What Is the Nollan/Dolan Test for Land Use Exactions?

The Nollan/Dolan test is the two-part constitutional standard courts use to decide whether a condition a government attaches to a development permit is an uncompensated taking of private property. Under this rule, drawn from the Fifth Amendment’s Takings Clause, any permit condition must have an “essential nexus” to the impact the project will create and must be “roughly proportional” to that impact. Fail either prong and the condition is unconstitutional, and the property owner can challenge it.

The test grew out of two Supreme Court cases involving beachfront and small-business permits, and it has since expanded to cover monetary demands, permit denials, and fees adopted by legislation. Knowing how each prong works, and where the doctrine stops, is what lets an owner tell a lawful condition from an unlawful one.

The Essential Nexus Prong

The first prong comes from Nollan v. California Coastal Commission (1987). James and Marilyn Nollan wanted to tear down a small beachfront bungalow and build a larger house. The California Coastal Commission agreed to issue the permit on one condition: the Nollans had to grant a public easement letting people walk across their private beach between two public beaches.¹

The Commission’s stated justification was that the new, larger house would block ocean views and create a “psychological barrier” discouraging beach use. The Supreme Court rejected that logic. Letting strangers walk laterally across the Nollans’ beach did nothing to restore anyone’s view or reduce any psychological barrier. Without a real connection between the problem the government identified and the property right it demanded, the permit process becomes, in the Court’s words, a tool for “extortion” to obtain property the government could not simply take without paying for it.¹

So the first prong asks a simple question. Does the condition actually address the impact the government says the project will cause? A new apartment complex that will increase demand for parks can be asked to dedicate park land. The same complex, if it has no traffic impact, cannot be forced to widen a road. The nexus does not have to be perfect, but it has to be real. When it is entirely missing, the analysis stops and the exaction fails.

The Rough Proportionality Prong

Even when a genuine nexus exists, the government still has to clear a second hurdle. That comes from Dolan v. City of Tigard (1994). Florence Dolan owned a plumbing and electrical supply store in Tigard, Oregon and wanted to nearly double its size and pave a 39-space parking lot. The city approved her permit but attached two conditions: she had to dedicate the portion of her property inside the 100-year floodplain for a public greenway along Fanno Creek, and she had to dedicate an additional 15-foot strip for a pedestrian and bicycle pathway. Together the dedications covered about 7,000 square feet, roughly 10% of her property.²

The city justified the greenway on flood-control grounds (the expansion would increase runoff) and the bike path on traffic grounds. The Supreme Court agreed a nexus existed but held the demands went too far. The city never explained why a public greenway was necessary when a private one would have handled flood control just as well. And it never quantified how many additional car trips the expansion would generate or how the bike path would absorb them. Conclusory statements were not enough.²

That produced the “rough proportionality” standard. No precise mathematical formula is required, but the government has to make an individualized determination showing the exaction matches the project’s actual impact in both nature and extent. A small retail expansion cannot be saddled with infrastructure costs that benefit an entire region. And the burden of proof sits with the government. The city must justify its demand; the owner does not have to disprove it.

What Kinds of Permit Conditions the Test Reaches

Nollan involved a demand for land. Dolan involved a demand for land. For years lower courts split over whether the same test applied to demands for money, or whether the government could sidestep the doctrine by simply refusing to issue a permit rather than approving one with a bad condition.

Koontz v. St. Johns River Water Management District (2013) closed both gaps. Coy Koontz owned nearly 15 acres of Florida wetlands and wanted to develop 3.7 acres. The water management district offered him a choice: shrink the project to a single acre and deed a conservation easement on the rest, or build the full 3.7 acres but pay to improve district-owned wetlands miles away. Koontz refused, and the district denied the permit.³

The Supreme Court held that the Nollan/Dolan test applies to demands for money as well as demands for land, and that it applies even when the government denies a permit because the owner refused to accept an unconstitutional condition. The principles behind the two-part test “do not change depending on whether the government approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so.”³

Labels do not control. A charge called a “fee” or “assessment” is still an exaction if it is imposed as a condition on a specific development permit and is meant to address the development’s impact.

Legislative Fee Schedules After Sheetz

Sheetz v. County of El Dorado (2024) extended the doctrine again. George Sheetz wanted to build a single-family home near South Lake Tahoe. The county required a traffic impact fee of roughly $23,000, set by a fee schedule that applied to all new development in the area rather than by any individualized study of his project. A California appeals court held that Nollan/Dolan did not apply because the fee came from legislation, not from a case-by-case administrative decision.⁴

The Supreme Court unanimously reversed. The Takings Clause draws no line between legislative and administrative permit conditions. A fee schedule adopted by a county board is subject to the same scrutiny as a one-off demand from a planner.⁵

The holding came with an important caveat. The Court declined to decide whether a legislative exaction imposed on a whole class of properties must be tailored with the same specificity as an individualized condition. Justice Kavanaugh, writing separately for himself and two other justices, noted that the decision “does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules.”⁴ Sheetz opened the door to challenging legislative fees; the precise standard courts will use is still unsettled.

What the Test Does Not Cover

Nollan/Dolan is narrower than many property owners expect. It governs exactions, not every restriction a government places on land. The Supreme Court drew the line in Lingle v. Chevron U.S.A. Inc. (2005), noting that Nollan and Dolan “involved dedications of property so onerous that, outside the exactions context, they would be deemed per se physical takings.”⁶ Several familiar government actions fall outside the test:

Zoning that limits a neighborhood to residential use may reduce property values but is not a condition on a specific permit, and is analyzed under other takings frameworks.
Property taxes and general user fees are outside the doctrine. The Koontz Court said so directly, noting its holding does not limit “the ability of governments to impose property taxes, user fees, and similar laws and regulations that may impose financial burdens on property owners.”³
General environmental restrictions, such as a rule prohibiting building in a wetland, are not permit conditions. They may still raise takings questions, but under the Penn Central balancing test or the Lucas total-taking rule instead.

The dividing line is whether the government is saying “you can build, but only if you give us something” versus “you cannot build here at all.” Nollan/Dolan addresses the first. The second falls under different constitutional rules.

What Happens When an Exaction Fails

An exaction that fails either prong is an unconstitutional condition. The government cannot require an owner to surrender a constitutional right, including the right to just compensation, as the price of a discretionary benefit like a building permit.⁶

Remedies are less settled than the underlying rule. Koontz deliberately left the remedy question open, noting that whether money damages are available “is not a question of federal constitutional law but of the cause of action — whether state or federal — on which the landowner relies.”³ What you can recover depends on the forum and the theory you use.

Under federal law, owners can sue under 42 U.S.C. § 1983, which creates a cause of action when a government actor deprives someone of constitutional rights. A prevailing plaintiff can recover reasonable attorney’s fees under 42 U.S.C. § 1988, which matters because these cases are expensive to litigate.⁷ Many state systems also offer an inverse condemnation claim, where the owner sues the government for compensation because its action amounted to a taking without formal eminent domain.

When an owner loses use of the property during the time it takes to challenge an unconstitutional condition, compensation is owed for that period. In First English Evangelical Lutheran Church v. County of Los Angeles (1987) the Court held that invalidating the regulation after the fact is not enough. The government must pay for the time the taking was in effect, because “where the government’s activities have already worked a taking of all use of property, no subsequent action by the government can relieve it of the duty to provide compensation for the period during which the taking was effective.”⁸ The government can withdraw the condition, amend it, or exercise eminent domain and pay in full, but it cannot escape liability for the period the owner was deprived.

Practical Steps if You Are Facing an Exaction

Knowing the standard and using it are different problems. Most exactions never get challenged because owners assume the demand is final or the fight will cost more than what is being taken. A few steps protect your position either way.

Get the government’s justification in writing. Ask the permit authority to state exactly what impact your project will cause and how the condition addresses it. Under Dolan, the government bears the burden of an individualized determination connecting the condition to your project’s specific impact.² If all you get is a generic reference to “increased traffic” or “community needs” with no data tied to your parcel, that is exactly the kind of conclusory reasoning the Court rejected.

Do not assume that paying the fee or granting the easement ends the matter. Owners who comply under protest may still have a viable claim, but the procedural rules for preserving that claim vary by jurisdiction. If a condition looks unlawful and you cannot afford to delay construction, talk to a land use attorney about how to preserve your objection while moving forward.

Watch the deadlines. Statutes of limitations for challenging permit conditions vary by state and can be short. Missing the window forecloses even the strongest constitutional claim.

1
Justia. Nollan v. California Coastal Commission, 483 U.S. 825 (1987)
2
Justia. Dolan v. City of Tigard, 512 U.S. 374 (1994)
3
Justia. Koontz v. St. Johns River Mgmt. Dist., 570 U.S. 595 (2013)
4
Justia U.S. Supreme Court Center. Sheetz v. El Dorado County, 601 U.S. ___ (2024)
5
Constitution Annotated. Sheetz v. County of El Dorado, CA: Legislative Exactions and the Fifth Amendment Takings Clause
6
Justia. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005)
7
Office of the Law Revision Counsel. 42 U.S. Code 1988 – Proceedings in Vindication of Civil Rights
8
Justia. First English Evangelical Lutheran Church v. Los Angeles County, 482 U.S. 304 (1987)