February, 2015

Eminent Domain and Land Valuation Litigation

Partial takings overview Lessons learned Partial takings update: Borough of Harvey

Cedars v. Karan, __ N.J. __ (July 8, 2013) Implications for the future

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Just compensation determined by “fair

market value” of the property as of the

date of value

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• Before and After method

value of entire parcel before taking

– value of remainder after taking = just

compensation

• Per Se method

value of land taken + diminution in value (or

damages) to remainder = just compensation

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FACTS:◦ 1M sf warehouse – brand new and empty◦ Date of value = recession◦ Original taking – no damage to remainder? $600,000◦ Revised taking – temporary/permanent damage? $3,100,000◦ Temporary taking disables entire building; permanent taking

damage disputed◦ Rent offered @$5/sf for 6 months-- $2.25M of revised offer◦ Settled during trial for $4,500,000

LESSON:◦ Don’t show your hand before you have to◦ Don’t assume anything◦ Get the condemning agency to second base, then drive the

runner home

In order to obtain severance damages (from taking a non-contiguous parcel) landowner must show that remaining parcel and parcel taken were parts of a single economic use and under the same ownership.

Housing Authority, City of Newark v. Norfolk Realty Co., 71 N.J. 314

(1976)

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FACTS:◦ Downtown industrial building with no on-site parking◦ Original offer takes adjacent garage property without

consideration of main building - $40,000◦ Town later agrees to reappraise considering unity of use◦ Revised value before $500,000 (new appraiser for City)◦ Case settled for $120,000 + right to use new parking during

daytime/weekday hours + purchase option for main building

LESSON:◦ Look before you leap◦ Don’t show your hand before you have to◦ Be creative and seek non-monetary relief where appropriate◦ Know thy appraiser/expert

3 Basic Rules: Evidence of cost of restoring remaining

property can be no greater than decrease in marked value if left uncured

Cannot be speculative (reasonable and certain – previously written existing boundaries of tract)

Duty to mitigate by condemneeState of New Jersey by Commissioner of Transportation v. Weiswasser, 149 N.J.

320 (1997)

FACTS:◦ Highway widenings @ restaurant and office building, front

parking eliminated/threatened on both◦ Restaurant – cure by replacing with additional land and driveway

Condemnor acquires land (excess land) and builds cure Offer monies retained to compensate for incomplete cure

◦ Office – cure not possible Damages are significant Case settled before construction assuming damage On-site cure implemented by parties after settlement

LESSONS:◦ Timing is critical◦ Should you cure before trial? Before construction?◦ Be nice!

Ordinarily, the effect upon value of a proposed project – either up or down - must be disregarded in valuation ◦ Highest and best use issues - zoning ◦ Physical condition of subject◦ Selection of sales or leases◦ Adjustments to sales or leases

The property is valued as if the “project” never occurred.

General Benefits: those which affect the whole community or neighborhood, and not special benefits unique to the property taken, previously inadmissible in New Jersey◦ These benefits are/were thought to have been enjoyed by entire

area◦ Why should the condemnee pay more for a public improvement

than his/her neighbor whose property is not taken? Special Benefits: Unique to the property taken, are

admissible Consistent with the Project Influence Doctrine

$2M oceanfront home on Long Beach Island – 18 mile long barrier island

Borough condemns a “dune easement” to allow US Army Corps of Engineers to construct a 22-foot high dune on the property

Borough offers $300 for easement; contends damages are “de minimus”

Owner’s appraiser: loss of views cause $500,000 of damages Owner moves in limine to bar Borough appraisal which

contends that taking creates “special benefits” via storm protection provided by dune

Evidence excluded by trial court as “general benefit” Jury awards $375,000 in damages Trial court ruling affirmed by Appellate Division

Before After

Before and After

Harvey Cedars v. Karan – the setting: Supreme Court grants certification before Superstorm Sandy Superstorm Sandy causes catastrophic property losses Areas with engineered dunes fare much better than those

without Dune/storm replenishment efforts are renewed in earnest

along the Shore Public perception and media portrayal paints “holdout”

oceanfront property owners as greedy, selfish, obstructionists Increasing political pressure mounted at local and State

levels, subjecting owners to ridicule and shame Amicus curiae status granted to State of New Jersey and

other interest groups

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Harvey Cedars v. Karan – the decision: general-benefits doctrine is “at odds with contemporary

principles of just-compensation jurisprudence” Jury only permitted to hear “one side” of the story Could result in a “windfall” to the property owners at public

expense Just compensation in partial taking must be based upon a

consideration of “all relevant, reasonably calculable, and non-conjectural factors that either decrease or increase the value of the remaining property”

Court recognizes that the loss of view is compensable, but requires rehearing permitting evidence regarding the impact of the storm protection benefits upon the value of the property as an offset to damages

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Harvey Cedars v. Karan – the implications: Will/did Karan cause the holdouts to change course and

donate their properties?◦ Mr. and Mrs. Karan settle for $1 – WHY?

What impacts will or may it have on just compensation determinations, or on the project at large? Harvey Cedars v. Groisser Pending challenges – Margate, Long Beach, Jenkinson’s

Compliance with Eminent Domain Act and Federal Act/Regs vs. Executive Order NJDEP and USACOE

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Harvey Cedars v. Karan – additional implications: Does the decision impact the two traditional methods of

valuing partial takings? Does the decision impact the duty of the condemnor and the

owner to mitigate damages? What remains of the “project influence” doctrine? Shield or

sword? Is compensation for diminution of access back on the table?

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Q&A?Thank you!

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Anthony F. DellaPelle, Esq., CRE®adellapelle@mckirdyriskin.com

www.mckirdyriskin.comwww.njcondemnationlaw.comwww.realestatetaxappeals.com

Practice limited to eminent domain, condemnation, redevelopment and real estate tax appeals 25+ years representing property owners and special counsel to condemning authorities in

eminent domain matters Author, New Jersey Condemnation Law Blog, www.njcondemnationlaw.com New Jersey “Super Lawyer” (“Top 100” - 2009-2014; “Top 10” – 2012) Subcommittee Chair, ABA Section of Litigation – Condemnation, Land Use & Zoning

Committee President, Franklin & Marshall College Alumni Association; Vice President, New Jersey Hall

of Fame Foundation

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Anthony F. Della Pelle, Esq. , CREadellapelle@mckirdyriskin.com

•Shareholder, McKirdy & Riskin, PA •Certified Civil Trial Attorney by NJ Supreme Court• New Jersey Representative, Owners’ Counsel of America• Member, Counselors of Real Estate®