In a two-judge unpublished opinion (full text here), a New Jersey appeals court reviewed a property owner’s claim that the City’s tactic – of threatening acquisition by eminent domain during land use proceedings – was a taking of private property warranting payment of just compensation. (100 Paterson Realty, LLC v. City of Hoboken, Docket No. A-1016-12T2). The trial court found no taking, and the Appellate Division agreed.
The property consisted of 6,000 s.f. of land area containing a 3,000 s.f. commercial building. The property was zoned R3 and would permit residential development. The property was identified as potential open space/parkland in the 2004 Master Plan. Appellant purchased the property in 2006 for $2M with knowledge of the zoning and the master plan notation.
Later in 2006, Appellant submitted an application to the Zoning Board of Adjustment for approval of 14 residential units. That application was withdrawn due to “push back” from the public.
In late 2007, Appellant submitted a second application to the Zoning Board, which called for a mixed-use development (retail/commercial museum use with residential), which requirement “multiple variances.” A hearing on the application was scheduled for June 17, 2008. However, on June 11, 2008, the City Council took several actions inimical to the property owners pending application. The Council passed a resolution that authorized acquisition of the property for open space, and also passed a resolution authorizing appraisal of the property (a statutory predicate to exercise of eminent domain). Then, the Council introduced an Ordinance to change the zoning of the property from R3 to “Open Space.” One of the resolutions asked the Zoning Board to “postpone consideration of all applications” then pending. Therefore, the June 17, 2008 Zoning Board hearing was adjourned without date.
In October 2008, Appellant’s partner on the Museum venture withdrew due to altered circumstances. Appellant sued the City in November 2008 alleging that the City’s actions affected a taking of private property for which compensation was due, i.e. filed an inverse condemnation action. The City responded by advising that the Open Space ordinance had been “tabled permanently” and that the pending application could proceed without delay.
The parties agreed to stay the litigation and discussions ensued. The City obtained an appraisal of the property at $2.1M, but in January 2010 advised that acquisition was not possible due to funding issues.
In January 2011, plaintiff filed an “as of right” plan for development of 9 residential units, which meant that the Planning Board would be required to approve the plan as drawn. In March of 2011, Planning Board adopted a Master Plan Reexamination Report that continued to recommend the subject for parkland. In August of 2011, Appellant voluntarily withdrew the “as of right” plan because the threatened acquisition and “parkland” designation frustrated his ability to obtaining financing, and rendered development of the property “fruitless”.
The dormant inverse case was revived and the case proceeded to trial. The owner presented two witnesses to advance his theory. The trial judge rejected the owner’s claims, finding that the commercial building was rented during the entire episode and that while the City’s actions may have impacted the owner’s ability to develop the property as he wanted, it did not deprive the owner of all beneficial use of the property.
The Appellate Division echoed the trial court’s findings and also underscored the fact that the owner voluntarily withdrew his “as of right” residential development. The Court also held – as a matter of law – that the owner’s claims that the City’s action frustrated his ability to finance the project were not compensable. (“Lost economic opportunities allegedly occasioned by pre-taking government activity do not constitute a compensable “taking” under either the United States or New Jersey Constitutions.”) (Slip op. at 13).
That final aspect of the decision is inconsistent with regulatory takings jurisprudence. If government action has an economic impact and frustrates an owner’s reasonable investment-backed expectations, the government action is a taking requiring payment of just compensation under the New Jersey, and United States, Constitution. However, it appears that the as of right application should not have been withdrawn and that was the final nail in the coffin for this property owner.