When Does Condemnation Go Too Far?

The first thing people think of when they hear words “condemnation” or “eminent domain” is the government’s ability to take property with dilapidated buildings or vacant wastelands and rejuvenate the land for a public purpose. However, in 1992, New Jersey passed the Local Redevelopment and Housing Law (LRHL), N.J.S.A. 40A:12A-1, causing a renaissance in the area of redevelopment. Municipalities within New Jersey have used the state’s redevelopment statutes to revitalize private property, for both public and private uses, when they deemed the property “areas in need of redevelopment”. These statutes enabled numerous municipalities to improve areas which were underutilized and/or poorly planned, not just blighted. To do so, municipalities needed to meet the standards of one of the eight statutory criteria listed in N.J.S.A. 40A:12A-1. As these types of takings became more prevalent, citizens of the state began to complain that their individual property rights were being violated.
The rapid rise in these instances of eminent domain is not only occurring in New Jersey. Throughout the United States municipalities are attempting to redevelop private properties that are underutilized. And just like in New Jersey, it often adversely affects private citizen’s rights. In Kelo v. New London, 545 U.S. 469 (2005), the Supreme Court of the United States held that the benefits a community received from the economic upgrade from the redevelopment of private property taken through condemnation is a permissible “public use” under the Takings Clause of the Fifth Amendment.

After the Kelo decision, New Jersey municipalities were astonished with the unanimous decision of our state’s Supreme Court in Gallenthin Realty Development, Inc. v. Borough of Paulsboro, A-51-2006. In this decision the Court held:
NJ Case

Because the New Jersey Constitution authorizes government redevelopment of only “blighted” areas, the Legislature did not intend N.J.S.A. 40a:12A-5(e) to apply in circumstances where the sole basis for redevelopment is that the property is “not fully productive”. Rather, subsection 5(e) applies only to areas that, as a whole, are stagnant and unproductive because of issues of title, diversity of ownership, or other similar conditions.

In Gallenthin, the Paulsboro sought to categorize a sixty-three acre parcel of land, consisting mostly of vacant wetlands, as an “area in need of redevelopment.” Paulsboro relied on N.J.S.A. 40A:12A-5(e), one of the 8 criteria, to exercise such a power. In part, subsection (e) states redevelopment is needed when “a growing lack or total lack of proper utilization of areas caused by the condition of title, diverse ownership of the real property therein or other conditions, resulting in a stagnant or not fully productive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare.”

Specifically, Paulsboro argued that the legislative intent of the words “other conditions” was intended to be infinite in scope. In essence, municipalities are permitted to acquire any parcel of land through condemnation for purposes of redeveloping property which is “not fully productive” or potentially useful to the public good. Gallenthin countered that Paulsboro’s interpretation was beyond the parameters set forth in the New Jersey Constitution and the Local Redevelopment and Housing Law found at N.J.SA. 40a:12A-1. Gallenthin contended “not fully productive” and “blighted” were not synonymous. Gallenthin felt that if these terms were to become interchangeable, municipalities would have the discretion to condemn any piece of land which they felt was not being used to its maximum productivity and place it into a redevelopment plan.

As previously stated, the Supreme Court ruled that Paulsboro had misinterpreted the intent of N.J.S.A. 40A:12A-5(e). The Court agreed that a windfall would occur if municipalities were allowed to take any land merely because it is “not fully productive”. In the Court’s opinion, “blighted” was intended to define those properties which have deteriorated to the point in which it has become a significant detriment to surrounding properties. Therefore, a municipality’s utilization of subsection (e) could only occur when a property’s lack of productivity is caused by issues with title and/or a diversity of ownership, as stated in the statute. The Court interpreted the term “other conditions” to mean conditions related to those dealing with title and ownership.

Redevelopment

It is important to note that this part of the decision only concerned subsection (e) of N.J.S.A. 40A:12A-5. The other 7 criteria remain unchanged by this interpretation. However, the Courts did emphasize in their decision that municipalities still need to provide considerable evidence on the record, no matter which criteria is employed, establishing that a subject property is in need f redevelopment. Simply having an expert recite the elements of the criteria and formulating a conclusion will be found insufficient.

Municipalities have all but abandoned redevelopment projects which are based on the property being “not fully productive”. Furthermore, the need for substantial evidence on the record has already altered how municipalities approach redevelopment. The rulings have caused municipalities to reevaluate the validity of existing and future redevelopment projects. From the municipality’s standpoint, this ruling will place a significant, some even say undue, burden on the municipality’s ability to provide a safer environment for its citizens. One definite is that the Courts will see a significant rise in appeals from landowners, using Gallenthin as their defense, whose property is being condemned for redevelopment. It will be interesting to see if and/or how the Courts will handle future arguments for the restriction of eminent domain for the purposes of redevelopment.

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