A New Jersey appellate court recently rejected a property owner’s claim that it was deprived of just compensation because the jury verdict reflected a discount for the cost of environmental remediation on its property.  New Jersey Schools Construction Corporation v. Warminster Investments Corporation, et als., Docket No. A-5319-07T15319-07T1.  Warminster, the property owner, argued that the jury undervalued its property because the trial judge permitted the jury to consider the cost of lead and asbestos removal, excluded rental value evidence for cell towers on the property, and permitted the condemnor’s expert to testify that Warminster would not receive a parking variance for its proposed use.  The Appellate Division rejected Warminster’s arguments, affirmed the trial court’s decision, and upheld the jury verdict.

 Warminster’s vacant, four-story, industrial building was a pre-existing, non-conforming use in a residential zone in the Town of West New York, and several cellular phone companies leased space on the building for their cell towers.  The condemnor planned to erect a public school on the property.  Warminster argued that the highest and best use of the property was a hypothetical 90-unit residential building and a parking variance, while the condemnor advocated a 75-unit building.

 Warminster’s three experts conceded at trial that they had not considered lead and asbestos removal costs, while NJSCC’s expert testified, over Warminster’s objection, that remediation would cost $1,106,230.  Warminster argued on appeal that the testimony should have been barred under Housing Auth. of New Brunswick v. Suydam Investors, LLC, 177 N.J. 2, 23-24 (2003), because the property should be valued as if remediated.  The Appellate Division disagreed by noting that asbestos and lead were contaminants and not a discharge.  The Appellate Division analogized the situation to the removal of tires and other garbage from the site, rather than a substance like oil that had been discharged into the soil.  Thus, the “double-take” at issue in Suydam was not implicated here.

 The trial judge excluded evidence of the cell tower leases and testimony related to their value because Warminster’s experts had failed to address a municipal ordinance which ordinance prohibited cell towers in residential districts unless they were located on municipal property, but did recognize the existence of towers like Warminster’s that pre-existed the ordinance.  These were permitted to continue under the ordinance “absent any enlargement or structural modification or the addition of any structure. . . .”  Reconstruction required a conditional use permit or variance, and structures not on municipal property were considered principal, not accessory, uses.  The Appellate Division agreed with the trial judge that Warminster’s expert planner lacked knowledge of the ordinance and therefore had no factual basis to testify about the likelihood of a variance being granted.  Further, Warminster’s appraiser had relied on the planner’s report which assumed the cell tower was a permitted use, and was therefore based on unsupported conclusions.

 Warminster additionally argued the trial court should have barred NJSCC’s testimony that approval of Warminster’s 90-unit project as speculative, although Warminster’s experts conceded that Warminster’s 2004 plan for 75-units had been criticized by Town officials for violating parking requirements.  The Appellate Division found the jury had sufficient evidence to conclude that Warminster’s proposal was speculative and unproven, while NJSCC’s proposal was more probable and feasible.

 The Appellate Division’s holding may further impact the way properties are valued during condemnation proceedings.  An article from the New Jersey Law Journal by Thomas M. Olson and Anthony F. Della Pelle from the law firm McKirdy & Riskin, PA on valuation considerations following the Suydam case and its progeny can be found in the New Jersey Condemnation Law Blog here.

The author wishes to acknowledge the assistance of Cory K. Kestner, Esq., of McKirdy & Riskin, PA, in the preparation of this article.

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