Legal Memorandum: "In Lieu" Payments for Property Development

Issue: What is the legal authority relating to ‘in lieu’ payments with regard to property development in Colorado?

An “in-lieu” payment may be analyzed as an “exaction” to determine whether requiring the payment constitutes a compensable taking.  The analysis is conducted under the “substantial-nexus” test set forth under Nollan v. California Coastal Comm’n, 483 U.S. 825, 107 S. Ct. 3141 (1987) (condition imposed on waiver of development restriction must be substantially related to the purpose or justification supporting the restriction being waived).  Colorado has codified the test in the Regulatory Impairment of Property Rights Act (RIPRA), Colo. Rev. Stat. §§ 29-20-201 to -205.  The relevant provision states:

(1) In imposing conditions upon the granting of land-use approvals, no local government shall require an owner of private property to dedicate real property to the public, or pay money or provide services to a public entity in an amount that is determined on an individual and discretionary basis, unless there is an essential nexus between the dedication or payment and a legitimate local government interest, and the dedication or payment is roughly proportional both in nature and extent to the impact of the proposed use or development of such property. This section shall not apply to any legislatively formulated assessment, fee, or charge that is imposed on a broad class of property owners by a local government.

(2) No local government shall impose any discretionary condition upon a land-use approval unless the condition is based upon duly adopted standards that are sufficiently specific to ensure that the condition is imposed in a rational and consistent manner.