A-3615 codifies Gallenthin Realty Development Inc. v. Paulsboro, 191 N.J. 344 (2007), in which the New Jersey Supreme Court scrutinized the then-common use of municipalities in New Jersey of a standard in the Local Redevelopment and Housing Law, N.J.SA. 40A:12A-5(e) — a “stagnant or not fully productive condition”  to justify that an area was blighted, or “in need of redevelopment”.   The legislation also codifies Harrison Redevelopment Agency v. DeRose, 398 N.J. Super. 361 (App. Div. 2008), in which an appeals court held adequate written notice of condemnation for redevelopment needs to be provided during the redevelopment planning process.

The other significant provision in this legislation  is that local governments will be given an option as to whether they will be empowered to use eminent domain to acquire properties in redevelopment areas.  If signed into law, this bill could help to spur redevelopment in certain areas without having to threaten the property rights of the existing owners.

The New Jersey Law Journal reported on the bill today in this article.  We also covered some earlier committee activity on this bill in this NJ Condemnation Law blog post.

Stay tuned for more on this legislative development.

McKirdy & Riskin’s Rich DeAngelis, Ed McKirdy and Tony DellaPelle served as counsel to the property owners in the DeRose case referenced above.   In addition, DellaPelle serves on the Redevelopment Committee of the New Jersey Builders’ Association, which was a proponent of the current legislation.

While this case was tried to the jury and affirmed on appeal long before Super Storm Sandy struck her devastating blow on the mid-Atlantic coastline, the argument did not appear to be limited to the “record below” as is standard operating procedure for Appellate tribunals in New Jersey.

The property owners’ attorney argued that there was no evidence in the appellate record that there was any “special benefit” that could be attributed to the presence or absence of dunes recognized by the market in transactions involving comparable beach-front property.  Buyers and sellers of property, of course, pay a premium for beach-front property and the market data clearly evidences such premiums.  But again, there was no evidence that a dune, per se, had any effect on market value.  At trial, there was, of course, evidence that values would be impacted down-ward when the property owners lost their view of the ocean, and their former private beach would be then become accessible by the general public.

The reason why the trial court ruled that the award of just compensation should not be tainted with speculative evidence of the value of a purported “special benefit” was because the alleged benefit was not special or unique to the owner – the dunes were designed to protect the entire island from storm surges – a quintessential general benefit.

We’ll post up the Supreme Court’s opinion when available, and a link to the argument itself will soon be on line.

Related articles

• NJ Supreme Court Wades Into Dune Debate (wnyc.org)
• Dune-protection appeal goes to N.J. high court (philly.com)
• NJ Supreme Court hears beach dune case (newsday.com)
• State officials keeping close watch on Harvey Cedars dune case before Supreme Court (nj.com)
• Mantoloking (NJ) Contemplates Use of Eminent Domain for Dune Easements (njcondemnationlaw.com)

In connection with the pending Tax Court actions, the City obtained an appraisal report from its expert on March 12, 2009 which concluded that the “retrospective market value of [Beach Creek's] property for 2006-2009 tax years” was $4.6 million.  The City provided its appraisal to Beach Creek in discovery and filed it with the Tax Court.  As of March 2009, the City had information that the full and fair value of the property in 2007 and 2008 was nearly $10 million lower than the assessed value for those years, and the City thereafter assessed the property at $4.6 million for 2010.

At trial before the Tax Court, Beach Creek’s expert separately valued the different uses on the property after determining that the most reliable appraisal would be one reached by using the valuation method most appropriate for each of the property’s several components.  Beach Creek’s expert used the income approach in valuing the marina and the land underlying the Towers, the cost approach to value the marina services building, and the sales comparison approach to value the restaurant. The value he assigned to the entire property for 2007 and 2008 is the total of the separate values of the components in each of those years.

At the conclusion of Beach Creek’s case, the Tax Court granted the City’s motion to dismiss concluding that Beach Creek had not produced evidence sufficiently definite, positive and certain in quality and quantity to overcome the presumption of validity that attaches to the assessment under New Jersey law. R. 4:37-2(b); Pantasote Co. v. City of Passaic, 100 N.J. 408, 412-14 (1985).  The court first determined that the hybrid approach used by Beach Creek’s expert of “taking one approach for each of the three or four aspects of the property and then somehow just adding them together and coming up to value,” was unprecedented.  Next, the court found Beach Creek’s expert’s application of the cost and comparable sales approaches flawed, and therefore the court had no basis for assigning a true value to the property based on Beach Creek’s evidence.

On appeal, the Appellate Division found Beach Creek’s evidence was adequate to withstand the City’s motion. As to a lack of precedent for the hybrid valuation approach, the Appellate Division cited to Livingston Mall Corp. v. Livingston Twp., 15 N.J. Tax 505, 508-09 (Tax 1996), where the court was faced with valuing a mall that included three anchor department stores and non-anchor mall stores that were leased. The Livingston Mall court concluded that the income approach failed to capture the value of the anchor stores because of a lack of data, and therefore it would be appropriate to use the cost approach for the anchor stores, and the income approach for the non-anchor stores which were leased.

Finally, the Appellate Division found the City’s moving for dismissal based on Beach Creek’s failure to overcome the presumption of validity raised a serious question about the City’s performance of its obligation under F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426 (1985), to “turn square corners” in litigation.  The City, intending to rely on the $4.6 million appraisal at trial, was in possession of evidence that the 2007 and 2008 assessments were grossly erroneous. The Appellate Division found the City’s actions were inconsistent with its obligation to “comport itself with compunction and integrity.”  Thus, the Appellate Division rejected the court’s conclusion that Beach Creek failed to overcome the presumption of the validity afforded to the quantum of these $14.3 million assessments for 2007 and 2008.  The undisputed evidence in the City’s report established that the $14.3 million assessments for 2007 and 2008 were well off the $4.6 million report value, and that sufficient to overcome any presumption that the assessments’ quantum was valid.

As outlined in F.M.C. Stores, the square corners doctrine requires that no government action be taken in litigation with the aim of gaining an unfair advantage over a private citizen.  Thus, the government may not “conduct itself so as to achieve or preserve any kind of bargaining or litigational advantage” over a member of the public.  As the F.M.C. Court observed, this means that “government may have to forego the freedom of action that private citizens may employ in dealing with one another.”Litigation strategies and actions that may be expected in litigation between two private parties will be scrutinized when taken on behalf of a government agency in litigation with a provide citizen.

The property owner in Livingston Mall Corp. v. Livingston Twp., 15 N.J. Tax 505, 508-09 (Tax 1996) was represented by Thomas Olson, Esq. of McKirdy & Riskin, P.A.

A copy of the Tax Court’s opinion in Beach Creek Marina v. North Wildwood City may be found here.

For more blog posts on appraisal report issues, please see the following:

Experts’ Opinions Accepted Over Town’s Objections

Real Estate Tax Appeal Evidence: Admissible in Eminent Domain Case?

Expert’s “Gut Feeling” on Costs Survives Dismissal Claim

Court Disapproves Averaging of Comparable Sales

The State had offered $1.9 million for the acquisition, but the church argued that the land was worth more than ten times that amount when taking into consideration the relocation costs (which apparently were not included in the offer amount). See Courier Post Online story.  Therefore the church challenged the NJDOT’s right to take, which was initially affirmed by the Appellate Division in October of 2012.

Photo Courtesy –   CHRIS LaCHALL/COURIER-POST.

Absent making application for certiorari to the United States Supreme Court, the case will proceed to a valuation proceeding where the property owner will have an opportunity to present its theories to a panel of Condemnation Commissioners and then to a Camden County Jury.  The second part of the process is designed to protect the property owners constitutional right to just compensation.

We’ll keep you posted.

Related articles

• NJ’s top court won’t consider cemetery case (newsday.com)

Photo courtesy Andrew Mills/Star Ledger.

You may remember when we blogged about the proposed easement that the town asked all of its beachfront residents to sign back in February.  Well, apparently not everyone was keen on donating their private property for beach/dune replenishment.

We’ll keep you posted.

Related articles

• Eminent Domain May Be Used in Mantoloking, N.J., for Beach Replenishment (insurancejournal.com)
• Mantoloking Plans To Use Eminent Domain To Get Land From Oceanfront Homeowners (newyork.cbslocal.com)
• Mantoloking may take land for beach replenishment (newsday.com)
• Dunes vs. property rights in storm-battered NJ (newsday.com)
• Mantoloking prepares to use eminent domain to turn homeowners’ property into dunes (nj.com)

At the close of proofs, Belleville moved to dismiss Route 21’s complaints pursuant to R. 4:37-2 on the grounds that Route 21’s experts each provided an impermissible “net” opinion.  Specifically, Belleville argued that Route 21’s valuation expert was unfamiliar with his sales, his adjustments to the sales was too great and rendered the information meaningless, and his reliance on the environmental experts opinion rendered his opinion a net opinion because the environmental report was a net opinion.

The Tax Court denied the motion. First, the court found the opinion was not flawed and inadmissible when some particular facts or conditions were not accounted for there were other substantive bases of support therein.  Similarly, the court noted that excessive adjustments went to the question of the expert’s credibility, and the weight to be given such adjustments depended on the facts and reasons supporting the appraiser’s conclusions.  Finally, the court found that Route 21’s environmental expert supported the conclusions in his report, and adequately explained the facts supporting those conclusions.

After reviewing all of the evidence presented to the court, the subject property’s fair market value as impaired was determined for each of the tax years under appeal, and an assessment was established by applying the Chapter 123 ratio as required.

A copy of the Tax Court’s opinion in Route 21 Associates v. Township of Belleville may be found here.

For more blog posts on environmental issues and appraisal report issues, please see the following:

“Special” Valuation Rules N/A To Environmentally Remediated Property

City of Elizabeth Ordered to Pay Motel Owner from Environmental Escrow

Environmental Impacts in Real Estate Valuation Litigation

Expert’s “Gut Feeling” on Costs Survives Dismissal Claim

Court Disapproves Averaging of Comparable Sales

The parties have now submitted their briefs on remand.  Our Owners’ Counsel colleague, Robert H. Thomas, Esq. has them available on his blog. Click here for the property owner’s brief, and here for the government’s brief.   The government argues that it “did not take a flowage easement” and “at most, there was a modest, unforeseeable, and incremental increase in flooding.” (Db1).  The property owner argues that the Corp’s induced flooding resulted in “catastrophic mortality” of several different tree species. (Pb8).

We’ll keep you posted.

Related articles

• Flood Control and Takings: Arkansas Game & Fish Commission v. United States (aquadoc.typepad.com)
• Loophole would allow landowners to sue Corps of Engineers over Missouri River flood losses (kansascity.com)
• Army Corps of Engineers braces for flood fight (fox4kc.com)

Photo courtesy of Associated Press

Owners of property along the Jersey shore continue to be battered, this time by their own elected officials.  The New Jersey Senate recently introduced S-2618, which provides:

“Just compensation for an easement over a portion of beachfront property condemned for the purpose of dune construction or beach replenishment shall include consideration of the increase in value to the entire property due to the added safety and property protection provided by the dune or replenished beach. Any additional rights of the public to access property held in the public trust arising as a result of the easement, or the dune construction or beach replenishment, shall not be considered to cause a diminution in the value of the entire property.”

The State Assembly has a companion bill mirroring the above - A-3896 - introduced on March 7, 2013.  Similar legislation has also been introduced in the State Senate and Assembly by other legislators, S-2599 and A-3889.  These bills are awaiting legislative committee review.

So we all understand the jumping off point, “just compensation” is a constitutional term and is found in the New Jersey Constitution (N.J. Const. Art. 1, Par. 20) and the U.S. Constitution (5th Amend.)  The text of the New Jersey Constitution reads: “Private Property shall not be taken for public use without just compensation.”

Every court in the history of the United States has interpreted the Fifth Amendment as limiting government’s authority to take private property.  Within the clause there are two limitations expressed.

First, the taking must be for a “public use.”  Second, government must pay “just compensation”.

While most, if not all, may agree that government taking of private property in order to replenish New Jersey beaches damaged by Superstorm Sandy would satisfy the “public use” criteria of the Constitution, legislation like the bills mentioned above that attempt to legislatively satisfy the “just compensation” part of the analysis appears to be constitutionally infirm for several reasons.

First, it would violate the fundamental concept that the just compensation is to be determined by judicial processes, not by legislative mandate.  United States v. Cors, 337 U.S. 325 (1949);   Monongahela Navigation Co. v. United States, 148 U. S. 312  (1893).   In other words, “there is no precise and inflexible rule for the assessment of just compensation.” State v. Gallant, 42 N.J. 583 (1963).

Second, the proposed legislation might allow government to acquire private property “without just compensation” in violation of the Constitution.  If a statute mandates a particular valuation rule which fails to afford “just compensation”, it is contrary to the constitutional mandate.

Third,  the proposed statute seeks to preemptively decide the issues pending before the New Jersey Supreme Court is a case known as Borough of Harvey Cedars v. Karan, 425 N.J. Super. 155 (App. Div. 2012).  The issue in Karan is whether the decision of an Ocean County jury to award a property owner “just compensation” for the taking of their private property should be affirmed.  The government has appealed the award of just compensation arguing that the property owners should not receive more than $1 dollar for the taking of their private beachfront property because the government put a public dune on the part taken that benefits the entire beach-going public, as well as the inland residences and businesses occupying the barrier island.  The trial court and the Appellate Division rejected the government’s argument, and the Supreme Court decided to take the case before Superstorm Sandy struck.

Finally, any legislation which seeks to treat some people or classes of people differently than others may itself violate the Equal Protection Clause contained in the 14th Amendment to the U.S. Constitution.

Now, in the aftermath of a devastating natural disaster, government seeks to remedy the devastation – that it alone could have prevented – by making private property owners the scapegoat.

But the property owners are not to blame. Let’s not forget that the Army Corps warned of these very dangers decades ago, and government failed to prepare use for the coming storms.  Let’s not let government attempt to foist its responsibility on the narrow shoulders of a small group of property owners.

For more on these issues, see our prior blog postings:

In the Wake of a Superstorm the Debate Continues – Who Should Pay for the Dunes?

Rebuilding After Sandy: Government Assistance at Odds With Private Property Rights

Related articles

• More on Dune Replenishment – Taking Private Property Without Just Compensation (njcondemnationlaw.com)
• Dunes Vs. Property Rights in Storm-Battered NJ (abcnews.go.com)
• Two N.J. Shore towns stand divided over new seawall (nj.com)

The Senate Community and Urban Affairs Committee voted 5-0 for the bill, which is sponsored by committee chairman Jeff Van Drew, D-Cape May, and Sen. Ronald Rice, D-Essex.  It shares some of the provisions which had been included in earlier legislative efforts by Senator Rice that failed to pass before the full Senate two years ago.

S-2447 codifies Gallenthin Realty Development Inc. v. Paulsboro, 191 N.J. 344 (2007), in which the New Jersey Supreme Court held that a blight determination requires a finding of a “deterioration or stagnation that has a decadent effect on surrounding property,” which could not ordinarily be applied to a large tract of vacant land.  The Gallenthin scrutinized the then-common use of municipalities in New Jersey of a standard in the Local Redevelopment and Housing Law, N.J.SA. 40A:12A-5(e) — a “stagnant or not fully productive condition”  to justify that an area was blighted, or “in need of redevelopment”.

S-2447 also codifies Harrison Redevelopment Agency v. DeRose, 398 N.J. Super. 361 (App. Div. 2008), in which an appeals court held adequate written notice of condemnation for redevelopment needs to be provided during the redevelopment planning process.

The other significant provision in the bill, and its companion bill in the State Assembly (A-3615),   is that local governments will be given an option as to whether they will be empowered to use eminent domain to acquire properties in redevelopment areas.

“The bill says municipalities can go with Option A or Option B,” says Michael Cerra, the senior legislative analyst with the New Jersey State League of Municipalities.

If enacted, this bill could help to spur redevelopment in certain areas without having to threaten the property rights of the existing owners.

The companion bill in the Assembly is scheduled for consideration in the Assembly Economic Development and Commerce Committee today.

PolitickerNJ reported on the bill earlier this week in this article.

Stay tuned for more on this legislative development.

Related articles

• Wyoming House approves eminent domain bill (trib.com)
• Eminent domain bill passes the N.C. House (blueridgenow.com)
• Wyo. House Set To Vote On Eminent Domain Bill (k2radio.com)

A full copy of the Study Report is available on the City’s website.

Photo courtesy Google maps.

As noted in a recent article by Amanda Palasciano of the Hudson Reporter, the next step in the process is for the Planning Board to hold public hearings on the proposed redevelopment designation.  Thereafter, the planning board will make a recommendation to the governing body on whether the entire area (or a portion thereof) is in need of redevelopment.   The governing body then would then adopt a resolution acting on the planning board’s recommendation.

Notably, if the area is blighted (i.e. designated in need of redevelopment) and a redevelopment plan is subsequently adopted, the City would be able to use eminent domain to take private property within the designated area.

The hearing dates should be up on the City website shortly.

Related articles

• After delays, City Council OKs north Omaha redevelopment project (omaha.com)
• Redevelopment spending pegged at $143m (utsandiego.com)
• End of Redevelopment leaves scraps for the ‘hood (utsandiego.com)
• Battlelines drawn over redevelopment of Cherry Creek North (denverpost.com)
• Hoboken Mayor Proposes ‘Universal Solution’ To Flooding (npr.org)
• Bayview Yards redevelopment plans get committee approval (metronews.ca)