As the Florida Legislature prepares to ponder laws that could shape the future of building rights in the Keys, a recent court decision in a 18-year lawsuit could establish new case law that sets a costly precedent for halting development in the island chain.
Released on Feb. 5, an opinion from Florida’s Third District Court of Appeals strikes a blow to the city of Marathon in a decades-long legal battle over Shands Key, a small, uninhabited island on Marathon’s gulf side off the end of Brian Road.
The case is especially critical in 2025, as the island provides a crucial local example of a takings case, triggered when government regulations strip away the economic uses of a piece of private property without just compensation, as guaranteed by the Fifth Amendment of the U.S. Constitution.
In 1956, Dr. R.E. Shands purchased the island from the federal government for $20,500, hoping to turn the land into a vacation destination for his family. At the time of purchase, zoning for the 7.9-acre island allowed for construction of one home per acre.
Shands’ vision never came to fruition, as he passed away in 1963, and ownership of the island was eventually transferred to his wife and later her four children. But by the time the family was ready to build on the island, the Florida Legislature had designated the Keys as an Area of Critical State Concern in 1979, enacting a host of development regulations. In 1992, the infamous ROGO system was born, aiming to slow the rate of development throughout the island chain and discourage building on environmentally sensitive land.
Zoning of the island changed from General Use, allowing for construction, to “Conservation Offshore Island,” allowing only for camping and beekeeping. The changes were later adopted by Marathon when the city incorporated in 1999, and when the Shandses applied for a dock permit in 2004, the request was denied, with the city offering instead to provide the Shands with transferable development rights (TDRs) for sale or use elsewhere in exchange for publicly dedicating the land.
The central argument in the case hinges on whether the provision of these development rights automatically prevents a takings case, or whether the rights qualify as “just compensation,” as guaranteed in the Constitution, for an island that has now seen its value slashed from a multimillion-dollar property to one potentially worth just tens of thousands under current regulations.
“Allowing the government to avoid a categorical, as-applied takings claim by awarding TDRs is constitutionally infirm, and here, the downzoning barred (the Shandses) from improving or developing Shands Key in any manner,” the opinion reads.
“In what can only be described as a trailblazing decision, the majority holds that … the availability of TDRs does not infuse value into a property otherwise rendered valueless by the regulation,” added judge Edwin Scales. He noted that while governments cannot force landowners to accept TDRs as compensation in lieu of cash, the building rights may still have value in negotiations for future takings cases, should property owners be willing to accept them.
Authoring the lone dissent of the court’s 10 judges, Chief Judge Thomas Logue supported the ruling of the case’s previous outcome in a trial court.
“It is undisputed that the unique economy of the Florida Keys provides an active, competitive market among private buyers for transferable development rights and islands in their natural state available for recreational uses,” he wrote, stating that either use would increase the island’s value to three to six times its original purchase price. “The case went to a bench trial and the trial court concluded no taking occurred, finding these values provided the owners a reasonable return on their investment.”
A closed session of the Marathon City Council on Tuesday, Feb. 25 will formally determine whether an expected appeal by the city will make its way to the Florida Supreme Court. City officials declined to comment on the pending litigation.
The Shands are represented by the Pacific Legal Foundation (PLF), a public interest law firm that represents citizens free of charge in suits against alleged government overreaches.
“This is an important case, and we’re excited with the outcome,” PLF attorney Kady Valois told the Weekly. “I think the Shands are finally happy that they can see the horizon on this 18-year fight.”
Should the city ultimately lose the case, Marathon’s taxpayers could be saddled with some, if not all, of the payments for an island the Shandses’ attorneys say should be worth millions, on top of decades of legal fees. It’s a hefty bill to pay, and one that provides a real-world outcome after a year full of debate throughout the Keys about the true threat of looming takings cases.
In dozens of county workshops, commission meetings and surveys aiming to inform a request to the Legislature for additional building rights, residents and advocacy groups opposing new construction in the island chain have called the threat of takings cases “overblown.” Meanwhile, those in favor of adding building rights have framed the financial threat of takings cases as a binary choice: write a permit, or write a check.
