New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

N.J.S.A. 20:3-26(b), part of the Eminent Domain Act of 1971, provides:

       
“If the court renders final judgment that the condemnor cannot acquire the real property by condemnation or, if the condemnation action is abandoned by the condemnor, then the court shall award the owner of any right, or title to, or interest in such real property, such sum as will reimbursed such owner for his reasonable costs, disbursements and expenses actually incurred, including reasonable attorney, appraisal and engineering fees.”

   
Despite the clear language in the statute, not all courts have allowed property owners to recover legal fees when a condemning authority decides to abandoned a condemnation case.  For example, a case decided in 1999 denied a request for allowance of legal fees and expenses in a condemnation action where Essex County filed a condemnation complaint, but abandoned the lawsuit before the commissioners held their hearing.  Essex County v. RAR Development, 323 N.J.Super. 505 (Law Div. 1999).  The Essex County court relied upon a case from 1941 which held that a property owner’s right to receive attorneys was “conditioned” upon the public entity abandoning the condemnation action within 20 days after the filing of the commissioners’ report or jury’s verdict.  Since the case in question did not reach the commissioners’ hearing stage, the court denied the request for legal fees and expenses.

   
On December 24, 2007, the Appellate Division of the Superior Court of New Jersey decided a case which rejected the Essex County decision.  West Orange Township v. 769 Associates, LLC, ___ N.J.Super. ___, 2007 WL 4472101 (N.J.Super.A.D. 2007).   In 769 Associates, the Appellate Division found that the entitlement to reimbursement of legal fees and expenses is triggered upon the filing of the condemnation action.  Once the complaint is filed, any abandoned entitles the property owner to reimbursement of legal fees and expenses.  In rejecting the Essex County decision, the Appellate Division found that the trial court in Essex County erred when it relied upon a decision interpreting a statute which had been repealed.  The Appellate Division continued by declaring:

      
 “Here, by contrast, there is simply not textual support in N.J.S.A. 20:3-26(b) for such a limitation.  Under our current law, the only condition that must be satisfied to trigger the right of reimbursement is the abandonment of a condemnation action by the public entity.  The point in time in which this occurs is not a relevant consideration in determining whether reimbursement is warranted.”

   
The Appellate Division also held that legal fees and expenses incurred prior to the filing of the condemnation complaint cannot be recovered by the property owner.  This is somewhat problematic because often times a property owner retains counsel to negotiate with the condemning authority before the condemnation complaint is filed.
  
   
769 Associates is an important case for two reasons.  First, is it seems to over-rule Essex County, although there is an argument that the Appellate Division’s discussion of the Essex County case is dicta and not binding on lower courts.  Second, as set forth in the blog posting discussing the Township of Pemberton v. Berardi decision,  a condemnor does not have to commit to the taking until many months into the case.  Now, as a result of the 769 Associates case, property owners have some recourse if a condemnation case is abandoned by the condemning authority late in the case.

• Print
• Comments
• Trackbacks

Timothy P. Duggan, Chair and Shareholder of Stark & Stark's Condemnation group, was the guest commentator on GlobeSt.com's website in response to the question, What are your views on eminent domain? GlobeSt.com is a real estate website providing news alerts, discussion forums and real estate related resources to cities across the nation.

In his response, Mr. Duggan discusses the various issues that make eminent domain such a controversial subject, including, the different types of redevelopment, relocation benefits, and the need for adequate compensation.

You can read Mr. Duggan's full response here.

• Print
• Comments
• Trackbacks

The Third Annual Eminent Domain in New Jersey Conference, presented by CLE International and Stark & Stark, will be held October 15 and 16, 2007 at the Nassau Inn Princeton, New Jersey. This is an educational two-day seminar focusing on finding a balance between property owner's rights and condemning authorities.

The seminar will provide a case law update and seminars focusing on: representing municipalities, legal challenges one will face during the redevelopment process, updates on redevelopment legislation and a discussion on condemning residential areas vs. commercial/retail/industrial areas.

The conference will also feature a mock trial with the Honorable Douglas J. Wolfso, Esq. and several New Jersey Real Estate attorneys, including Stark & Stark Shareholder, Timothy Duggan.

Mr. Duggan and Vincent Mangini, both Shareholders and member of Stark & Stark's Condemnation and Real Estate Groups, will present the case law update at this year's seminar.

You can log onto CLE's seminar page for registration information and a downloadable brochure of the conference here.

• Print
• Comments
• Trackbacks

Timothy P. Duggan, Shareholder and member of Stark & Stark's Condemnation Group, was quoted in Monday's Courier News, in the article, Somerville seizes supermarket's lease.

Mr. Duggan commented on Pathmark's potential option of filing an appeal in court in order to save the property, and states that while it is difficult to get a stay granted, several recent court decisions have favored property owners.

You can read the full article here.

• Print
• Comments
• Trackbacks

Public Advocate Ronald K. Chen released a follow up report on May 29, 2007, addressing what he perceives as abuses in the use of eminent domain to acquire property for redevelopment projects.  After setting forth a synopsis of specific examples of eminent domain abuse arising in cases decided by the New Jersey courts, the Public Advocate suggests several remedies which seemed to be directed towards his critics and the legislators considering amending the existing laws.  However, are  Public Advocate Ronald J. Chen and the two legislators who sponsored bills aimed at reforming the law (Senator Ronald Rice (D-Essex) and Assemblyman John Burzichelli (D-Gloucester)) on a course to reach a proper balance in the law?  Possibly, but more work is needed.

    What is at stake is the right to own property on one hand, and the need to encourage and complete redevelopment plans in truly blighted areas.  When used properly, redevelopment can turn a blighted and unsafe area into a thriving and safe neighborhood.  However, when abused, properties which have some deferred maintenance issues (i.e. chipped paint) are being taken to make room for higher end homes and businesses, changes need to be made.  The proper balance can be achieved by focusing on the following issues.

    First, the issue of what constitutes “blight” must be addressed.  The New Jersey Constitution limits the taking of private property for private redevelopment to blighted properties only. Some believe that the vague definitions in the Local Redevelopment and Housing Law have greatly expanded this limitation and would allow virtually all of New Jersey to be placed in an “area in need of redevelopment” since a land planner could most likely find a problem in every home and conclude that, based upon today’s design and land use standards, the property in not fully productive or fully utilized.  The proper balance can be achieved by changing the definition of an “area in need of redevelopment” to one that is closer to the constitutional requirement of blight.

    Second, all public notices should be use plain language and delivered to homeowners, not just published in the local newspaper.  The public must be told that their local government is considering action that may involve the condemnation of their homes or business.  For a person to understand the type of notice used by most towns seeking to designate an area in need of redevelopment, he or she would have to enroll in law school and take several classes in land use law.  The law needs to be changed so that property owners receive notice in a manner designed to allow them to seek professional advice on how to proceed.

    Third, make it clear that the condemning authority must prove, at every stage, that the property is blighted.  All hearings need to be open to the public with a detailed explanation of what exactly will happen if a redevelopment plan is approved.  Each step must be explained, with an opportunity to ask questions and present proofs.  A detailed record needs to be made in order to allow for proper judicial review when the time comes.

    Finally, compensation needs to be fair. Under the present law, compensation is often inadequate and the relocation benefits minimal, at best.  Property owners should not be given a windfall, but need to be made whole in order to meet the requirement of just compensation.  It is the “making whole” that needs to be addressed. Much of the resistence to the legitimate exercise of eminent domain would be eliminated if property owners felt adequately compensated and relocation costs covered.

    In regards to residential property owners, they must be paid enough money to find  replacement housing in a safe and comparable neighborhood.  In some circumstances, replacement housing may cost more than the property being taken.  Under existing law, the measure of damages is generally the fair market value of the property being taken.  In many cases, the fair market value standard works.  However, when replacement housing cannot be purchased with the fair market value taking proceeds, a property owner must have some other recourse in order to be justly compensated.

    As for businesses, New Jersey law only requires a condemning authority to compensate a property owner for the real estate, not the business itself.  The only requirement is to relocate the business.  Often times, a business is dependent upon a certain location (i.e. down town location) and cannot afford a rent increase.  If there are no affordable business locations available, the business may be forced to close. The law needs to be reformed to take into consideration rent differentials and allow business owners an opportunity to prove that additional compensation is needed to allow them to survive.

    Redevelopment is a necessary planning tool for many parts of New Jersey.  We have neighborhoods and cities that need to be revived for the long-term health of our State and its residents.  However, eminent domain cannot be used simply because a town decides it prefers a more upscale neighborhood or needs additional tax ratables.  The proper balance will allow blighted areas to be redeveloped, but stop the abusive practice detrimental to the rights of property owners.   

• Print
• Comments
• Trackbacks

On June 13, 2007, the New Jersey Supreme Court reversed a lower court ruling which upheld the designation of a parcel of property as being in “need of redevelopment.” Gallenthin Realty Development v. Paulsboro (A-51-2006 - decided June 13, 2007).  The property in question consists of approximately 63 acres of undeveloped open space.  In the past, the property owner used the property to receive dredge deposits from a nearby creek, a use that the property owner believed would continue on a sporadic basis in the future.  Also, the property owner cultivated wild-growing weed which was sold for animal feed.  However, the Township set its eyes on the property and decided it was necessary for a larger redevelopment project.  To take the property, the Township had to first have it designated as an area in need of redevelopment.  Once designated, the Township could invoke its power of eminent domain.  But how could open space that had been identified by the New Jersey Department of Environmental Protection as “protected wetlands” ever meet the definition of an area in need of redevelopment?  Easy - use the vague criteria of “not fully productive property” under the Local Redevelopment and Housing Law and argue that there are many more productive uses for the property that will benefit the public in general. Although the trial court and appellate division condoned this approach, the New Jersey Supreme Court did not.

The New Jersey Supreme Court started its review by taking us back to the Blighted Areas Clause of the New Jersey Constitution which confines the taking of private property for private redevelopment to those areas considered “blighted.”  When the New Jersey Constitution was amended in 1947 to add the Blighted Areas Clause, the New Jersey Legislature was concerned that certain sections of older cities had fallen in value and become “blighted” or “depressed.”  To facilitate investment in blighted areas, governing bodies needed the ability to assemble blighted properties in order to attract private investment in the hopes of reviving a depressed area.  This is a sound policy.  Years later, the legislature adopted the Local Redevelopment and Housing Law which adopted the concept of an “area in need of redevelopment” which, for all intents and purposes, was an expanded definition of blight.

In this case, the fact that the property was not fully productive, standing alone, clearly cannot be the basis for a taking under the limitations imposed by the Blighted Areas Clause of the New Jersey Constitution.  The New Jersey Supreme Court confirmed that to meet the requirements of the New Jersey Constitution, more must be shown.  Evidence must be presented as to why the property is not fully productive and that evidenced must be viewed in light of the other criteria set for in the Local Redevelopment and Housing Law.

Equally important is the New Jersey Supreme Court’s statement the a municipality must present “substantial evidence” to support its case.   A record must be created with facts and expert opinions that are more than a cursory review of the property and recitation of the statutory criteria. Trial courts are reminded that in order for a municipality to get the decision making deference it seeks, it must first come forward with substantial evidence to support its designation of an area in need of redevelopment.

This decision does not change the law - it merely enforces the law.  The Blighted Areas Clause of the New Jersey Constitution has been around for over 50 years and the New Jersey Supreme Court confirmed its limitation on redevelopment projects.  The Supreme Court’s decision re-enforces the growing trend of striking designations that resulted from net opinion reports and cursory review of properties.  More important, the decision will have no impact on legitimate (constitutional)  redevelopment projects.  Towns that do their homework and hire qualified planners will still be able to redevelop blighted and depressed parts of town as envisioned by the drafters of the Blighted Areas Clause of the New Jersey Constitution.

• Print
• Comments
• Trackbacks

The New Jersey Turnpike will be widened between Interchanges 6 and 9, including widening the existing roadway from three to six lanes in each direction between 8A in Monroe Twp. and 6 in Mansfield Twp. The Authority also intends to widen the Garden State Parkway between mileposts 30 and 80. Other road projects are occurring on local, county and state roads. Many road-widening projects require that some private property be purchased or condemned under the power of eminent domain.

As a general rule, a property owner is entitled to just compensation for the value of property taken through eminent domain. If the entire property is acquired, the general measure of compensation is fair market value. However, the matter becomes complicated when only a portion is taken in what is referred to as a “partial taking.”

In a partial-taking, the owner is entitled to be paid for the value of the property taken and any damage to the property they retain, referred to as the “remainder.” Partial takings are generally more complicated than full taking since they require more thorough analysis of the impact on the remainder which may have lost parking, access, highway views and certain future land use rights.

However, what happens when the road widening causes the highway to be so close to the buildings that the owner is forced to close its business and move, or is being so disrupted that operating the business is problematic? Can the property owner force the state to acquire the balance of the property to have a complete taking? The answer depends on whether the value of the remaining property is essentially zero.

The legislature passed a law in 1971 stating, “if as a result of a partial taking of property, the property remaining consists of a parcel or parcels of land having little or no economic value, the condemnor, in its own discretion or at the request of the condemnee, shall acquire the entire partial.” N.J.S.A. 20:3-37. The property left with little or no economic value is commonly referred to as a “uneconomic remnant.” Although at first read the statute seems straightforward, the words “little or no economic value” have caused litigation and heartaches.

Case law interpreting the statute in New Jersey and other states focuses on the economic value of the remainder, not the present use of the property. If the owner can no longer use the property for its present use, they must still prove that the property cannot be put to some other use that has value to force the State to take the entire property.

For example, a New Jersey Court failed to require the State to condemn an entire parcel being utilized as a church when a highway was expanded. After the widening, the highway was 41 feet from the front door of the church and the right of way extended to the lower steps of the entrance. At trial, the pastor testified that the church was unable to conduct services as a result. Although the court did not dispute that the church was deprived of the use of its building, the church failed to show that the property was “unfit for all uses.” As a result, the church was only entitled to the value of any damage it could prove to the property it retained.

In another case, the court did require the State to acquire an entire parcel when it sought to expand a road. In that case, part of the building was taken and what was left could not be put to any economic use. In addition, the remainder lands saddled the property owner with a building that had to be demolished and potentially could cause safety hazards.

It is very difficult to prove that a remainder has little or no economic value. When an owner’s existing use is no longer viable, the property may still have some economic value, thereby precluding a complete taking. This is particularly disturbing when an owner is required to move his business as a result of the taking, but is saddled with a property that no longer meets his needs. Although the condemning authority may be required to pay relocation expenses, the condemning authority is not required to pay for loss of business.

Uneconomic remnants cases are very difficult to win. As a result, it is important for property owners to perform a thorough investigation of every possible way the remainder may have been damaged by the taking in order to be made whole. If an owner does argue the remainder has little or no value, the property must have strong testimony from a qualified appraiser.

You can read the full text of this article printed in the June 2007 edition of Real Estate New Jersey here.

• Print
• Comments
• Trackbacks

Timothy Duggan, Chair and Shareholder in Stark & Stark's Real Estate, and Condemnation  groups, authored the article Balancing Redevelopment and Property-Owner Rights in the recent issue of NJ Biz Magazine.

You can read the full article here.

• Print
• Comments
• Trackbacks

Timothy Duggan, a Chair of the Condemnation group, will be a presenter at Eminent Domain in New Jersey seminar on April 17, 2007 at the Hyatt Regency New Brunswick in New Brunswick, New Jersey.

The seminar will address:

• Case Law Developments
• The State of Eminent Domain Legislative Reform
• Environmental Issues
• Valuation Issues
• Planners in the Process
• Relocation Assistance Issues
• The Ethics of Redevelopment

You can download the brochure here.

• Print
• Comments
• Trackbacks

On January 4, 2007, the Appellate Division affirmed a case which awarded $2 million in relocation asistance for a hot dog manufacturer forced to move its business as a result of a condemnation case.

In New Jersey, a business operator (owner or tenant) is entitled to relocation assistance if the business is required to be moved as a result of an eminent domain case. However, under New Jersey law, the mandated relocation benefits are skimpy at best and are presently under review as part of the pending legislation seeking eminent domain reform. As evidenced by a recent Appellate Division decision, business owners must be very diligent in order to maximize their potential recovery of relocation benefits. Jersey City School District v. Marathon Enterprises, docket no. A-6188-03T5, Jan. 4, 2007).

Marathon Enterprises owned a building which was acquired by the Jersey City School District to build a school. After a trial, the jury awarded Marathon $5.2 million as just compensation for the building. Marathon also sought relocation benefits arising from the relocation of machinery and equipment to its new facility. After a three day trial before an administrative law judge, the court awarded Marathon $2,039,265 in relocation benefits. The New Jersey Department of Community Affairs adopted the decision and the Appellate Division affirmed. Why did Marathon receive so much money for relocation benefits? The answer is:

1.  The business involved a meat processing operation (Sabrett hot dogs) which was subject to strict regulation by the United States Department of Agriculture (USDA). The USDA regulations require raw and cook meat to be kept separate, the plant must be cleaned and sanitized daily, and the floors must have drains and be slanted to allow for proper water flow . The administrative law judge’s opinion will tell you everything you always wanted to know (or not know) about hot dogs! As a result of the unique operation, it was not a simple move. 

2.  Neither the school district nor property owner could find a suitable place to relocate the business in the surrounding towns. Marathon decided to buy a building adjacent to its operation in the Bronx, New York, and renovate the building to make it USDA-compliant and accommodate the equipment being relocated from Jersey City. The total cost of the land acquisition and renovations to the building was $11 million. 

3.  Among some of the big ticket items in the renovations of the building were (a) lowering the floor several feet, (b) new electrical service necessary for the equipment being moved, and (c) modifying the building to keep the raw meat process separate from the cooked meat process. The attached decision goes into detail on what was done to the building. Since the USDA has onerous requirements for meat processing operations, the cost of the new facility was exorbitant.

 4.  Most important, Marathon had outstanding documentation to prove its case. During the trial, Marathon was able to separately identify which expenses were directly related to machinery and equipment being moved to the new location. For example, invoices for electrical work were broken down by area of the plant which enable Marathon’s witnesses to relate the invoice to specific equipment (ie. machine being relocated or a new piece of machinery).

This case is important to both condemning authorities and property owners. Condemning authorities must understand the nature of a business to be relocated and investigate any unique needs of the business. The time to do this is before the Workable Relocation Assistance Plan (WRAP) is completed. Properties owners must prepare their case while renovations are being made and ask their contractors to provide detailed invoices for work which may be recoverable under New Jersey law.

Read the decision here.

Technorati Tags: New Jersey : Redevelopment : Condemnation

 

• Print
• Comments
• Trackbacks