The New Jersey Supreme Court recently affirmed dismissal of a property owner’s challenge to a municipal ordinance that authorized issuance of $6.3M in municipal bonds to fund redevelopment of the famous Edison Battery Building in West Orange, N.J. Opinion here.  The owner’s group filed their challenge 53 days after final publication of the bond ordinance.  The Supreme Court held “that a challenge to a redevelopment bond ordinance must be filed within twenty days of the final publication of the ordinance in accordance with Rule 4:69-6(b)(11), barring the most extraordinary of circumstances, which are not present here.”

The Supreme Court affirmed the dismissal on timeliness grounds even though the owner’s group complained that the Clerk’s improper denial of a referendum petition was partially to blame for their failure to file a timely court action, or at least should have tolled the limitations period.  That argument was rejected by the Court because a bond ordinance is not subject to referendum challenge.  And, in light of that ruling, the property owners were simply out of time to directly challenge the bond ordinance. (And for whatever reason, the owners failed to ask the lower court to enlarge the time period in the interests of justice.)

As Justice Holmes once said; “If a man neglects to enforce his rights, he cannot complain if, after a while, the law follows his example.”

As reported by Lehigh Valley Live, Penn East submitted its application to the Federal Energy Regulatory Commission (FERC) in late September to install a gas transmission line that would cross through several New Jersey counties and into Pennsylvania.  The new pipeline is part of Penn East’s Southern Reliability Link and would connect with the Williams-Transco pipeline being installed now in Mercer County.

Penn EastSRL Route Map (general)On September 25, 2015, residents rallied against the new pipeline in Delaware Township as reported by here.  “This could happen in Hunterdon and Mercer counties, if a consortium of companies known as PennEast gets permission to build a 118-mile natural gas pipeline from Luzerne County, Pa., to Mercer County. In New Jersey, the route would cross more than 4,000 acres of preserved open space and farmland, and the property of over 500 landowners. And most of these landowners don’t want it!”  See also, “Rally” article.

Residents of Northampton, Pa have even started a website entitled “Stop the PennEast Pipeline.”

Penn East has prepared a Landowner Bill of Rights, but in the same breadth cites to the Bill of Rights of the United States Constitution declaring that it will have the right to use Eminent Domain to take private property to complete this public project.  “PennEast in the packet says if the company needs to use eminent domain, it likely will seek to acquire an easement and under its conditions, the landowner would retain ownership of the property. However, if the company needs land to build a compressor station, it will seek to purchase the property outright by deed and PennEast would have ownership.” See Lehigh Valley Live Article (

If FERC approves the application, and if the pipeline company complies with all the procedural requirements of either New Jersey Law, or Federal law required, it may be authorized by a New Jersey court to take private property.  But, even if that occurs, all private property owners are entitled to Just Compensation as guaranteed by the Fifth Amendment of the United States Constitution.

Grand Central NYT 9-28-15In retaliatory fashion, the owner of Grand Central Station has sued the City of New York, et al. because of a recent approval that would allow its neighbor to construct a 1,000 foot high office tower.  The New York Times reported on September 28th that the owner “filed a $1.1 billion lawsuit in United States District Court in Manhattan that argued that the administration of Mayor Bill de Blasio, a Democrat, the City Council and the developer, SL Green Realty Corporation, had deprived him of his property rights when the city gave SL Green permission to build a 1,501-foot tall office tower, without having to buy any air rights from him.”

No so long ago, a prior owner of rail station brought a takings suit against the City of New York which wound up in the United States Supreme Court, Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), which spawned the Penn Central regulatory takings test and to date almost 2,500 case citations.  As framed by the New York Court of Appeals:  The “specific issue presented in this case is whether, as applied to these plaintiffs, the city’s Landmarks Preservation Law and the action of defendants thereunder with respect to certain property commonly known as the Grand Central Terminal are unconstitutional. Trial Term responded affirmatively on the grounds that plaintiffs’ private property was taken for public use without just compensation and that they were deprived of due process and equal protection of the laws. We disagree.” The United States Supreme Court agreed with the Court of Appeals in the seminal case.

According to the Times, Grand Central’s “lawyers argued in the suit that by granting SL Green the rights to build a tower “for free” that is twice as big as had been permitted by zoning, the de Blasio administration and City Council had rendered Grand Central’s air rights “worthless.””

We shall see about that.

90 miles north of Las Vegas exists one of U.S. military’s top-secret bases, Area 51.  From novels to movies, Area 51 has garnered the public’s curiosities for decades.  Unbeknownst to the public, however, a local family owning a 400-acre parcel has lived next door to Area 51 since its inception.  For reasons of national security, the government last year initially offered to purchase the 400-acre parcel from the Sheahan family but the offer was rejected.  The government again recently offered to purchase the 100 acres of owned property and about 300 acres of unpatented mine claims from the family for $5.2 million.  The family, however, is again refusing to sell the land and the government has threatened to initiate eminent domain proceedings if their offer is not accepted by September 10, 2015.

Photo courtesy of

Photo courtesy of

With the Sheahan family unwilling to sell their property, the government’s exercise of its eminent domain power appears inevitable.  Determining just compensation of the property will be the issue given that the property may be even more valuable with certain mineral rights and reserves.  At the same time, however, the alleged radioactive fallout from numerous above-ground nuclear weapons tests may become an issue in valuation of the property. We will monitor the case if indeed it heads to the courtroom and provide updates when available.

For media coverage, see links below.

Family Offered $5.2M for Land Next to Area 51

Area 51 neighbors Reject $5.2 Million Air Force Buyout Offer

Henderson family, Air Force at Odds Over Land Near Area 51

Family Rejects Air Force’s $5.2 Million Bid for Land Near Area 51

Deadline Expires for Private Land Near Area 51

As reported by our Owners Counsel colleague, Mike Rikon, the New York Appellate Division reversed a Supreme Court ruling that had dismissed a regulatory takings claims in Blue Is. Dev., LLC v Town of Hempstead, 2015 N.Y. App. Div. LEXIS 6363, 2015 NY Slip Op 06488 (N.Y. App. Div. 2d Dep’t Aug. 12, 2015).  The property owner purchased a property with the intention of developing 172 waterfront condominium units.  A use variance was granted by the municipality, but there was a condition attached to the approval requiring the owner to sell all the units as condos, but permitted the subsequent owner to rent the units.  The property owner petitioned the municipality to relax the restrictive covenant and the Town modified the subject covenant in a resolution dated July 13, 2010, to provide that Blue Island “was permitted to lease up to 17 of the 172 units for a period of five years after the issuance of the certificate of occupancy or until the delivery of title to the 155th unit, whichever occurred first. In 2013, Blue Island sought a further modification allowing it to sell 32 units and maintain the remaining 140 as rentals. In a resolution dated November 12, 2013, the Town denied this application without explanation.”

The property owner filed suit challenging the restrictive covenant on two bases: 1) the covenant was beyond the authority of the municipality because it was a regulating the owners ability to alienate the land, not the owners use of the land; and 2) that the covenant effectuated an unconstitutional taking based on a denial of development.  The Appellate Court found both challenges had merit and should not have been dismissed by summary motion practice:

“Here, Blue Island’s complaint alleged both that the restrictive covenant did not advance any legitimate municipal interest and that the covenant denied it an economically viable use of the land. Whether Blue Island can ultimately demonstrate that the denial of a modification to the restrictive covenant effects a taking, it has stated a claim, and the Town has not pointed to any documentary evidence defeating that claim. Accordingly, upon reargument, the Supreme Court should have adhered to its prior determination denying that branch of the Town’s motion which was to dismiss the unconstitutional taking cause of action.”

We’ll keep our eyes on Bulldozers at Your Doorstep to see what happens.

Property tax issues arise commonly when a property designated for redevelopment fails to become a reality as originally proposed.  In Seaboard Landing, LLC (“Seaboard”) v. Borough of Penns Grove (“Borough”), the Borough envisioned a redevelopment plan to revive a struggling commercial area along the waterfront on the Delaware River.  In 2003, the Borough issued final site plan approvals to 10-acres of vacant waterfront land (the “subject property”) owned at the time by Fenwick Commons, LLC.  The redevelopment plan which was later known as “The Riverwalk at Penns Grove” was designed to be a 191,000 square-foot, riverfront entertainment center with retail, dining, hotel and marina facilities overlooking the Delaware River.  To that end, the Borough rezoned the waterfront area, created marina districts, and sought necessary funding for the project by obtaining grants and loans from the State and the adoption of bond ordinances.  Today, a 30 feet by 770 feet walkway along the Delaware River and a bulkhead is the only visible achievement of “The Riverwalk at Penns Grove.”  The project came to a halt after the construction of the bulkhead and walkway in 2007, and the 10-acre vacant waterfront lot remains deserted to this day.  In 2007, Fenwick Commons, LLC sold the property to the plaintiff in the present matter, Seaboard Landing, LLC.

Penns GroveThe issue at trial was the Borough’s omitted added assessments on the subject property for tax years 2007 and 2008, as well as the assessments for tax years 2011, and 2012.  Following the construction of the walkway and bulkhead in 2007, the Borough’s tax assessor placed an omitted added assessment prorated for the last two months of tax year 2007 ($208,333), and for the entire tax year of 2008 ($1,250,000).  When the average ratio is applied to the added assessment, the implied equalized value of the two-month prorated assessment for 2007 is $343,162, and $2,314,815 for the entire 2008 tax year.  A municipal-wide revaluation was undertaken in tax year 2009 which assessed the subject property at $3,363,100 which was the valuation challenged by Seaboard for tax years 2011, and 2012.

At trial, Seaboard and the Borough both presented expert testimony from a licensed real estate appraiser.  Both experts concluded that the subject property was over-assessed on all of the relevant valuation dates.  Seaboard’s expert relied on the cost approach and concluded that the true market value of the subject property was $876,000 as of October 1, 2011, the valuation date for tax year 2012.  Seaboard’s expert, however, provided no detailed analysis to find the true market value for purposes of the omitted added assessments for tax years 2007, and 2008 or for tax year 2011.  Instead, Seaboard’s expert testified that the value conclusion reached for tax year 2012 was the same for all prior years under appeal.  Meanwhile, the Borough’s expert applied the sales approach and concluded that the subject property had a true market value of $2,420,000 for the relevant valuation dates after the completion of the walkway and bulkhead, and a value of $1,820,000 for tax years 2011, and 2012.

The Tax Court judge rejected the net opinion of Seaboard’s expert that his value conclusion for tax year 2012 would apply to the prior years.  The court noted that the expert made no substantive analysis in his report to sustain such a finding.  Moreover, the expert’s own opinion contradicted his time adjustments to the comparable sales prices he used for tax year 2012 since the adjustments were based on market fluctuations.  The court also did not find the expert credible given that he opined that the bulkhead and walkway, which was constructed in 2007, depreciated 75% in value in just five years.

Nevertheless, the Tax Court reduced the challenged assessments for the tax years under appeal.  The court found that the sales approach utilized by the Borough’s expert was credible and more applicable for purposes of valuing vacant land.  However, the court found that the Borough’s expert gave too much weight to one sale and further misapplied that value to 12.12 acres when in fact it should have been 10.542 acres.  After correcting the adjustments and re-applying it to the correct acreage determined by the court, the added assessment prorated for tax year 2007 was reduced to $68,880, as well as tax year 2008 which was reduced to $314,300.  The assessments for tax years 2011 and 2012 were also reduced from $3,363,100 down to $1,460,000 and $1,475,000, respectively.

Rarely will a municipality prepare an appraisal report that concludes a value significantly much lower than the assessed value and take it to trial.  The failed redevelopment plan may have left a bitter taste with the Borough given that Seaboard had not made any repayments to the Borough for obtaining loans to build the bulkhead and walkway, and retreated on its intentions to redevelop the property.  However, there may yet be some hope for the Borough as the property was recently foreclosed, and a new owner and the Borough are discussing future plans to redevelop the waterfront property.

Here is an excellent recent article on the propriety of attempting to use eminent domain to “take” underwater mortgages in various places around the country.  Entitled “Eminent Domain for UnderwaterMortgageUnderwater Mortgages: Already on the Way to the Bottom of the Sea of Bad Ideas” , our Owners Counsel of America colleague Dwight Merriam summarizes what’s wrong with this idea, as we have done before on several occasions.

Thanks to Dwight for the excellent read, and also to our colleague Robert Thomas for his heads up and his own succinct summary (and Sonny & Cher video) on topic!


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