Texas Takings Victory

In a resounding victory for the application of the Nollan/Dolan test to all forms of development exactions, the Texas Supreme Court ruled recently in Town of Flower Mound v. Stafford Estates Limited Partnership, No. 02-0369 (May 7, 2004) that a road improvement required by a town, as a condition of approval of a housing development, was a taking of property requiring payment of compensation to the landowner.

Relying on a land development code provision requiring developers to improve substandard streets that abut subdivisions, the Town of Flower Mound conditioned its approval of a 247-lot phased subdivision on Stafford’s obligation to rebuild an existing road with concrete rather than asphalt. Flower Mound enforced the code provision even though the projected impacts from Stafford’s subdivision project did not warrant the degree of improvements mandated by the Town. Stafford rebuilt the road at a cost exceeding $484,000, but only after objecting to the condition at every administrative level provided. 

Stafford filed a takings claim against the Town to recover its costs for building the road, arguing (1) that the existing asphalt road was not in disrepair and (2) that the Town had made no attempt to determine whether the required improvements were roughly proportional to the subdivision’s impact on the road, invoking the standards from the U.S. Supreme Court’s Nollan and Dolan cases. In return, Flower Mound argued that the Nollan/Dolan test applies only when a government exaction requires a dedication of an interest in property, not when permit approval is conditioned upon an expenditure of money. NAHB participated as an amicus in support of the developer, emphasizing that the U.S. Supreme Court clearly set forth a standard for these types of situations — the required exaction must be related both in nature and extent to the impact of the proposed development — and that the Dolan “rough proportionality” test is not limited to the context of land dedications.

In clear, authoritative language, the Texas Supreme Court found that the Nollan/Dolan standards were applicable to this case. As the court interpreted it, Nollan/Dolan does not even “hint” that monetary exactions should be analyzed differently than physical dedications in determining whether there has been a taking. According to the court, these standards are essential to protect against government’s “unfairly leveraging its police power over land-use regulation to extract from landowners concessions and benefits to which it is not entitled.”

This decision is a welcome result because it forces local governments in Texas to be accountable for conditions and exactions that are imposed, often with little restraint, upon land development approval. 

The Town of Flower Mound’s challenges to the Nollan/Dolan standards are not novel, nor are they unique to this case. In fact, local governments nationwide, as a matter of course, argue that Nollan/Dolan is not applicable to their particular exactions. As we continue to confront different forms of development exactions (including impact fees) across the nation, this case provides a model for challenging excessive fees and land dedications required of property owners. [ return to top ]