Eminent Domain From Start to Finish National business institute June 3, 2013

The Panel Anthony F. Della Pelle, Esq. , CRE (Moderator) John H. Buonocore, Jr. Esq. Thomas M. Olson, Esq. Paul T. Beisser, III, MAI, CRE Value Research Group, LLC William W. Northgrave, Esq. McManimon, Scotland & Baumann, LLC Lawrence H. Shapiro, Esq. Ansell, Grimm & Aaron, P.C. Mark W. Sussman, MAI, CRE Lasser Sussman Associates, LLC

Course Outline The Eminent Domain Process Condemnor vs. Condemnee Perspectives Calculating Just Compensation: Appraisers’ Insights Relocation Assistance Challenging the Right to Condemn Trial Practice and Strategy Ethics in Condemnation

The Eminent Domain Process Constitutional and Legislative Grant of Authority Enabling Legislation – Municipal, County, Special Agency, State and Federal Governments Public Use Requirement Requirement for Just Compensation Redevelopment Law issues Atlantic City - casino issues Wide discretion

Just Compensation "...nor shall private property be taken for public use without just compensation." U.S. Const. Amend. V "Private property shall not be taken for public use without just compensation. Individuals or private corporations shall not be authorized to take property for public use without just compensation first made to the owners." N.J.S.A. Const. Art. 1, Sec. 20

Just Compensation Compensation for the property taken Reduction in value (damages) to any remaining property Interest Indemnity for loss Attorneys’ fees and costs not generally recoverable by condemnee

Legal Resources Eminent Domain Act - N.J.S.A.20:3-1 et seq. Rule 4:73 (Condemnation) Relocation Assistance Act - N.J.S.A. 20:4-1 et seq., N.J.S.A. 27:7-72, et seq. and regulations - N.J.A.C. 5:11-1; N.J.A.C. 16:6-1.1 et seq. Local Redevelopment and Housing Law – N.J.S.A. 40A:12A:-1, et seq.

Legal Resources (cont’d) 21 New Jersey Practice, Skills and Methods, Eminent Domain

Legal Resources (cont’d)

Legal Resources (cont’d) The Appraisal of Real Estate, 13th Ed. Appraisal Institute Eaton, Real Estate Valuation in Litigation, 2d Ed., Appraisal Institute New Jersey Condemnation Law Blog: www.njcondemnationlaw.com

Eminent Domain Act of 1971 N.J.S.A. 20:3-1 et seq. Uniform procedure applicable to all proceedings in which the power to condemn is being exercised, except acquisitions by PANYNJ which proceed pursuant to N.J.S.A. 32:1-77, et seq. Applies to “inverse” actions

Four-Step Process Attempt at amicable resolution through bona fide negotiations Final judgment on authority for and due exercise of power by condemnor Commissioners’ Hearing Jury Trial on appeal from Commissioners’ Report on the issue of just compensation test

Single Issue -Value - Controversy Fact finder is concerned with just compensation only - Court adjudicates all other issues (e.g., title, proceeds allocation) One award representing the value of all interests in the property (“unit rule”) Award must take into account all damages, both present and prospective - no further proceedings or relief

What Constitutes “Property” Real vs. Personal Property As to real estate, “functional unit” test for “fixture” issues Interplay between functional unit and moving expenses as relocation benefit * N.J.S.A. 20:3-2(d) * State v. Gallant, 42 N.J. 583 (1964)

Date of Value Pursuant to N.J.S.A. 20:3-30, the earliest of the following events: Date possession is taken by the condemnor Complaint date Date on which condemnor substantially affects use and enjoyment of property Declaration of “blight” or “in need of redevelopment” determination, but see N.J.S.A. 20:3-38 * See Kirby Forest Industries v. U.S., 467 U.S. 1 (1984)

Prelitigation Matters Prelitigation Entry and Inspection/Evaluation N.J.S.A. 20:3-16 Title Searches Parcel Surveys Appraisal Environmental Inspections Right of Entry

Bona Fide Negotiations Notice of appraisal inspection Written offer by certified mail Offer not less than approved appraisal Description of property to be acquired Disclosure of all appraisals obtained Minimum 14 days for reply to offer Must address issues raised by owner

Litigation - Phase 1 Complaint Order to Show Cause Declaration of Taking Order Permitting Deposit Notices Answer Judgment Appointing Commissioners

Complaint Must include: a statement showing the amount of compensation offered by the condemnor; a reasonable disclosure of the manner in which the amount has been calculated. “Reasonable disclosure” by the condemnor includes furnishing the condemnee with: the map a description of land to be acquired the identity of the improvements to be acquired, if any a statement of the full fair market value a description of the appraisal valuation method or methods relied upon (cont’d)

Complaint (cont’d) date of sale or date and duration of lease the consideration for the sale or amount of rent the book and page number of the recording of the deed of the comparable sale any unusual factors concerning the property known to the condemnor which may affect value. a breakdown of the appraised value allocated to the land to be acquired, and improvements to be acquired, if any; Data concerning comparable sales or leases relied upon in determining the amount of compensation offered which shall include: names of seller and purchaser or landlord and tenant, the location of the property by block, lot, street, street number, and municipality,

Parties Join all parties with an interest in the property, e.g.: Tenants, holders of easements, occupants Mortgagees and other lienholders Municipality (for taxes) Only those parties who are joined have their interest foreclosed by the proceedings. Easements are to be condemned separately as a “DE” parcel together with the property which it serves; the area of the easement should be designated on the serviant parcel as “SE” and the appraisal should adjust accordingly.

Order to Show Cause Action is brought in a summary manner pursuant to R.4:67. May be presented to the court ex parte. No summons, but language is consistent Served within the state at least 10 days before the return date

Declaration of Taking Basically, a “deed” from the condemnor to itself Fixes the property and rights acquired based on legal description Recorded in County Clerk/Register’s office

Order for Deposit Provides for deposit of estimated compensation (usually the amount of the offer per the appraisal) May be obtained ex parte

Abandonment of Action Provided no declaration of taking has been filed, the action may be unilaterally abandoned by the condemnor at any time before, or within 30 days after, the filing of the award of commissioners; or in the event of an appeal from the award, at any time before, or within 30 days after, the entry of judgment; or in the event that a hearing before commissioners is waived, at any time before, or within 30 days after, judgment has been entered in the action. [N.J.S.A. 20:3-35] Otherwise, condemnee must consent to abandonment Entitlement to fees costs and expenses. N.J.S.A.20:3-26(b) West Orange v. 769 Associates, LLC, 397 N.J. Super. 244 (App. Div. 2007)

Answer Must raise all defenses to the right to take and manner of exercise of the power of eminent domain. Failure to deny the authority of the condemnor to condemn in the manner provided for by the rules constitutes a waiver of the defense. All issues other than those related to value and damages must be determined by the court prior to the appointment of commissioners. N.J.S.A. 20:3-11 State v. Orenstein, 124 N.J. Super. 295 (App. Div.), certif.. denied 63 N.J. 588 (1973)

Answer (cont’d) Must demand a jury trial if one is desired. Must be served and filed in accordance with the Rules or pursuant to Order to Show Cause Non-contesting appearance may be filed in lieu of answer; valuation issues preserved. N.J.S.A. 20:3-12(c).

Denial of Right to Condemn When the authority to condemn is denied, all further steps in the action are stayed until the issue of the right to take has been finally determined. Does “finally determined" mean exhaustion of the appellate process if appellate review is sought? N.J.S.A. 20:3-11 Bridgewater Tp. v. Yarnell, 64 N.J. 211 (1974) County of Sussex v. Merrill Lynch, 351 N.J. Super 1 (App. Div. 2002) There is no discovery on the issue of the right to condemn except by leave of court. N.J.S.A. 20:3-12(d).

Some Defenses to Taking No public purpose – bad faith, pretext Lack of necessity Failure to pass requisite authorizations Indefinite description Failure to engage in bona fide negotiations. N.J.S.A. 20:3-6 Trenton v. Lenzner, 16 N.J. 465 (1954)(parking facility for proprietary use) West Orange v. 769 Associates, 172 N.J. 564 (2002)(roadway primarily serving residential development) Texas Eastern v. Wildlife Preserves, 48 N.J. 261 (1967)(necessity) Hillsborough v. Robertson, 260 N.J.Super. 37 (Law Div. 1992) Essex Fells v. Kessler, 289 N.J. Super 329 (Law Div. 1995)

Return Date of Order to Show Cause - The Right to Take Condemnor’s Procedural and Substantive Compliance with Eminent Domain Act Hearing may be required * R. 4:67-5; R. 4:73-1 * Bergen County v. Hackensack, 39 N.J. 377 (1963)

Judgment Appointing Commissioners Final Judgment as to Right to Take and Due Exercise of Power Appoints 3 Commissioners Jurisdiction now with Commissioners Appealable as of right Stay of further proceedings upon appeal? N.J.S.A. 20:3-2(j) – appealable as of right

Deposits into Court The amount of the initial deposit may not be less than the amount of the prelitigation offer N.J.S.A.20:3-18 which itself may not be less than the amount of the condemnor's approved appraisal. Deposits into Superior Court are by administered by the Clerk of Superior Court, Trust Fund Unit, which holds the funds in an interest-bearing account.

Withdrawals from Court By motion and petition Request for dismissal of other defendants Processing withdrawal from Trust Funds Unit Condemnor’s ability to preserve portion of deposit for site remediation Consideration of possession issues NJSA 20:3-19 re possession

Litigation - Valuation Proceedings Valuation (Appraisal) Commissioner’s Hearing Procedure Jury or Bench Trial – de novo

Elements of Fair Market Value Willing buyer & seller Neither being under a compulsion to act Being fully informed of all facts and circumstances about the acquired property (even if not known on date of value) Owner is not limited to value for the use to which property is currently being put - owner entitled to value for highest and best use. State v. Caoili, 135 N.J. 252 (1994) State v. Shein, 283 N.J.Super 588 (App. Div. 1995)

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

Partial Taking – Two Methods of Valuation 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

“Wide Factual Inquiry” of “all material facts and circumstances – both past and prospective – that would influence a buyer or seller interested in consummating a sale of the property” State of New Jersey by Commissioner of Transportation v. Silver, 92 N.J. 507 (1983) Village of South Orange v. Alden Corporation, 71 N.J. 363 (1976)

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 v. Sun Oil, 160 N.J.Super. 513 (Law Div. 1978) State of New Jersey by Commissioner of Transportation v. Weiswasser, 149 N.J. 320 (1997)

Commissioners’ Hearing Non-binding arbitration Provide reports 15 days in advance Obtain Award, File Appeal No appearance = no right to appeal * Borough of Keyport v. Maropakis, 332 N.J. Super. 210 (App. Div. 2000)

Appeal from Award of Commissioners File within 20 days of service of award May be relaxed up to 30 days for good cause Non-relaxable thereafter Party may not rely on appeal filed by adversary - Adversary may withdraw * City of Long Branch v. Spanos, A-2936-04T1, 2006 W.L. 1627977 (App. Div. 2006) R. 4:73-6

Litigation - Trial “De Novo” Condemnor proceeds first No burden of proof Condemnation trial is an "evidential construction of a hypothetical sale” Wide discretion in admission and rejection of evidence Jury view of condemned property. R.4:73-7 Environmental considerations – valuation as if “remediated” Paterson v. Bienstock, 123 NJSuper 457 (App.Div. 1973)(no burden of proof)

Condemnor’s Perspective Obligations of the Condemning Authority "…the power to take property through eminent domain is one of the most intrusive aspects of sovereignty“ [State, by Comm'r of Transp. v. D'Onofrio, 235 N.J. Super. 349 (Law Div. 1989)]. "…in the condemnation field, government has an overriding obligation to deal forthrightly and fairly with property owners…. (i)t may not conduct itself to achieve or preserve any kind of bargaining or litigational advantage over the property owner…. Its primary obligation is to comport itself with compunction and integrity, and in doing so government may have to forgo the freedom of action that private citizens may employ in dealing with one another. [F.M.C. Stores, Co. v. Morris Plains, 100 N.J. 418 (1985)].

Condemnor’s Perspective (Cont’d) Special Considerations a. Obligation to "Go First" - pre-acquisition "Homework" (inspections, title searches, surveys, appraisals, environmental inspections). - Bona fide negotiations expansion of "reasonable disclosure" in manner offer calculated. - Commission Hearings b. Stake Out Fair, Defensible Position

Condemnor’s Perspective (cont’d) Main Goal a. obtain payment of just compensation: paying neither too much nor too little for condemned property Damnum Absque Injuria Certain Classes of Damages are not compensable as a matter of law. Basic concept: damages, to be compensable, must result from the partial taking of a property and not something else.

Condemnor’s Perspective (Cont’d) Damnum Absque Injuria (cont’d)   (1) Loss of business; franchise, future or current profits, tenants or good will State v, Comm'r of Transp. v. Hess Realty Corp., 226 N.J. Super. 259 (App. Div. 1988), certif. den. 113 N.J. 229 (1989), cert. den. 493 U.S. 964 (1989) but see State, by Comm'r of Transp. v. Arifee, 2009 N.J. Super. Unpub. LEXIS 2333

Condemnor’s Perspective (cont’d) Damnum Absque Injuria (2) Damages resulting from condemnor's use of land acquired from others (power lines on adjoining property) P.S.E. & G. Co. v. Oldwick Farms, Inc. 125 N.J. Super. 31 (App. Div. 1973), certif. den. 64 N.J. 113 (1973) (3) Loss of visibility resulting from condemnor's use of land acquired from others State, by Comm'r of Transp. v. Weiswasser, 149 N.J. 320 (1997)

Condemnor’s Perspective (Cont’d) Damnum Absque Injuria (cont’d) (4) Revocation or Modification of Access and provision of "reasonable alternative access" pursuant to State Highway Access Management Act, N.J.S.A. 27:7-89 et seq. State v. Marlton Plaza Assocs., L.P., 426 N.J. Super. 337 (App. Div. 2012), certif. denied __ N.J. __ (2012) - regulation of access accomplished by police power and is not a taking - administrative scheme regulating access provides adequate protections to property owners

Condemnor’s Perspective (Cont’d) Damnum Absque Injuria (cont’d) Damages attributable to general circuity of travel, changed traffic patterns or erection of barrier State v. Monmouth Hills, Inc. 140 N.J. Super. 449 (App. Div. 1970), certif. den. 57 N.J. 133 (1970)   State, by Comm'r of Transp. v. Charles Investment Corp., 143 N.J. Super. 541 (Law Div. 1976), aff'd 157 N.J. Super. 14 (App. Div. 1977), aff'd o.b. 76 N.J. 86 (1978)

Condemnor’s Perspective (cont’d) Damnum Absque Injuria (cont’d) (6) Noise and vibration impacts absent proof that there is measureable increase in noise level and/or vibrations caused by taking and proof that such impacts are reflected in the marketplace. State, by Comm'r of Transp. v. Carroll, 123 N.J. 308 (1991)

Condemnor’s Perspective (Cont’d) General Benefits of Project May Not Offset Damages   Borough of Harvey Cedars v. Karan, 425 N.J. Super. 155 (App. Div. 2012) certif. granted 210 N.J. 478 (2012)

Successful Handling of Condemnation Case Requires: Appreciation of Constitutional Magnitude of Issues Careful Attention to Procedural Details Careful Attention to Substantive Details Familiarity with the Property and the Valuation Concepts

Anthony F. DellaPelle, Esq., CRE Questions? Anthony F. DellaPelle, Esq., CRE adellapelle@mckirdyriskin.com www.mckirdyriskin.com Lawrence H. Shapiro, Esq. lhs@ansellgrimm.com www.ansellgrimm.com