A property redeveloper makes an offer for your home or business property. What are your options? Do you accept the initial offer? Can you negotiate? Should you resist and go to court to obtain the best price? Condemnation of property is a complex issue and an eye-opening experience for anyone confronted with it.
New Jersey, the most densely populated state in America, is in the forefront of private redevelopment projects initiated under the Local Redevelopment and Housing Law (LRHL). Since 1950, the LRHL has undergone significant change. With each amendment, the law’s key term, blighted area, has become more inclusive and has taken on new and wide-ranging meaning. From four narrowly drawn definitional standards, the law has expanded to seven broadly worded definitions of blight, now including property that is “either stagnant or unproductive.” Several TV commentators have stated that the current version of the LRHL defines blighted area, now euphemistically called “area in need of development,” to include almost any older neighborhood or business district.
With state legislation clearly in their corner, municipalities and their private redevelopment partners have been undertaking dozens of redevelopment projects in urban areas and in older business districts adjoining major highways.
Private redevelopment begins with the acquisition of property within the boundaries of the redevelopment plan. If the sale of property cannot be achieved by the private redeveloper, a process totally unregulated by the LRHL, the municipality is legally authorized to acquire the redevelopment property by eminent domain.
Here is a brief description of the eminent domain or condemnation process as established by Constitution, statute, court rules and case law.
The goal of the condemnation process is to compensate property owners when the government acquires their private property for public use. While certainly laudable, it is important to remember that just compensation is fair market value, not replacement cost. This is an important distinction which prompts the question as to whether just compensation is really that just.
Formal condemnation proceedings commence when the public entity files a condemnation complaint and a declaration of taking with the Superior Court. Once the declaration of taking is filed, the public entity is legally entitled to immediate possession of the property, unless specific legal objections are successfully established by the property owner.
The remainder of the condemnation proceedings address, and only address, the fair market value of the property through a condemnation commissioners’ hearing and, if necessary, a trial. It should be noted that the good will of a business located on the property will not be considered when establishing value.
Because the overriding obligation of government is to deal forthrightly and fairly with property owners, specific procedures have been set forth in the Eminent Domain Act. These procedures must be undertaken prior to the filing of a condemnation complaint or declaration of taking. They are in place to assure that the condemner, the municipality, either achieves nor preserves any kind of bargaining or litigational advantage over a condemnee, the property owner.
The condemner must first engage in bona fide negotiations which comprise of a written statement including the property to be acquired, the compensation to be paid and a reasonable disclosure of the manner in which the amount of compensation has been calculated. The compensation calculation is made by an appraiser during an inspection of the property that the condemnee must by law allow. The Eminent Domain Act envisions this process will encourage settlement without litigation.
While the Eminent Domain Act goes a long way toward simplifying the process, there are two inherent flaws in the pre-litigation phase of condemnation. First, the question arises as to whether the obligation to conduct bona fide negotiations has truly been fulfilled by simply presenting the condemnee with an appraisal figure in a take it or leave it deal, as is so often the case. Second, in a private redevelopment project the redeveloper invariably employs the same appraiser for all properties to be acquired, or the municipality uses an appraiser who may well be employed on a regular basis by the municipality in all its condemnation actions. In both cases, those close ties and the financial incentives may make the condemnation appraiser a less than neutral figure.
In many cases the only way a condemnee can increase the fair market value of his or her property is to litigate in Superior Court, and litigation is costly. The attorneys’ fees borne by the property owner are not compensable, except under very limited circumstances. Many people, therefore, simply forego their right to a commissioners’ hearing and a trial.
Too often residential and business property owners, either for financial or emotional reasons or both, believe they have no alternative but to accept the condemner’s offer. However, an hour’s consultation with an attorney experienced in eminent domain to determine your rights, may be time very well spent.
Stay tuned. Eminent domain is currently a hot topic in the New Jersey Legislature. There are several bills pending, which if enacted, will provide some major revisions to the law.
Mary Lou Delahanty, Esq., is an environmental attorney with experience in eminent domain law. She is a partner with the firm Szaferman Lakind Blumstein Blader & Lehmann, P.C., 101 Grovers Mill Road, Lawrenceville, NJ 08648. You may reach her at 609-275-0400 or email@example.com.