Has Florida Expanded Regulatory Takings Law? What Shands v. City of Marathon Means for Property Owners and Local Governments

Regulatory takings cases rarely reshape an entire area of property law. Most simply apply long-established principles to a new set of facts, and the result is a short opinion that practitioners file and rarely think about again. Every so often, though, a decision comes along that causes lawyers, local governments, and property owners across the state to stop and ask whether the rules have actually changed. Shands v. City of Marathon may prove to be one of those cases.[1]

After the United States Supreme Court declined to review the decision on June 8, 2026, [2] the Florida Third District Court of Appeal’s en banc opinion[3] remains controlling law within its district and, in my view, the single most important Florida regulatory takings decision in years. Whether other Florida courts ultimately embrace the Third District’s reasoning remains to be seen, but the decision already represents a significant shift in how at least one Florida appellate court analyzes categorical takings claims under the United States Supreme Court’s decision in Lucas v. South Carolina Coastal Council.[4]

In Lucas, the Court established the categorical rule that a compensable taking occurs when a regulation “denies all economically beneficial or productive use of land.”[5] In such circumstances, the regulation constitutes a taking unless “background principles of the State’s law of property and nuisance” already prohibit the property owner’s intended use.[6] The Lucas rule applies to the “extraordinary circumstance when no productive or economically beneficial use of land is permitted” and represents a narrow exception to the fact-specific analysis ordinarily required in regulatory takings cases.[7]

At the center of the City of Marathon dispute was a deceptively simple question.[8] Can a local government avoid liability for a categorical taking merely because it offers a property owner transferable development rights, or TDRs, instead of allowing any use of the property itself? For nearly three decades, the answer in Florida’s Third District was yes. As of February 2025, it is likely no.

If you own property, represent property owners, or sit on the other side of the table as a local government official responsible for land use regulation, the Marathon decision is worth understanding now, before it comes up in your own case. My firm regularly represents parties on both sides of these disputes, and I would welcome the opportunity to discuss how this decision may affect a pending or anticipated matter involving conservation zoning, downzoning, or a development order denial.

What Happened in Shands v. City of Marathon?

In 1956, Dr. R.E. Shands purchased a 7.9-acre offshore island in the Florida Keys, now known as Shands Key, for $20,500. At the time, the island was zoned for general residential use, permitting construction of one home per acre. Dr. Shands died in 1963 without developing the property, and title eventually passed to his four children.

In 1986, Monroe County adopted a comprehensive plan that downzoned Shands Key from general use to a conservation designation, and the City of Marathon adopted the same restriction when it incorporated in 1999. Under that designation, the only permitted uses of the island became beekeeping and personal camping. The City also adopted a competitive permit allocation system, commonly referred to by its acronyms ROGO and BPAS,[9] which awarded transferable development rights to owners of restricted parcels. Those rights, along with any residential building permit allocation points attached to a property, could be sold to third parties for use on other, more developable land.

In 2004, the Shands family applied for a permit to build a dock, the first development step anyone had taken on the island since 1956. The City denied the application, citing the presence of high-quality mangrove habitat for an endangered bird species. The family then pursued an administrative Beneficial Use Determination. The City’s own special master concluded that the downzoning had left the family with no reasonable economic use of the property and recommended that the City either issue a building permit or purchase the island outright. The City Council voted 3 to 2 to reject that recommendation, and litigation followed in 2007.[10]

What came next was nearly two decades of litigation. The Third District reversed an early dismissal on statute of limitations grounds in 2008, [11] and reversed a summary judgment entered for the City in 2019 because the record did not establish the value of the TDRs the City relied on as providing just compensation to the Shands family. [12] Following that second remand, the Shands family moved for partial summary judgment, arguing that the downzoning had deprived them of all economically beneficial use of the island under U.S. Supreme Court’s Lucas decision. The City opposed the motion with appraisal evidence demonstrating that the island could be sold for its TDRs, valued at $147,000, roughly six times the family’s original investment, or for recreational use in its natural state, valued between $46,000 and $60,000, roughly three times the original investment.

The trial court denied summary judgment and, after a two-day bench trial in 2021, ruled in the City’s favor under the fact-intensive, multi-factor test established in Penn Central Transportation Co. v. New York City,[13] finding that the island’s residual value provided the Shands family a reasonable return on their investment. A panel of the Third District reversed that ruling in 2023. The full court then agreed to rehear the case en banc, and on February 5, 2025, the en banc court reversed the trial court and directed that partial summary judgment be entered for the property owners.

Why Did the Third District Break With Its Own Precedent?

This is the heart of the decision, and it is where Marathon departs sharply from how many Florida practitioners had long understood takings law to operate.

Writing for the en banc majority, Judge Miller held that the availability of TDRs and the possibility of a profitable sale for recreational use could not be considered when deciding whether a Lucas taking had occurred in the first place. Both, the court held, belong only on the just compensation side of the takings equation, after a taking has already been established. [14] The court adopted the reasoning Justice Scalia offered in his separate concurrence in Suitum v. Tahoe Regional Planning Agency, where he wrote that a marketable transferable development right ‘relates not to the taking but to compensation’ because it does not restore any use of the regulated land itself, but instead confers a new and different right to develop someone else’s land. [15]

The court then went a step further on the recreational use question. Relying on the Federal Circuit’s decision in Lost Tree Village Corp. v. United States, the majority reasoned that a typical economic use of land allows an owner to derive a benefit from ownership itself, such as farming, logging, or grazing, rather than requiring the owner to sell the property to someone else.[16] Because beekeeping and camping were the only uses the regulation actually permitted on Shands Key, and because a sale for recreational value did not count as an economic use of the land in the majority’s view, the court concluded that the island had been rendered economically idle within the meaning of Lucas, regardless of what it might command on the open market.

In doing so, the en banc majority expressly receded from its own prior decisions in the Beyer cases, Shands I, Shands II, and Ganson v. City of Marathon, each of which had treated the availability of TDRs as evidence weighing against a categorical taking.[17] That is not a minor action for an appellate court to take. It is an acknowledgment that three decades of settled expectations, on both sides of the bar, no longer reflect the law in the Third District.

What Did the Concurring Judges Add?

Two concurrences are worth flagging for practitioners. Judge Scales agreed with the result but wrote separately to work through the practical mechanics of how TDRs are now supposed to function on the compensation side of the ledger, including how a local government’s written offer of TDRs might affect an attorneys’ fee award under section 73.092 of the Florida Statutes if the case eventually settles or goes to a jury.[18]

[19] Judge Gordo concurred separately to respond directly to the dissent’s separation of powers concerns, framing the majority’s role as safeguarding an individual constitutional right against government overreach rather than encroaching on the legislative or executive branches. [20]

Why Was the Decision So Controversial?

Chief Judge Logue’s dissent is lengthy, pointed, and worth reading in full if you handle takings cases in Florida. His core objection is that the majority abandoned an objective, value-based test in favor of a subjective inquiry into what counts as a ‘productive’ use of land, a shift he argues the United States Supreme Court has twice rejected.

The dissent’s starting point is Penn Central’s instruction that a takings analysis must examine the impact of a regulation on ‘the value of the parcel as a whole,’ [21] a formulation that Judge Logue read as expressly including the value of transferable development rights sold to third parties, not merely those retained and used on adjacent land. He also points to Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency and Lingle v. Chevron U.S.A. Inc., both of which describe the Lucas categorical rule as reserved for the extraordinary case where a regulation eliminates the complete value of a property, not merely its physical development potential.[22][23] On the dissent’s reading, an island that a private, willing buyer would pay six times the purchase price to acquire has not been rendered economically idle in any meaningful sense, whatever label the regulation places on the permitted uses.

The dissent closes with a broader institutional concern. Judge Logue catalogs the dozens of Florida counties and municipalities, well beyond Marathon, that rely on TDR programs to balance conservation goals against private property rights, and he warns that a categorical rule excluding TDRs from the takings analysis exposes all of them to a new wave of Lucas litigation. He frames this as a separation of powers problem, arguing that the majority’s approach hands courts an easier path to strike down land use regulations that the political branches adopted, in this instance, to protect Florida Keys residents during hurricane evacuations.

Does the Supreme Court’s Denial of Certiorari Mean the Third District Was Correct?

This is one of the most common misconceptions I encounter, and it matters a great deal here.

A denial of certiorari is not a ruling on the merits. It carries no precedential weight, and it does not signal that the Supreme Court agreed with the decision below. It means only that fewer than four justices voted to hear the case, for any number of reasons that have nothing to do with whether the Third District correctly interpreted the law.

The City’s petition gave the Court a genuine opportunity to resolve a real and growing split of authority. The Fifth Circuit, the Federal Circuit, and the Supreme Court of Hawaii have each held that a Lucas taking turns on whether a regulation eliminates all economically productive uses of land, largely disregarding evidence that the property retains substantial market value. The Eighth Circuit, the District of Columbia Circuit, and the Supreme Court of Michigan, along with the Ninth Circuit in its more recent decisions, have gone the other way, holding that a Lucas claim fails so long as the property retains meaningful value in the marketplace. [24][25] The Third District’s en banc opinion in Marathon falls squarely in the first camp. The Supreme Court’s denial leaves that split fully intact.

Practically speaking, here is what the denial does and does not do. It does not make the Third District’s reasoning correct as a matter of federal constitutional law, and it does not bind any other Florida district court of appeal, let alone any other state or federal circuit. It does mean that, for now, the Third District’s opinion is the last word on this case, and it remains fully controlling precedent within the Third District, which covers Miami-Dade and Monroe Counties, including all the Florida Keys. Trial courts elsewhere in Florida are not bound by it, but they will read it, and so will the lawyers appearing before them. An opinion this thoroughly reasoned, even one I believe misreads the governing Supreme Court precedent in places, tends to accumulate persuasive weight well beyond its home district.

It is also worth remembering that the Florida Supreme Court had its own chance to weigh in and passed on it, denying review of the Third District’s decision in December 2025, over dissents from two additional judges on the Third District itself who viewed the case as one of great public importance.[26]

What Could This Mean for Florida Property Owners and Local Governments?

For property owners, particularly those holding conservation zoned, wetlands, or environmentally overlaid parcels within the Third District, Marathon provides a meaningful new argument. If your property has been reduced to uses that generate no income from the land itself, camping, beekeeping, passive recreation, or the like, the fact that a local government has offered you TDRs or pointed to a hypothetical sale should no longer be treated as an automatic defense to a categorical takings claim. That argument did not exist in this form before February 2025.

For local governments, the lesson cuts the other way. Marathon should prompt a hard look at any regulatory scheme that leans heavily on TDRs as a substitute for compensation, particularly conservation overlays, downzonings tied to environmental sensitivity, coastal setback requirements, and comprehensive plan amendments that eliminate density on specific parcels. A TDR program remains a legitimate and valuable land use tool, and nothing in Marathon prohibits its use. What Marathon changes is where TDRs belong in the analysis. Local governments within the Third District can no longer assume that a generous TDR award will, by itself, defeat a Lucas claim at the summary judgment stage. That risk should be priced into how those programs are structured and how aggressively a denial gets defended.

Developers negotiating around restricted parcels, particularly in the Keys, should also take note. If TDRs are now understood as compensation rather than a defense to liability, that has real implications for how those rights are priced, marketed, and negotiated between property owners, local governments, and third-party buyers.

Does This Affect Bert Harris Act Claims?

Florida property owners already have more than one path to relief when a regulation goes too far. Alongside a constitutional inverse condemnation claim like the one at issue in Marathon, the Bert J. Harris, Jr. Private Property Rights Protection Act provides a separate, statutory cause of action for property owners whose land has been unfairly burdened by a new law, rule, or ordinance, without requiring proof of a complete taking under the constitutional standard.[27]

The Third District’s own opinion acknowledges this distinction, noting that the Bert Harris Act filled a gap in Florida law by allowing compensation for adverse regulatory effects without satisfying the constitutional standards for a taking. [28] Marathon does not rewrite the Bert Harris Act, and the two frameworks remain analytically distinct. But a Third District opinion holding that TDRs do not defeat a categorical takings claim may well influence how courts and local governments think about whether a regulation has left a property with a reasonable, beneficial use for Bert Harris purposes as well. Property owners who believe a regulation has gone too far should have both theories evaluated together, not in isolation.

What Questions Remain Unanswered?

Marathon settles the question for one island in the Florida Keys, but it leaves several larger questions open, including:

• Will Florida’s other district courts of appeal follow the Third District’s lead, or will one of them create an intra-state conflict that eventually forces the Florida Supreme Court to step in?
• Will the Florida Supreme Court revisit its decision to deny review now that the case has run its course through the federal system?
• Will courts applying Marathon require the kind of active, competitive recreational market that existed in the unique economy of the Florida Keys, or will the holding extend to property in markets with far less demand for land held in its natural state?
• And, perhaps most importantly for the rest of the state, does Marathon’s reasoning extend beyond environmentally sensitive coastal property to downzonings and comprehensive plan amendments more generally, or will courts eventually confine it to its unusual facts?

I do not think any of these questions has an obvious answer yet. That is precisely why property owners and local governments should be tracking how trial courts outside the Third District treat this decision over the next year or two.

What Should Florida Property Owners and Local Governments Do Now?

If you are a property owner who has been left with only nominal uses of your land after a downzoning, an environmental overlay, or a development order denial, do not assume that an offer of transferable development rights forecloses a takings claim. Have the regulation, the permitted uses, and the available compensation reviewed together, and do it before any applicable statute of limitations runs.

If you are a local government official or land use planner, now is a good time to revisit how your jurisdiction’s TDR program is structured, documented, and valued, and to make sure any denial of development potential is supported by a record that would hold up under either the Lucas categorical test or the more forgiving Penn Central balancing test, since it is not yet clear which one a reviewing court will apply outside the Third District.

What Is the Lasting Impact of Shands v. City of Marathon?

The Supreme Court’s refusal to hear City of Marathon v. Shands did not answer every question surrounding regulatory takings in Florida. In many respects, it created new ones. Whether Marathon ultimately becomes a watershed decision that reshapes how Florida courts analyze conservation zoning statewide or remains confined to the unusual facts of a single offshore island, will depend on how the next several courts to confront the issue choose to apply it.

What is already clear is that property owners, developers, and local governments in the Third District can no longer assume that transferable development rights, or the theoretical ability to sell restricted land for recreational use, will automatically defeat a categorical takings claim. For practitioners handling Florida land use and eminent domain matters, Marathon is likely to become required reading for the foreseeable future. As is so often true in land use law, today’s landmark decision has a way of becoming tomorrow’s starting point.

Do Not Navigate a Potential Florida Takings Claim Alone

Regulatory takings litigation is fact intensive, procedurally unforgiving, and, as Marathon demonstrates, capable of shifting significantly even after a case has been pending for nearly two decades. A property owner who assumes an offer of TDRs closes the door on a takings claim, or a local government that assumes its existing TDR program is bulletproof, may be operating on assumptions that Marathon has already changed.

Whether you are a property owner evaluating whether a downzoning, environmental overlay, or development order denial has crossed the constitutional line, or a local government official responsible for defending or restructuring a TDR program in light of this decision, the stakes of getting this analysis wrong are significant and often permanent. If you have questions about how Shands v. City of Marathon may affect a pending matter or a regulation you are considering adopting or challenging, I welcome the opportunity to discuss it with you.

[1] Shands v. City of Marathon, 411 So. 3d 452 (Fla. 3d DCA Feb. 5, 2025) (en banc), cert. denied sub nom. City of Marathon v. Shands, 2026 U.S. LEXIS 2458 (U.S. June 8, 2026).

[2]City of Marathon v. Shands, No. 25-1251, 2026 U.S. LEXIS 2458 (U.S. June 8, 2026).

[3]Shands v. City of Marathon, 411 So. 3d 452 (Fla. 3d DCA Feb. 5, 2025) (en banc).

[4]Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019 (1992).

[5] Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015, 1027 (1992).

[6] Id at 1029.

[7] Id. at 1017.

[8] Shands v. City of Marathon, 411 So. 3d 452 (Fla. 3d DCA Feb. 5, 2025) (en banc); City of Marathon v. Shands, 2026 U.S. LEXIS 2458 (U.S. June 8, 2026).

[9] Shands v. City of Marathon, 411 So. 3d 452, 455 n.1 (Fla. 3d DCA Feb. 5, 2025) (en banc) (describing the City’s Rate of Growth Ordinance and Building Permit Allocation System, Marathon, Fla., Code §§ 107.01-.08).

[10]Shands v. City of Marathon, 411 So. 3d 452, 455 (Fla. 3d DCA Feb. 5, 2025) (en banc).

[11]Shands v. City of Marathon, 999 So. 2d 718 (Fla. 3d DCA 2008).

[12]Shands v. City of Marathon, 261 So. 3d 750 (Fla. 3d DCA 2019).

[13]Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124 (1978).

[14]Shands, 411 So. 3d at 463-64.

[15]Suitum v. Tahoe Reg’l Planning Agency, 520 U.S. 725, 747 (1997) (Scalia, J., concurring in part and concurring in the judgment).

[16]Lost Tree Vill. Corp. v. United States, 787 F.3d 1111, 1117 (Fed. Cir. 2015), cert. denied, 582 U.S. 952 (2017).

[17]Shands v. City of Marathon, 411 So. 3d 452, 465 (Fla. 3d DCA Feb. 5, 2025) (en banc) (expressly receding from Beyer v. City of Marathon, 37 So. 3d 932 (Fla. 3d DCA 2010) (Beyer I); Beyer v. City of Marathon, 197 So. 3d 563 (Fla. 3d DCA 2013) (Beyer II); Shands v. City of Marathon, 999 So. 2d 718 (Fla. 3d DCA 2008) (Shands I); Shands v. City of Marathon, 261 So. 3d 750 (Fla. 3d DCA 2019) (Shands II); and Ganson v. City of Marathon, 222 So. 3d 17 (Fla. 3d DCA 2016)).

[18] Id.

[19]Id. at 465-67 (Scales, J., concurring).

[20]Id. at 467-70 (Gordo, J., concurring).

[21]Id. at 475 (Logue, C.J., dissenting) (quoting Penn Central, 438 U.S. at 130 n.27, 130-31).

[22]Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 332 (2002).

[23]Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 539 (2005).

[24]Petition for a Writ of Certiorari at i, City of Marathon v. Shands, No. 25-1251 (U.S. filed May 1, 2026).

[25]Id. at 11-21 (surveying the split among the Fifth, Eighth, and Ninth Circuits, the District of Columbia Circuit, the Federal Circuit, and the Supreme Courts of Hawai’i and Michigan).

[26]City of Marathon v. Shands, No. SC2025-0833, 2025 WL 3497005 (Fla. Dec. 5, 2025).

[27] Bert J. Harris, Jr. Private Property Rights Protection Act, § 70.001, Fla. Stat. (2024).

[28]Shands, 411 So. 3d at 458 n.6 (citing § 70.001(1), Fla. Stat. (2024)).