Municipality Need Not Negotiate With Mortgage Holder Before Condemning Property

By: Peter J. Gallagher

Last year, we told you about a decision from the Appellate Division holding that a condemning authority does not have to engage in bona fide negotiations with a mortgage holder that has obtained final judgment on the property that the authority is seeking to condemn. Click here for the prior post. The Supreme Court has now affirmed the Appellate Division’s decision.

Under New Jersey law, before condemning real property, a condemning authority must, among other things, engage in bona fide pre-litigation negotiations with the party that "owns title of record to the property."  N.J.S.A. 20:3-6. Prior case law had made clear that this limitation meant that a condemning authority was not required to negotiate with a leaseholder or some other party that might have an "interest" in the property, but was instead required to negotiate only with the record title owner. In Borough of Merchantville v. Malik & Son, LLC, however the Supreme Court was faced with a slightly different question — whether a municipality needs to negotiate with an entity that held the mortgage on the underlying property, had obtained final judgment of foreclosure against the title owner, and was on the verge of taking the property to sheriff’s sale. The Supreme Court ruled that it does not.

 

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Eminent Domain Reform Advances In The Garden State

by:  Peter J. Gallagher

New Jersey is one step closer to updating its eminent domain laws for the first time since the U.S. Supreme Court handed downs its landmark Kelo v. City of New London decision in 2005. On March 4, 2013, the Senate Community and Urban Affairs Committee voted unanimously to approve a bill (S-2447) that would, according to a press release from Senate Democrats, “create a two-track system for redevelopment, establishing separate requirements for redevelopment projects that would involve condemnation and for those that would not.” The two tracks would protect homeowners whose properties might otherwise be subject to condemnation, while also creating a more streamlined process for municipalities undertaking redevelopment projects that do not involve condemnation.

According to the press release:

The legislation would require municipalities to advise property owners within a proposed redevelopment area of the municipality’s intent to use or not use eminent domain to facilitate a redevelopment plan at the outset of the redevelopment study as well as to provide specific notice of such designation. Unless a municipality notifies owners of property located in a proposed redevelopment area that the designation will allow the municipality to take property located in the area by eminent domain – or that the proposed area is a Condemnation Redevelopment Area – the “Local Redevelopment Housing Law” would not authorize the use of eminent domain.

The bill would also authorize municipalities that intend to implement redevelopment initiatives without using eminent domain to do so but to still take advantage of the other tools available under the LRHL that encourage and facilitate economic development activities, create job opportunities, increase commerce, and enhance ratable values within their communities during these difficult economic times. This process would require designating the proposed area as a Non-Condemnation Redevelopment Area.

Having made it out of the Senate Community and Urban Affairs Committee, the bill now heads to the Senate Budget and Appropriations Committee. Stay tuned for more updates.

“Put Your Makeup On, Fix Your Hair Up Pretty, And Meet Me Tonight In Atlantic City.”

by:  Peter J. Gallagher

Apparently there is more than fist bumping (pumping?) going on "down the Shore."  The PropertyProf Blog has an interesting story about what it calls "A Non-Taking On The Jersey Shore."  If nothing else, the story gives me a work-related reason to go down to Atlantic City.  I don't really want to go down to the casinos, I have to do it for the sake of the blog . . .

The article tells the story of a tiny lot sandwiched in between Trump Plaza and Cesar's Palace.  It is zoned for gambling, which the post notes "doesn't exactly seem like the highest and best use."  But, the lot has some history, as it was at the center of a high-profile takings case from the early days of the once booming (now not really booming) gambling mecca:

Vera Coling and her husband bought the property in 1961, when Atlantic City was still a thriving beachtown. A decade later, as the city fell into decline, it made the drastic decision to legalize gambling and welcome big-time casino development.  The prime location of Coking's three-story house quickly attracted the interest of the real estate industry. In 1983, for example, Bob Guccione (the founder of Penthouse), offered to purchase the house for $1 million to build a casino. Coking said no.

Soon enough, the property attracted the attention of another tycoon – Donald Trump.  Unlike Guccione, Trump had the local redevelopment agency attempt to acquire the property through eminent domain for $250,000, a much reduced price.  Coking sued Trump and the redevelopment agency, claiming that the taking was not for a public purpose.  The Superior Court in New Jersey agreed with Coking.  It ruled that because there were few restrictions on what Trump could do with the property, there were "no assurances that the public interest will be protected."

The post notes that the arguments raised in the case are "[o]f historical interest for property profs" and other folks interested in takings, because it was "the Institute for Justice's first test case for the theories it later advanced in Kelo [v. City of New London]," the controversial eminent domain/takings case decided by the U.S. Supreme Court a few years back.

Also of historical interest is the interview with Donald Trump embedded in the post, which presents a much younger, pre-Apprentice, less coiffed, but no less pompous, version of the Donald. 

Finally, in case you are interested, the property is for sale.  Here is the listing.  It can be yours for only $5 million, or slightly less than what this guy took from the Tropicana in a marathon gamling session a few weeks ago.

Sewer Service Stunting Growth

by:  Katharine A. Muscalino

If the economy and local land use regulations didn’t make development hard enough, some counties and municipalities have discovered the New Jersey Department of Environmental Protection’s June 2009 Water Quality Management Rules as another technique to inhibit growth and property development in New Jersey. The Water Quality Management Rules require counties, and some municipalities, to closely examine sewer service within their borders, and limit expansion of that service when possible. Counties have applied the DEP’s rules to remove undeveloped properties from the sewer service areas in their wastewater management plans, and to limit demand from sewered properties to the gallonage they currently produce.

Holmdel has taken the Water Quality Management Rules a step farther in its attempts to limit the possibilities for the redevelopment of the Alcotel-Lucent corporate campus, by arguing that the campus should not only be limited to its existing gallonage, but that sewer service should be limited to the existing corporate buildings’ footprints. This limitation would not only cap the size of the future development and its sewer service demand, but would also significantly limit the potential for new uses, and particularly residential use, on the site. If Holmdel succeeds in this aggressive wastewater management planning, it will have serious ramifications for the future of the property and its marketability.

 

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NJDEP Proposes Common-Sense Waiver Rule

by:  Thomas Spiesman

NJDEP
   In furtherance of Governor Chris Christie's Executive Order No. 2 that seeks to establish "Common Sense Principles" to govern New Jersey, the New Jersey Department of Environmental Protection (NJDEP) has proposed a rule to enable it to remove unreasonable impediments to economic growth while ensuring net environmental benefit for the State.  The rule, which is available online here,  would permit the NJDEP to waive strict compliance with regulations in certain limited circumstances that do not compromise protections for the environment or public health. 

 

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Highlands Council Grants Rare Redevelopment Petition in Preservation Area

It is not every day that the New Jersey Highlands council approves development in the Preservation Area.  The New Jersey Highlands region is made up of more than 800,000 acres of land covering more than 1,250 square miles and stretching across 88 municipalities.  Within this 800,000 acres is the Highlands Preservation Area, which includes approximately 398,000 acres, of which approximately 145,000 acres are undeveloped.  Obtaining approval to build within the Preservation Area is difficult to say the least.  That is why the August 19, 2010 decision by the Highlands Council to approve a Highlands Redevelopment Area Petition for the development a 12,000 square foot office building in Mount Olive is noteworthy.  The two-story building is situated on a 20-acre tract in the Highlands Preservation Area.  Noting that the nearly all of the 20 acres are already disturbed, as the property was formerly used as a stone quarry, the Highlands Council issued the approval on the condition that the applicant would make several environmental improvements to the property, including installation of topsoil and trees in areas currently consisting of gravel and exposed bedrock.  The building will be serviced by an on-site well and on-site septic system.  As noted above, the approval marks one of the few developments permitted in the Preservation Area by the Highlands Council and offers an example to other Preservation Area property homeowners. 

Read Highlands Council Resolution granting the approval.