Notice of Potential for Condemnation Required to Impose Strict 45-Day Limitations Period to Redevelopment Designations

In Harrison Redevelopment Agency v. Anthony J. DeRose,  decided February 25, 2008, the New Jersey Appellate Division ruled that due process concerns mandate that the notice provisions of the Local Redevelopment and Housing Law (“LRHL”), N.J.S.A. 40A:12A-6, will not pass constitutional muster unless a municipality provides a property owner with contemporaneous written notice that fairly alerts the owner that:

(1) his or her property has been designated for redevelopment,

(2) the designation operates as a finding of public purpose and authorizes the municipality to acquire the property against the owner’s will, and

(3) informs the owner of the time limits within which the owner may take legal action to challenge that designation.

Thus, an owner constitutionally preserves the right to contest the designation, by way of affirmative defense to an ensuing condemnation action.  Absent such constitutionally-adequate notice, the owner’s right to raise such defenses is preserved, even beyond the traditional forty-five day limitation period after the designation is adopted.

If the municipality’s notice does contain these constitutionally-essential components, an owner who wishes to challenge the designation must bring an action within the forty-five day period after a municipality has adopted the designation.  The owner who is provided with such adequate notice typically may not raise objections to the designation as a defense in a future condemnation action.  However, a court may apply the “interests of justice” standard to expand the forty-five day limitation period when circumstances require.

Additionally, in remanding the case to the trial court to consider the appellant’s challenges to the underlying redevelopment designation, the appellate court found that, while the issue of retroactivity in Gallenthin v. Borough of Paulsboro is ultimately an issue for the state Supreme Court, the court presumed that the holding has “pipeline retroactivity” to cases such as this, where the matter was pending in the court on June 13, 2007 when the Court decided Gallenthin.  As a result, the appellate court directed the trial court to allow all parties to supplement the record as to whether substantial evidence was present to designate the property in question as an area in need of redevelopment in accordance with the Gallenthin court’s interpretation of section N.J.S.A. 40A:12A-5(e) which limited redevelopment designations under this section to properties with diverse title and ownership issues, and not amorphous claims of “underutilization.” Gallenthin held that the expert testimony supporting a redevelopment designation must provide a substantive analysis of the facts surrounding the criteria for finding an area to be in need of redevelopment.

 The impact of the Harrison decision on existing redevelopment areas is clear, namely, if a municipality did not provide individual notice of the designation of a property as a redevelopment area and the potential for future condemnation as outlined in the Harrison opinion (which detail pertaining to notice is not required by the plain language of the LRHL or reported decisions prior to this opinion), a property owner would have standing to challenge the procedural or substantive facts underlying a redevelopment designation years down the road.  Thus, this opinion is a blaring warning to developers, municipal officials and property owners that the underlying strength of any redevelopment designation should be evaluated by a prospective developer, investor or landowner early on in the redevelopment process as, if condemnation is ultimately used, the original redevelopment designation could be voided, even if the designation was resolved years prior.

For a copy of our bulletin on this decision, click here.

Downtown NJ Hosting Q&A on Proposed COAH Rules With DCA Commissioner on March 14

Downtown NJ, a not-for-profit organization dedicated to enhancing the economic and social welfare of downtowns and providing support for downtown districts and coalitions, will be hosting a free forum next month to discuss the proposed Third Round affordable housing regulations proposed by the Council on Affordable Housing (COAH).  DCA Commissioner Joseph Doria will be joined on the panel with Stan Slachetka, P.P. of T&M Associates and Louis A. Riccio, Executive Director of the Madison Housing Authority.

From the Downtown NJ website:

Downtown NJ will hold an open forum to explain the new rules and answer your questions. Commissioner Joseph Doria of the NJ Dept. of Community Affairs will present the state’s position and what the proposed rules mean.

Please join Downtown NJ members for this important information forum.

Friday, March 14
9:30 am – 10:30 am
Cranford Town Hall
8 Springfield Avenue

The session is free and open to elected officials, municipal administrators, SID managers and board members, land use attorneys, planners and developers.

Make a reservation by calling DNJ at 973-992-8800 or by email at info@DowntownNJ.com

Last Public Hearing on Highlands Plan Slated For February 13

The second of three public hearings regarding the Highlands Regional Master Plan was held at Passaic County Community College on Monday night.  The plan, which has as its ultimate goal the preservation of a source of drinking water for approximately 5 million New Jersey residents, has been a lighting rod for criticism by environmentalists who don’t believe the act went far enough, by builders who claim that the plan puts unreasonable limits on growth and by property owners in the region who own land once thought to be a nest egg for retirement which will be rendered worthless with no real prospect of compensation at anywhere near the land’s full value.  (Not to mention the complaints being raised at public hearings on the new COAH Third Round rules and the impact on the Highlands, which environmental leaders are not missing an opportunity to point out.)

Originally offered with laudable goals of watershed preservation but passed after political compromise, the plan continues to be subject to much public criticism and legal challenges. 

For a synopsis the latest hearing, read “Highlands Plan Gets Additional Critics” from Tuesday’s Star Ledger. 

The final public hearing on the Highlands Master Plan is scheduled for 6:30p.m. at Voorhees High School, 256 County Road 513 in Glen Gardner. 

Written comments may be submitted by e-mail to RMPComments@highlands.state.nj.us.  Comments may also be submitted on the Final Draft Regional Master Plan by February 28, 2008 to:

Attn: Final Draft RMP Comments

Highlands Council

100 North Road – Route 513

Chester, NJ 07930

Appellate Courts Continue To Hear Arguments Over Redevelopment Designations

On February 4, the Appellate Decision issued an unpublished decision finding that the Borough of Belmar did not properly support the designation of “an area in need of redevelopment” based upon the Gallenthin v. Paulsboro decision.  BMIA, LLC v. Planning Board of the Borough of Belmar, Docket No.  A-5974-05T5 (App. Div. Feb. 4, 2008).  Additionally, a separate panel of the Appellate Division heard oral argument yesterday, led by Public Advocate Ronald Chen, involving a redevelopment area in Harrison in which he argued that the 45-day statute of limitations for challenging a redevelopment designation violates constitutional requirements of due process.

In BMIA, LLC, the court found that the proper standard “involved a narrow legal construction of the LRHL,” which required that the designation be set aside.  The court noted that while the consultant’s report on which the defendant Borough had relied might have established that the area could be “better utilized” and that “redevelopment would be beneficial,” there was no evidence that the existing conditions were “detrimental to the health, safety, morals or welfare of the community” as required by N.J.S.A. 40A:12A-5d, or were due to “issue of title” or “diversity of ownership” as required by N.J.S.A. 40A:12A-5e.  Having decided that the redevelopment designation did not follow the strict requirements of the Local Redevelopment and Housing Law, the court declined to address the issue of whether the LRHL permits a municipality or redevelopment agency to enter into a redevelopment agreement with a redeveloper before a redevelopment plan has been prepared.

In the Harrison case, the Star Ledger reported that the Public Advocate is challenging the time period in which a legal challenge may be brought against a redevelopment designation.  In challenges to a redevelopment designation, the statute of limitations is 45 days from the establishment of the redevelopment area by the governing body, subject to limited exceptions.   Here, none of the the affected property owners objected to the underlying designation, but six years later, several were faced with condemnation proceedings.  According to the Star Ledger article:

State Public Advocate Ronald Chen and lawyers for three present and past property owners argued that the state’s redevelopment law does not give property owners enough time to challenge a town’s plans to take their property. They said the owners may not know their property is actually targeted for condemnation until years after the deadline for legal action has expired.

In 1997, the Harrison Planning Board determined a portion of the town south of Route 280 was blighted and designated it as an “area in need of redevelopment” by Hoboken-based Harrison Commons Inc. Chen and supporting lawyers said when the planning board conducted a required public hearing, officials provided property owners only positive information about the benefits of redevelopment and told them it would not affect their property rights.

A year later, the Harrison council adopted the planning board’s redevelopment recommendation. Property owners had only 45 days under the law to initiate legal action opposing the blight designation, but the town did not identify any specific properties it intended to take through eminent domain.

Another six years passed before property owners were notified the town planned to condemn their properties. By then, Chen said, the 45-day period to take legal action had long passed.

“Under our current law, New Jersey residents can lose their property without adequate notice that their property will be taken and without a hearing,” Chen said. “This case demonstrates why the current law fails to satisfy the due process requirements of the federal and state constitutions.”

Chen argued that any government notice of condemnation procedures must include notice of a property owner’s right to challenge in court.

Gregory Castano, counsel for the planning board, said the 45-day rule is intended to prevent last- minute challenges that can be expensive and time-consuming to a government.

We will be keeping a close eye on this case as if the court strikes down the limitations period, it will potentially open up the door to challenges to redevelopment areas created years ago, well before the Gallenthin Court’s strict reading of N.J.S.A. 40A:12A-5e.  Thus, both the BMIA case and the Harrison case are reminders of the necessity of thorough due diligence as to the underpinnings of a redevelopment designation by a prospective purchaser or redeveloper of property within a redevelopment zone.

P.S.  The Star Ledger also reported on the positives associated with new residential and commercial development in Harrison, as well as the ongoing construction of a new soccer stadium, in the area of the Harrison Path station.  For the full article entitled “On the Path to a Boom,” click here.

Former Chief Justice Comments on Gallenthin Decision

In a panel discussion at Monmouth University this week, former Justice James Zazzali provided some commentary on the Gallenthin opinion he authored as well as the future of redevelopment:

“There can be little question that the exercise of eminent domain has received a bad name lately,” said Zazzali, author of the state Supreme Court decision.  The jurist described himself as “somewhere in between” builders who support the use of eminent domain, and critics of the power.  As for the question of redevelopment and its link to eminent domain, he said: “Maybe some might call it a mess. I do not.” 

Despite a growing public perception that individual property rights were being “trampled” in some redevelopment cases, “we did not voice an opinion about whether redevelopment was good or bad,” said the chief justice.

“There are restraints in the exercise of the authority. “In my view, the court acted appropriately” in deciding Gallenthin in a way that provides a measure of protection to property owners,” Zazzali said. “The court did not decide what sort of redevelopment was appropriate,” and is neither driven by pro- or anti-redevelopment forces, he said. 

“At the end of the day, redevelopment and eminent domain can still play a valuable role in the revitalization of the urban landscape,” Zazzali said.  Requiring more than a cursory report to prove an area is blighted “will in all likelihood reduce the number of redevelopment projects,” Zazzali conceded. “The answer is not to abandon redevelopment in these areas. . . . If we do it right, it can be a win-win-win situation for developers, municipalities and their citizens. I plead for cooperation and conciliation.”

For the full article from the Asbury Park Press, click here.