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Real Property • Exaction
PROP#255
Legal Definition
An exaction is an amenity the government seeks in exchange for granting permission to build. To be constitutional (i.e., not a taking), the government bears the burden of demonstrating an exaction rationally related to the impact of the proposed development.
Plain English Explanation
"Exaction" is the act of demanding and obtaining something from someone. In the context of property law, an exaction is when the government demands to get something of value in exchange for allowing a company to do something it wants to do. In order for it to be constitutional, the government must show that there is some rational relation between their demand and the impact of the proposed development. For example, imagine if Amy wanted to develop her piece of property into a 300-unit residential development in HypoTown. Amy would likely need to seek permission in order to build out such a large project. HypoTown may say, "We'll let you do that if you agree to build 3 new bus stops, wider roads, and a small park." These demands in exchange for permission are exactions, and the default assumption is that they are inappropriate. It is up to the government to demonstrate why they are reasonable and not an overstep.
Hypothetical
Hypo 1: Amy owns a large parcel of land in HypoTown. She wants to develop it into a 300-unit residential community. When she seeks the development permits, HypoTown says they will only grant them if Amy promises build 3 new bus stops, widen streets, build a small park, and erect a large fountain. Result: HypoTown's demands are exactions. The new bus stops, widened streets, and small park are arguably reasonable and rationally related to the impact of Amy's development because 300 units full of people will undoubtedly increase traffic, strain on infrastructure, bus lines, etc. People also need green space in order to stay healthy. Thus, HypoTown will likely be able to force Amy to pay for those things, even if she doesn't want to, in order to get her permits approved. However, the large fountain seems a bit silly and unnecessary, so Amy would likely be able to fight that.
Hypo 2: This hypo comes courtesy of my father-in-law and is based on a true experience he had: Amy lives in HypoTown and owns a local hardware store. Next to the hardware store is an empty abandoned lot. Amy decides she wants to expand her hardware store by purchasing the empty lot and developing it. HypoTown tells Amy they will only approve her development if she agrees to build out a large stretch of sidewalk. The sidewalk won't connect anywhere, but HypoTown believes in the future HypoTown will be a popular destination for tourists and wants to be prepared for them to have somewhere to walk. Result: On a law school exam, this is a great example of an unconstitutional exaction, because there is no rational relation between Amy's desire to expand her small business and its impact on the need for a new piece of sidewalk that isn't connected to anything. It's just the government's attempt to get free infrastructure and, on an exam, it would fail. In the real world, unfortunately, the hardware store I'm describing spent thousands of dollars in legal bills fighting the government and, ultimately, was unsuccessful in getting its permits.
Hypo 2: This hypo comes courtesy of my father-in-law and is based on a true experience he had: Amy lives in HypoTown and owns a local hardware store. Next to the hardware store is an empty abandoned lot. Amy decides she wants to expand her hardware store by purchasing the empty lot and developing it. HypoTown tells Amy they will only approve her development if she agrees to build out a large stretch of sidewalk. The sidewalk won't connect anywhere, but HypoTown believes in the future HypoTown will be a popular destination for tourists and wants to be prepared for them to have somewhere to walk. Result: On a law school exam, this is a great example of an unconstitutional exaction, because there is no rational relation between Amy's desire to expand her small business and its impact on the need for a new piece of sidewalk that isn't connected to anything. It's just the government's attempt to get free infrastructure and, on an exam, it would fail. In the real world, unfortunately, the hardware store I'm describing spent thousands of dollars in legal bills fighting the government and, ultimately, was unsuccessful in getting its permits.
