NATIONAL BUSINESS INSTITUTE

Eminent Domain From Start to Finish

June 3, 2013

The Panel2

Anthony F. Della Pelle, Esq. , CRE (Moderator)John H. Buonocore, Jr. Esq.

Thomas M. Olson, Esq.

Paul T. Beisser, III, MAI, CREValue Research Group, LLC

William W. Northgrave, Esq.McManimon, Scotland & Baumann, LLC

Lawrence H. Shapiro, Esq.Ansell, Grimm & Aaron, P.C.

Mark W. Sussman, MAI, CRELasser Sussman Associates, LLC

Course Outline3

The Eminent Domain Process Condemnor vs. Condemnee Perspectives

Calculating Just Compensation: Appraisers’ Insights

Relocation AssistanceChallenging the Right to CondemnTrial Practice and StrategyEthics in Condemnation

The Eminent Domain Process4

Constitutional and Legislative Grant of AuthorityEnabling Legislation – Municipal, County, Special

Agency, State and Federal Governments Public Use RequirementRequirement for Just Compensation

Just Compensation5

"...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 Compensation6

Compensation for the property takenReduction in value (damages) to any remaining

propertyInterestIndemnity for lossAttorneys’ fees and costs not generally recoverable

by condemnee

Legal Resources7

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)8

21 New Jersey Practice, Skills and Methods, Eminent Domain

Legal Resources (cont’d)9

Legal Resources (cont’d)

10

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 197111

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 Process12

Attempt at amicable resolution through bona fide negotiations

Final judgment on authority for and due exercise of power by condemnor

Commissioners’ HearingJury Trial on appeal from Commissioners’ Report on

the issue of just compensation

SingleIssue -Value - Controversy

13

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”14

Real vs. Personal PropertyAs to real estate, “functional unit” test for “fixture”

issuesInterplay 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 Value15

Pursuant to N.J.S.A. 20:3-30, the earliest of the following events:

Date possession is taken by the condemnor Complaint dateDate 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 16

Prelitigation Entry and Inspection/Evaluation N.J.S.A. 20:3-16

Title SearchesParcel SurveysAppraisalEnvironmental InspectionsRight of Entry

Bona Fide Negotiations17

Notice of appraisal inspectionWritten offer by certified mailOffer not less than approved appraisalDescription of property to be acquiredDisclosure of all appraisals obtained Minimum 14 days for reply to offerMust address issues raised by owner

Litigation - Phase 1 18

ComplaintOrder to Show CauseDeclaration of TakingOrder Permitting DepositNoticesAnswerJudgment Appointing Commissioners

Complaint19

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) 20

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,

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.

Parties21

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 Cause22

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 Taking23

Basically, a “deed” from the condemnor to itselfFixes the property and rights acquired based on legal

descriptionRecorded in County Clerk/Register’s office

Order for Deposit24

Provides for deposit of estimated compensation (usually the amount of the offer per the appraisal)

May be obtained ex parte

Abandonment of Action25

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)

Answer26

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.

Answer (cont’d)27

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 CauseNon-contesting appearance may be filed in lieu of

answer; valuation issues preserved. N.J.S.A. 20:3-12(c).

Denial of Right to Condemn28

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 Taking29

No public purpose – bad faith, pretextLack of necessityFailure to pass requisite authorizationsIndefinite descriptionFailure to engage in bona fide negotiations. N.J.S.A.

20:3-6

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)

30

Judgment Appointing Commissioners31

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?

Deposits into Court32

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 Court33

By motion and petitionRequest for dismissal of other defendantsProcessing withdrawal from Trust Funds UnitCondemnor’s ability to preserve portion of deposit

for site remediationConsideration of possession issues

Litigation - Valuation Proceedings34

Valuation (Appraisal)

Commissioner’s Hearing Procedure

Jury or Bench Trial – de novo

Elements of Fair Market Value

35

Willing buyer & sellerNeither being under a compulsion to actBeing 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)

Entire Taking

36

•Just compensation determined by “fair

market value” of the property as of the

date of value

Partial Taking – Two Methods of Valuation

37

• 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”

38

• 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 Cure39

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’ Hearing40

Non-binding arbitrationProvide reports 15 days in advanceObtain Award, File AppealNo appearance = no right to appeal

* Borough of Keyport v. Maropakis, 332 N.J. Super. 210 (App. Div. 2000)

Appeal from Award of Commissioners41

File within 20 days of service of awardMay be relaxed up to 30 days for good causeNon-relaxable thereafterParty 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)

Litigation - Trial “De Novo”42

Condemnor proceeds firstNo burden of proofCondemnation trial is an "evidential construction of

a hypothetical sale”Wide discretion in admission and rejection of

evidenceJury view of condemned property. R.4:73-7Environmental considerations – valuation as if

“remediated”

Condemnor’s Perspective

43

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

44

Condemnor’s Perspective (cont’d)

45

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

46

Condemnor’s Perspective (cont’d)

47

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 

48

Condemnor’s Perspective (Cont’d)

Damnum Absque Injuria (cont’d)

(5) 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)

49

Condemnor’s Perspective (cont’d)

50

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)

51

Successful Handling of Condemnation Case Requires:

52

Appreciation of Constitutional Magnitude of IssuesCareful Attention to Procedural DetailsCareful Attention to Substantive Details Familiarity with the Property and the Valuation 

Concepts

Questions?53

Anthony F. DellaPelle, Esq., CREadellapelle@mckirdyriskin.com

www.mckirdyriskin.com

Lawrence H. Shapiro, Esq.lhs@ansellgrimm.comwww.ansellgrimm.com