Opinion: Is “Inverse
Condemnation” the Next Battleground for Reform?
Too many property owners
are still at the mercy of local governments thanks to an obscure legal maneuver
By R. William
Potter, May 28
in Opinion
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Local officials
deem private property underutilized or “blighted,” declare it “in need of
redevelopment” and transfer it to a “redeveloper” who promises to build an
upscale project in its place.
Sound like an
abuse of eminent domain? Fortunately, that’s how the New Jersey Supreme Court saw it three years
ago, when in the case of Gallenthin v. Borough of
Paulsboro it ruled such a seizure unconstitutional. Since then, courts have
prevented many a municipality from using similar standards for declaring
properties “blighted” and seizing them for “redevelopment.” [Disclosure: Our
firm represented Gallenthin in that landmark case.]
Unfortunately,
many property owners are still at the mercy of local governments thanks to a
somewhat obscure legal maneuver known as “inverse condemnation.” And that means
the campaign against abuse of eminent domain -- which began in 2004 after the U.S. Supreme Court upheld the City of New London’s taking of a
private home to make way for an office complex that was never built -- must
continue.
In New Jersey, inverse
condemnation plays out this way. A property has been declared blighted but,
post-Gallenthin, the local municipality doesn’t try
to take it over because it knows the court will block any such attempt. Nor
does it officially condemn the property, which would require it to pay the
owner for purchase. But because the property is declared
blighted, there is also little to no hope of sale to any other purchaser.
No condemnation, no way to sell -- which amounts over time to a de facto
“taking,” since ultimately the only way out of this limbo is for the city to
seize the property eventually.
More than 40 years
ago the state Supreme Court described it this way: “There can be no doubt that
a declaration of blight adversely affects the market value of property. This is
unfortunate because in many instances the taking does not occur for a number of
years. In the meantime, the owner can only wait for that ultimate taking; there
is no market otherwise open to him for the sale of the property. In fairness,
it is not enough to assure the owner that at some time, perhaps years hence, he
will receive the market value of his land. Meanwhile, he and his family may
well be imprisoned economically in a blighted area for many years.”
Think of what it
would mean if your home or business was “imprisoned economically in a blighted
area” for several years with no hope of sale or condemnation. I heard tales of
such “imprisonment” at business conference last summer where I spoke on eminent
domain.
The owner of a
printing company told me he couldn’t get financing to expand his business to
take on new orders. Why? He’s been in a blighted area for 15 years and no bank
will touch blighted property.
A waterfront owner
said he couldn’t build on his valuable land or sell to a developer because it
was slated for condemnation that had not occurred for more than a decade.
Another business
owner (a client of ours) has been in a blighted area since 1996, but the city
has proclaimed it will never use eminent domain. And in the most heartbreaking
case, a woman’s family needed to sell their beachfront home to pay for a
medical operation but couldn’t do so because it was in a “blighted” zone dating
to the mid 1990's.
So what’s to be
done? An eminent domain reform bill that died in the last legislative session
had an automatic “sunset date” on blighted areas of five years. That’s still a
long time to be “imprisoned economically,” but at least it would have promised
eventual relief.
It’s time to
remount efforts for such reform. It’s the only way to help trapped owners who
now must either endure the “imprisonment” or turn again to the courts, the last
bulwark against this continuing abuse of government power.
http://www.njspotlight.com/stories/10/0527/2039/