Eminent Domain and Land Valuation Litigation

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Presentation transcript:

Eminent Domain and Land Valuation Litigation Severance Damages in Partial Takings Cases: Lessons Learned and Future Considerations   Eminent Domain and Land Valuation Litigation February, 2015

Course Outline Partial takings overview Lessons learned Partial takings update: Borough of Harvey Cedars v. Karan, __ N.J. __ (July 8, 2013) Implications for the future

Lessons Learned

Entire Taking Just compensation determined by “fair market value” of the property as of the date of value

Partial Taking - Just compensation determined by two methods 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

Lesson One: Partial Takings – the Per Se Method

Lesson One: Partial Takings – the Before and After Method

Lesson One: Partial Takings – the Before and After Method 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

Unity of Use: Taking of Non-Contiguous Parcel 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)

Lesson Two: Unity of Use Taking of Non-Contiguous Parcel

Lesson Two: Unity of Use Taking of Non-Contiguous Parcel 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

Mitigation – Cost to Cure 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 condemnee State of New Jersey by Commissioner of Transportation v. Weiswasser, 149 N.J. 320 (1997)

Lesson Three: Mitigation/Cure – Before the Taking

Lesson Three: Mitigation/Cure – Proposed Cure

Lesson Three: Mitigation/Cure

Lesson Three: Mitigation/Cure

Lesson Three: Mitigation/Cure 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!

The Project Influence Doctrine 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. Idea is to obtain value free from influences on value resulting from “the Project” Value might rise or fall What is “the Project” – AC example, Hyman example Does the taking need to be a “redevelopment” taking to trigger project influence of redevelopment plan? Does project make it more difficult to find “true”, unaffected market

General Benefits vs. Special Benefits: 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

General Benefits vs. Special Benefits: Harvey Cedars v. Karan $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

Harvey Cedars v. Karan: Before and After Before After

Harvey Cedars v. Karan: Before and After

Dune Replenishment and Partial Takings 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

Dune Replenishment and Partial Takings 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

Dune Replenishment and Partial Takings 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

Dune Replenishment and Partial Takings 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?

Anthony F. DellaPelle, Esq., CRE® Final Thoughts Q&A? Thank you! Anthony F. DellaPelle, Esq., CRE® adellapelle@mckirdyriskin.com www.mckirdyriskin.com www.njcondemnationlaw.com www.realestatetaxappeals.com

Anthony F. Della Pelle, Esq. , CRE 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 Anthony F. Della Pelle, Esq. , CRE adellapelle@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®