree to build a sidewalk, or otherwise pay an "in-lieu" fee to help build sidewalks in other parts of the City. The plaintiffs, who were subjected to the ordinance as part of a proposed housing development application, argued that the ordinance and the resulting condition of approval constituted a takings without just compensation.
The key issue before the Sixth Circuit was which "legal test" or "standard" applied to its review of the facts. The City wanted the court to view the ordinance like any other zoning or generally applicable development restriction, and the petitioner wanted the court to view it as an unlawful exaction (i.e., a form of extortion). As the Court explained this issue:
In particular, the parties  disagree over the "test" that we should use to judge whether the sidewalk ordinance commits a taking. The landowner plaintiffs ask us to apply the "unconstitutional-conditions" test that the Supreme Court adopted to assess conditions on building permits in Nollan v. California Coastal Commission, 483 U.S. 825 (1987). Nashville responds that the Court has applied Nollan's test only to ad hoc administrative conditions that zoning officials impose on specific permit applicants—not generally applicable legislative conditions that city councils impose on all permit applicants. For legislative conditions, Nashville says, we should turn to the deferential "balancing" test that the Court adopted to assess zoning restrictions in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).
The Court sided with the plaintiffs, holding that the unconstitutional-conditions test was the applicable legal framework. Applying this test, the Court concluded that the government must show a "nexus" between the condition and the development's impact, and "rough proportionality" between the burden created by the condition and that project's impact.
The Court, however, never actually analyzed the facts under this standard, concluding that Nashville had actually "waived any argument that it can satisfy this unconstitutional-conditions test." Accordingly, the Court ruled in favor of the plaintiffs on this issue without having to actually scrutinize the ordinance or condition of approval.
This decision is significant primarily because it is the first time that a federal appellate court has held that the unconstitutional-conditions test applies to the enforcement and imposition of generally applicable legislative conditions. Previously, local agencies argued that this test applies only to "adjudicative" decisions in which zoning officials, acting on an ad hoc basis, choose the specific conditions to impose on a specific landowner's project. The court disagreed and clarified that how/why the conditions are imposed is not in itself determinative. This is an important clarification, that will help property owners and developers alike to better understand when a development condition implicates the Fifth Amendment.
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