Lead Opinion
The opinion of the Court was delivered by
This case concerns the appropriate date for valuing condemned property pursuant to the Eminent Domain Act of 1971 (N.J.S.A
At issue is whether a letter written by a municipality to a potential condemnee “substantially affect[ed]” the value of the property, thereby setting the valuation date pursuant to N.J.S.A. 20:3-30(c). The trial court determined that the date of the letter, which stated that the municipality may acquire the property owner’s land for use as a community park, had obtained financing for the acquisition, and intended to obtain a prompt appraisal of the property’s value, constituted the proper date for valuing the property. The Appellate Division reversed the trial court’s decision, holding that the letter was “merely a preliminary step to a potential future condemnation.” 285 N.J.Super. 436, 451,
I
In 1987, Stuart Nierenberg, Marilyn Nierenberg, Philip Kramer, Sol Kramer, and Ely Kramer formed Princeton Manor Associ
The property is zoned R-2 Residential by the Township of West Windsor (Township). That zoning permits single-family detached dwellings on three-quarter acre lots. R-2 zoning also allows open-space cluster developments as a conditional use if the lot size is at least 20,000 square feet and is served by either public water or public sewer. The subject property is serviced by public water and partially by public sewer.
At some time prior to 1987, the property, together with two contiguous parcels, was designated on the Township’s Master Plan as a potential site for West Windsor’s proposed Community Park. On July 8, 1987, Princeton Manor Associates purchased the property from Yvette Nierenberg for approximately $4,320,700, and Yvette simultaneously acquired an interest in the partnership.
In the months following the sale, Princeton Manor Associates prepared a plan for a forty-eight-lot residential subdivision of the property. The partnership spent approximately $25,000 in engineering costs preparing the plan. The final plan conformed with the municipal zoning ordinance. The partnership’s attorney Peter Buchsbaum would later testify that it was “a relatively straightforward submission.” The partnership’s subdivision application was presented to the Township on May 13,1988.
By letter dated May 19, 1988, the Township’s Director of Community Development acknowledged receipt of the partnership’s application. The Director notified the partnership that certain administrative requirements had not been met, such as payment of a required application fee/security deposit and submission of additional copies of certain documents. On June 3, 1988,
The partnership was then faced with a choice. It could wait at least seven months for the seasonal high water period to conduct percolation tests, at an approximate cost of $40,000. Alternatively, the partnership could attempt to have the municipal sewer plan amended to provide service to the entire property. The partnership was studying the sewer plan amendment process when Yvette Nierenberg received a certified letter from Robert Bruschi, the Township Administrator. That letter, dated July 29, 1988, read:
Dear Ms. Nierenberg:
TOWNSHIP MASTER PLAN/COMMUNITY PARK
Enclosed is a copy of the facilities portion of the Township Master Plan. Three (3) properties to comprise a potential Community Park have been designated in it. In conjunction with the Master Plan, the Township applied to the New Jersey Green Acres for a low-interest loan for the properties’ purchase. Several months ago, the Governor notified us of our award of a $3 million loan to supplement the Township’s funding for purchasing this property. On June 27,1988, the Township Committee authorized the Mayor to enter into an agreement with New Jersey Green Acres to fund this acquisition.
Therefore, this is formal notification that West Windosr [sic] Township may acquire this property for the purpose of establishing a Community Park.
Shortly, the Township along with independent appraisers and the Green Acres Office will determine a fair-market value for the property.
In the interim, I am available to answer your questions regarding the above items.
Upon review of the July 29 letter, Buchsbaum advised his clients that they could not secure Township approval for enlargement of the sewer system when the Township appeared intent on condemning the property.
On August 23, 1988, an appraiser retained by the Township wrote to Yvette Nierenberg, stating “[t]his firm has been retained by the Township of West Windsor to make an appraisal on the above captioned property which is part of the Community Park
On February 16,1989, Buchsbaum wrote to Bruschi, stating:
Confirming our previous conversation, we have found it impossible, as a practical matter, to proceed with the development plans previously filed on the above-referenced property because of the Township’s statement that it intends to acquire the property for a park. However, the matter has now been pending some six months, but we have not even received an appraisal or any form of offer.
We can not have our land rendered unusable while the Township considers the matter. This is, in fact, what has occurred over the last six months, even though we have expressed a willingness to discuss the issue with the township.
Bruschi responded:
As I have explained to you in our conversation on the telephone approximately two weeks ago, the Township is not in the position to begin any negotiations with the property owners until such time as we have received the fair market value from the Green Acres Office at the State of New Jersey. As soon as this is received by the Township, we will begin our discussions with the property owners involved, and you will be notified at that point.
In March 1989, the Township attorney Michael Hartsough was informed that the Department of Environmental Protection, Division of Green Acres Land Acquisition (Green Acres) had approved the acquisition. On April 19, Hartsough sent a letter to Buchs-baum stating that Green Acres had accepted an appraisal valuing the property at $3,022,000. Hartsough reminded Buchsbaum that, pursuant to the Act, he had fourteen days to respond. However, Hartsough encouraged negotiations between the Township and the partnership, and granted several extensions to permit further negotiations.
As negotiations continued, it became apparent that grounds for compromise existed. After the Township received the appraisals for the properties to be acquired for the Community Park, it realized that it could not afford to both purchase the properties
On September 5, 1989, West Windsor’s Township Committee adopted a resolution accepting an offer by the partnership to sell thirty-seven acres to the Township for $1,250,000. The partnership would be permitted to complete a residential development of no more than sixty units on the remaining thirteen acres, subject to a rezoning of the property and planning board approval. The Township Park Planning Committee recommended against the rezoning, arguing that the planned development would be an excessively intensive use of the remainder. On August 15, 1990, the Township Committee declined to approve the zoning ordinance amendment necessary to permit development of the remainder.
On August 29,1990, Buchsbaum wrote to Hartsough to confirm that the “upset price” for purchase of the entire property was $3.3 million dollars. Buchsbaum and Hаrtsough had negotiated that “upset price” in the event that the zoning amendment failed. In his reply letter, Hartsough observed that “the Township Committee last evening in closed session agreed to the purchase of the Nierenberg tract for $3.2 million.” Hartsough further noted that the Township Committee intended to introduce a bond ordinance authorizing the debt necessary to consummate the transaction. That bond ordinance was eventually defeated.
On December 12,1990, Hartsough wrote to Buchsbaum indicating that, although the Township still desired to have the property included in the plans for the Community Park, the Township would require a “price ... more reasonable in terms of current economic conditions.” Upon receipt of that letter, Buchsbaum advised his clients that the Township was stalling the condemna
On January 22, 1991, the partnership filed a complaint in the Law Division seeking, among other relief, just compensation for the Township’s alleged destruction of the value of its property or, alternatively, specific performance of its prior agreement with the Township whereby the partnership would receive $1,250,000 and the property would be rezoned to permit construction of no more than sixty units on thirteen acres. While the lawsuit was pending, the Township continued to express its interеst in acquiring the property. It arranged for new appraisals and continued to negotiate with the partnership.
Those negotiations produced a new plan whereby the partnership would retain thirty-seven acres on which a thirty-four-lot subdivision would be permitted. The Township would acquire the remaining thirteen acres of the property. That proposal would require no zoning change or variance. The Township issued a pre-condemnation letter pursuant to N.J.S.A 20:3-6, stating its intent to acquire the thirteen-acre portion of the property. On May 29, 1992, the parties entered into a contract pursuant to which the Township thereafter acquired the thirteen acres for $700,000. The contract contained the following language:
WHEREAS Buyer’s planner and engineer have conducted a preliminary review of a concept plan [for development of the remaining thirty-seven acres] ... and both have indicated no objection to the lots and layout as proposed in the concept plan provided that all ordinance standards are met at the time of an actual application for development.
The contract also contained language indicating that execution of the terms of the contract would result in a stipulation of dismissal of the pending lawsuit. The final paragraph of the contract indicated that “[ejxecution of this Contract shall not bind the Township and the West Windsor Planning Board to any development application by the Seller in the future.” Title to the thirteen acres passed to the Township on June 25, 1992.
On July 17, 1992, the West Windsor Township Committee met and adopted a resolution authorizing the Township to take action
The sole issue at trial concerned the date on which the property was to be valued pursuant to N.J.S.A 20:3-30. The partnership presented Steven Segal, an expert real estate consultant with substantial experience in the valuation of real estate in Mercer County. Segal testified that the July 29,1988, letter had substantially affected the use and enjoyment of the property, as no developer would continue attempts to develop the property while threatened with condemnation. Segal explained that, in 1988, the real estate market had been at its peak, and prudent developers would have bypassed the Nierenberg property for other, unencumbered, propertiеs. Segal testified that the letter had diminished the property’s market value by at least twenty-five percent.
The Township presented the expert testimony of Russell Sterling, a real estate appraiser and consultant. Sterling had conducted a marketability study that indicated that the growth in residential development that had typified the early 1980s had ended by 1986. Sterling testified that, in 1988 and 1989, an excess of residential lots had been available in the Township and surrounding areas. Therefore, Sterling concluded that the letter had not substantially affected the property. Rather, the value of the property had decreased after July 1988 because of market conditions.
After hearing testimony from five witnesses and examining 138 exhibits, the trial court issued a comprehensive opinion concluding that the appropriate date of valuation was July 29, 1988, the date of the letter. The court first concluded that the standard set forth by N.J.S.A 20:3-30(c) “does not require a showing of governmental action which substantially destroys the beneficial use of private
The court then made enumerated findings of fact:
(1) The letter written to defendant Yvette Nierenberg was on West Windsor stationery, was signed by Robert W. Bruschi, Township Administrator, was sеnt certified mail-return receipt requested, and was stated to be “formal notification.” Copies were sent to the Township Attorney, the Assistant Township Administrator/Clerk, and the funding agency, New Jersey Green Acres. Either lawyer or layman reading this letter would view it as an official action on a matter of great significance. These aspects of the letter lead to the conclusion that it is much more than a simple letter advising defendant, Nierenberg, of her right to accompany an appraiser on his inspection.
(2) While the letter uses the word “may” in describing the purpose of the notification (“that West Windosr (sic) Township may acquire this property”), the word “may” is so overwhelmed by the other aspects of the letter as to justify a conclusion of a predetermination on the part of plaintiff to take the action described. This is especially so since the “formal notification” is not a required action if no decision has been made by a governmental body to exercise its right of eminent domain.
(3) Accompanying the letter and referred to therein was a copy of the map entitled “Community Facilities Plan” which included defendants’ property. Also included with the letter was “a copy of the facilities portion of the Township Master Plan,” pages 77 through 94 inclusive, discussing in detail the construction of a public park on defendants’ property, among others. The letter wаs obviously intended to impress Nierenberg with the advanced stage of plaintiff’s plan to use defendants’ property for public purposes.
(4) The letter states in some detail that funding for the acquisition of defendants’ property was available, reciting the source of the money and actions taken to obtain it. It advises defendant, Nierenberg, that the money was to come from a $3,000,000 low-interest loan from the Green Acres program pursuant to notification from the Governor of New Jersey that the award of the loan had been approved. The $3,000,000 was described as a supplement to funding by plaintiff, indicating that additional money was also available. The money was said to be “funding for purchasing this property,” referring to three properties of which defendants’ property was one, shown on the Master Plan. A reasonable conclusion from a reading of this portion of the information is that a governmental body which has sent a letter advising that it has sought and successfully obtained a $3,000,000 low-interest loan to purchase properties for a public park and which states it has supplemental funding for that purpose, seriously intends to acquire the property described. This conclusion is reinforced by the statement, “On June 27, 1988, the Township Committee authorized the Mayor to enter into an agreement with New Jersey Green Acres to fund this acquisition.” The words “fund this acquisition,” indicate an intеntion to do so.
*123 (5) Finally, the letter states that a determination of the fair market value of defendants’ property is going to be made, and that three different groups are going to make that determination, “the township,” “the Green Acres office,” and “independent appraisers,” an indication that more than one appraiser was to be involved. The only reason for plaintiff to determine the fair market value of defendants’ property would be to purchase the properly, and a statement of three groups being involved in that decision is indicative of a firm intent to acquire the property.
The court reasoned that the Township’s letter impeded development, thereby significantly diminishing the possibility that the land would be put to its highest and best use as a residential development. The court observed that the only apparent alternative use would be agricultural. The court also relied on the “conservative” estimate of the partnership’s real estate expert that the letter had devalued the property by twenty-five percent, noting that “[t]here is no doubt that this is so."
The court rejected the Township’s argument that any effect that the letter may have had was temporary only, as the parties eventually settled their subsequent inverse condemnation case. The court found that the settlement “constituted ... an acquisition of a portion of the prоperty for which funding was then available.” The court noted that the evidence adduced at trial indicated that the Township’s proprietary attitude towards the property had not abated. The threat of condemnation continued uninterrupted, as was demonstrated by the Township Committee’s subsequent actions. Continuity of the substantial effect of the letter on defendant’s property was established. Therefore, the court concluded that the date of that letter — July 29, 1988 — was the appropriate valuation date.
On April 29, 1994, five days after the entry of the trial court’s Order setting July 29, 1988, as the date of valuation, the Township moved before the trial court to bar Yvette Nierenberg and the partnership under the doctrines of res judicata and collateral estoppel from relying on the July 29, 1988, valuation date. The Township’s core argument was that, because the inverse condemnation complaint was dismissed with prejudice by a consent judgment, the consent judgment should be considered an adjudication on the merits that would preclude further judicial review. The
The Appellate Division reversed the decision below. 285 N.J.Super. 436,
The letter contained no promise by the Township that it would ultimately condemn the property. Instead, the Township indicated it “may” acquire the property for development of a community park in accordance with the master plan and that it had obtained a loan commitment to enable it to take this course. Prior to the creation of Princeton Manor and the purchase of the property, Philip Kramer was aware of the fact that the land was a potential site for a community park. The ¿mster plan made that potential crystal clear. So too, Princeton Manor either knew or should have known that the Township had obtained a low interest loan in order to acquire and develop the property as a park and that Green Acres funding was available. The Township Committee’s resolution was a matter of public record. Clearly, these events did not dissuade Princeton Manor from proceeding with its plan for development.
[Id. at 450-51,667 A.2d 362 .]
The court determined that the letter “did not earmark the property for taking. Instead, it was merely a preliminary step to a potential future condemnation.” Id. at 451,
The Appellate Division contrasted N.J.S.A 20:3-30(c) with N.J.S.A 20:3-38, which provides that “[t]he value of any land or other property being acquired in connection with development or redevelopment of a blighted area shall be no less than the value as of the date of the declaration of blight by the governing body upon a report by the planning board.” In enacting that provision, the Legislature presumed that a declaration of blight would adversely affect value. See Newark Hous. Auth. v. Ricciardi, 176 N.J.Super. 13, 19,
The Appellate Division further found that the partnership could have perfected its application for major subdivision approval, thereby forcing the Township to determine its acquisition plans. Id at 452,
While the state appeals were pending, Yvette, Stuart, and Marilyn Nierenberg, together with the partnership, filed suit in United States District Court against the Township, the Mayor, and the Township Committee. Plaintiffs sought relief pursuant to 42 U.S.C.A § 1983 and the New Jersey common-law actions for breach of contract and fraudulent misrepresentation. The complaint was dismissed on defendants’ motion for summary judgment. The court found that plaintiffs’ § 1983 claims were time-barred, and declined to exercise supplemental jurisdiction over the claims arising under state law. On February 20, 1997, the Third Circuit Court of Appeals entered a Judgment affirming the decision of the District Court.
II
A
When private property is condemned for public use, the condemnor is required to pay “just compensation” to the property
Although a sum of money equal to “fair market value” cannot always be a perfect measuring stick for determining the worth of property to a landowner, the State must try as nearly as possible, emplоying objective standards, to replace the land which has been earmarked for public use with equivalent public funds.
[54 N.J. 50, 53,253 A.2d 163 (1969).]
One of the primary objectives of the Act was to integrate and standardize the more than 300 statutes then existing authorizing the exercise of eminent domain. County of Monmouth v. Wissell 68 N.J. 35, 39-40,
Article V of the report, entitled “Date as of Which Compensation Shall be Determined,” contains the following comment:
Property owners are ... affected by public announcements by agencies of proposed projects, highway routes and the like. Years may elapse between the date of the announcement and the consummation, and the final plan may and probably will differ substantially from the original scheme. The Commission*127 realizes that a public body must be afforded a wide range of time within which to reach its final conclusion, and to this end, will publicize various thoughts to test public opinion. But some consideration should be given to the persons whose property is thus placed in the test tube, and boiled in the caldron of public and political bickerings. It is said that this is the price which is paid for the benefit of living in a democracy. But why should thеse property owners pay the entire cost? Should not the benefited public also share?
The Commission ... suggests that any increase or decrease in the value of property caused by administrative actions, or public announcements of proposed public improvements, (other than that due to physical depreciation within the reasonable control of the owner) shall be disregarded in determining the compensation for the taking, and that compensation shall be fixed as of the date the action of the taking body shall substantially affect the use and enjoyment [sic] of the property.
[Report of Eminent Domain Revision Commission of New Jersey 27-28 (1965) (emphasis added).]
Shortly before passage of the 1971 Act, this Court decided Jersey City Redevelopment Agency v. Kugler, 58 N.J. 374,
The parcel in question was declared blighted nine years before condemnаtion proceedings were instituted by plaintiffs Jersey City Redevelopment Agency and its Commissioner. Id. at 376,
The Court defined the issue as “the problem of the effect in subsequent condemnation cases of the earlier announcement by a public agency that a public improvement was planned for a particular location or area.” Id. at 379,
A few months after the effective date of the Act, the Law Division decided State v. Milkon Realty, Inc., 119 N.J.Super. 156,
Describing the standard governing application of subsection (c), the court stated: “A substantial effect upon the use and enjoyment of property is occasioned when the condemnor takes action which directly, unequivocally and immediately stimulates an upward or downward fluctuation in value and which is directly
The result reached in New Jersey Sports & Expositim Authority is consistent not only with New Jersey precedent, see John M. Payne, A Survey of New Jersey Eminent Domain Law (With Academic Interruptions), 30 Rutgers L.Rev. 1111, 1139 (1977) (explaining that New Jersey Spmts & Exposition Authority “[made] manifest a trend in New Jersey law that ha[d] been discernible for some time”); it is also consistent with the longstanding rule applied by courts in other jurisdictions. See, e.g., United States v. Virginia Elec. & Power Co., 365 U.S. 624, 636, 81 S.Ct. 784, 792, 5 L.Ed.2d 838, 849 (1961) (holding that “[t]he court must exclude any depreciation in value caused by the prospective taking once the Government Vas committed’ to the project”); Murray v. United States,
B
In Rova Farms Resort, Inc. v. Investors Insurance Co. of America, this Court set forth the standard of review for non-jury civil actions:
Considering first the scope of our appellate review of judgment entered in a non-jury case, as here, we note that our courts have held that the findings on which it is based should not be disturbed unless “ * * * they are so wholly insupportable as to result in a denial of justice,” and that the appellate court should exercise its original fact finding jurisdiction sparingly and in none but a clear case where there is no doubt about the matter. That the finding reviewed is based on factual determinations in which matters of credibility are involved is not without significance. Findings by the trial judge are considered binding on appeal when supported by adequate, substantial and credible evidence.
[65 N.J. 474, 483-84,323 A.2d 495 (1974) (citations omitted).]
Those principles continue to be consistently applied. See, e.g., Cohen v. Radio-Electronics Officers Union, 146 N.J. 140, 157,
The rationale underlying that limited scope of appellate review is that a trial judge’s findings are substantially influenced by his or her opportunity to hear and see the witnesses and to get a “feel” for the case that the reviewing court can not enjoy. State v. Whitaker, 79 N.J. 503, 515-16,
State v. Johnson, 42 N.J. 146,
Ill
In its opinion, the Appellate Division began its analysis by stating that “[t]his case does not involve a claim of inverse condemnation.” 285 N.J.Super. at 446,
Although we disagree with none of those observations, we note, as did the Appellate Division, that those principles are not dispositive of this appeal. The inquiry whether specific governmental action constitutes a taking does not determine whether a landowner’s use and enjoyment of his or her property has been substantially affected by a future condemnor for the purpose of fixing the valuation date that governs the eventual condemnation proceeding. In an inverse condemnation case, the property owner is “required to show that there has been substantial destruction of the value of [his or her] property and that defendant’s activities have bеen a substantial factor in bringing this about.” Washington Market Enters, v. City of Trenton, 68 N.J. 107, 123,
The question whether and when a landowner’s use and enjoyment of his or her property has been “substantially affected” under N.J.S.A 20:3-30(c) is a mixed question of law and fact. See 5 C.J.S. Appeal & Error § 703d (1993) (“Mixed questions of law and fact concern the application of a legal rule tо the facts and the determination of whether the rule is satisfied.”). The standard of review of the court’s findings of fact is dictated by Rova Farms, supra, in which we emphasized that “[findings by the trial judge are considered binding on appeal when supported by adequate, substantial and credible evidence.” 65 N.J. at 484,
Among the trial court’s factual findings were that the letter disclosed the Township’s firm intention to acquire the property
Applying the subsection (c) standard to those findings, the trial court concluded that the letter of July 29, 1988, had substantially affected the partnership’s use and enjoyment of the property. Therefore, the court held that the fair market value of the property would be determined as of that date pursuant to N.J.S.A 20:3-30(c).
Whether the partnership’s inability to develop the property, which resulted in the twenty-five percent diminution in the property’s value, constituted a “substantial” effect for purposes of subsection (c) is more of a legal than factual question. Although the court in New Jersey Sports & Exposition Authority further refined the inquiry by stating that “[a] substantial effect upon the use and enjoyment of property is occasioned when the condemnor takes action which directly, unequivocally and immediately stimulates an upward or downward fluctuation in value and which is directly attributable to a future condemnation,” 143 N.J.Super. at 353,
In fixing the date of the Township’s letter as the valuation date for condemnation purposes, the trial court determined as a matter of law that the letter’s impact on the value of the partnership’s property was of such consequence and magnitude as to render use of the date of taking for valuation purposes unfair to the condemnee. In contrast, establishing valuation as of thе date of the Township’s letter would avoid imposing on the condemnee the loss in value that the court found to be attributable to the letter. Although this Court could adopt a more restrictive legal standard that could overcome the trial court’s conclusion, we decline to do so. We find no justification for requiring, as a matter of law, more than a twenty-five percent diminution in value in order to trigger the valuation mechanism of N.J.S.A 20:3-30(c).
We conclude that the trial court properly found that the date of the Township’s letter set the date of valuation. That determination should not discourage municipalities from responsibly notifying potential condemnees of an intention to condemn. See N.J.S.A 20:3-6 (dictating that condemnor must engage in bona fide negotiations that include written offer to purchase before initiating condemnation proceedings). Nor should our disposition be viewed as penalizing condemnors. The objective of N.J.S.A 20:3-30(c) is neither to reward nor to punish either party to a condemnation. Rather, it is to establish value at the time that the condemnor’s actions substantially affect the landowner’s use and enjoyment of his or her properly. See New Jersey Sports & Exposition Auth, supra, 143 N.J.Super. at 349,
IV
We reverse the judgment of the Appellate Division and remand the matter to the Law Division for further proceedings consistent with this opinion.
Notes
N.J.S.A. 20:3-30 was amended by L. 1996, c. 62, § 42, eff. Sept. 10, 1996, to include the following subsection:
(d) the date of the declaration of blight by the governing body upon a report by a planning board pursuant to section 38 of P.L.1971, c. 361 (C. 20:3-38), or, in the case of a property being maintained as an abandoned property for failure to remove the property from the abandoned property list, as provided pursuant to subsection c. of section 37 of P.L.1996, c. 62 (C. 55-19-56), if there was no declaration of blight, as of the date of expiration of the condemnee’s right to appeal inclusion of the property on the abandoned property list.
Dissenting Opinion
dissenting.
This case is more about failed intentions than evil onеs. The Appellate Division concluded that a July 29, 1988 letter from the Township evidencing interest in a property was only a preliminary step in the condemnation process and not an event that substantially interfered with the use and enjoyment of the property. The Court has instead determined that the letter, though followed by years of negotiation, revealed an interest in acquiring the property so strong as substantially to interfere with the owner’s rights. The Court has held, in effect, that the date for valuation of a property under condemnation should be the earliest date when a public body demonstrates a firm interest in acquiring a properly. I agree with the Appellate Division and therefore dissent.
I
This is the third claim by Princeton Manor Associates (PMA) that the precondemnation activities of the Township of West Windsor had substantially interfered with its property rights. The two others were dismissed with prejudice. This claim for an earlier date of taking also should be dismissed. A federal action
We need not debate what res judicata, effect should be given to those determinations. Those prior proceedings amply illustrate that this entire situation is simply the result of a long drawn-out process in which the Township attempted, in good faith, to acquire this fifty-acre parcel of land. At no point until actual condemnation did the Township substantially interfere with PMA’s use and enjoyment of the property.
There are several indicia of the Township’s good faith. First, despite PMA’s contention that the July 1988 letter had substantially interfered with the use and occupancy of its property, the March 1989 Green Acres Certification of Fair Market Value specifically recited that the highest and best use of the property was as residential property. There was no suggestion in that certification that there would be any negative effect on the property’s value because the property had been designated as a community park, or even because the Township had indicated its intent to acquire the property. Had the Township been attempting to take advantage of PMA, it would have valued the property as undevelo-pable land. The Certification of Fair Market Value prepared by Green Acres and furnished to PMA placed the property in the second tier of a three-tier valuation system. The certification noted that “the second tier is made up of properties placed under contract of sale contingent upon approvals for development which produces values in the mid range.” The cеrtification did not value the property as raw land, the lowest tier. Nor did it value the property as having received preliminary or final approval, a determination that would reflect the highest tier value. Thus, if the July 1988 letter had substantially interfered with the best use
Unfortunately for them, the property owners decided to make a counter-offer that would have allowed them to sell part of the property and to construct 115 town homes on a retained portion of the property. The Township offered to pay over $3 million for the fifty acres. This offer in turn provoked another response from the Township that would have permitted PMA to construct forty-eight homes on thirteen acres to be retained. PMA responded that it wished to build sixty homes on thirteen acres and sell the remaining thirty-seven acres for $1,250,000. Although the Township was willing to draft a resolution to put this to the planning process, the proposed zoning ordinance to permit the development was defeated. In addition, PMA had insisted upon an upset price of $3.5 million if the proposal fell through. (This was later reduced to $3.3 million.) The Township responded with a closed-session offer to purchase the property for $3.2 million in October 1990. A bond ordinance intended to finance the purchase fаiled two months later. Still, the developers continued to negotiate for more money and now sought, in addition to a $3.3 million purchase price, two years of rent at approximately $350,000 a year.
Again there was a new offer. In August 1991, the Township offered to acquire thirteen acres for $586,000 in consideration for the dismissal of the pending litigation between the parties, in which PMA had asserted a de facto taking. PMA counter-offered to sell thirteen acres for $800,000 if PMA could build thirty units on the remainder. The Township again counter-offered. In January 1992, the Township offered to purchase the entire fifty acres, but this time for $2,250,000. After several more months of exchange, the Township purchased the thirteen acres for $700,000. PMA’s inverse condemnation action was dismissed with prejudice. Finally, in March 1993, the Township authorized the acquisition of the remaining thirty-seven acres. When PMA refused what turned out to be the final offer of $1,210,000 for the remaining
Throughout this tangled scenario of offer, counter-offer, reply offer and reply to reply offer, I am simply unable to find the kind of obstructive governmental action that “substantially affects” the use and enjoyment of the property. N.J.S.A 20:3-30. It was a failed bargaining process, nothing more.
II
The issue posed by this case is but one aspect of the larger problem posed by government precondemnation аctivities. For this analysis, I essentially restate a recent summary of the law. See S. Cary Gaylord & Lorena Hart Ludovici, Condemnation Blight, C730 ALI-ABA 189 (1992). Condemnation blight is a term
“applied somewhat imprecisely to the detrimental conditions that befall land slated for public acquisition. Either the project is undesirable and depresses values for some distance around its proposed boundaries, or, whatever the nature of the project, the affected land will surely be taken (or so the market believes) and hence, becomes virtually useless to the private sector of the market.”
|jCondemnation Blight, supra, C730 ALI-ABA at 191 (quoting Kanner, Developments in Eminent Domain: A Candle in the Dark Comer of the Law, 52 J. Urban L. 862, 891-92 (1975)).]
Usually, the signs of condemnation blight are apparent.
When rental property is involved, tenants vacate the premises either because of public announcements of the planned project or because government agencies directly notify tenants that condemnation is imminent and recommend that they leave. The vacant buildings fail to generate enough revenue to cover mortgage payments or property taxes thus exposing landowners to possible foreclosure. In addition, the empty buildings invite vandalism which hastens the physical deterioration of the area. Often the premises are in such a state of deterioration that buildings are boarded up and eventually tom down____
Vacant and residential properties are also vulnerable to the impact of condemnation blight. Ordinances may be passed which prohibit any new construction or development of the property which substantially impairs the value and marketability of vacant land. Residential property is affected by a decrease in dty services such as street cleaning and refuse collection resulting in a slum appearance to the neighborhood. Police protection may be decreased, thus encouraging vandalism. In addition, piecemeal condemnation of various neighboring lands adds to the general deterioration of the whole neighborhood____ As a final blow to landown*142 ers, sometimes the governmental agency decides, after a period of years, that it does not need to condemn the parcel and allows the owner to remain in possession of his once valuable and now virtually worthless property. See Washington Market Enters. v. City of Trenton, 68 N.J. 107,343 A.2d 408 (1975).
[Id. at 191-92 (citations omitted).]
The effect of precondemnation activities is most stark in the context of developed rental properties. Because the delay between the initial actions and the actual taking can be substantial, in the interim the values of and interest in the property can plummet. Unease about the future has an impact upon a wide range of residential and business choices. “Tenants tend to move out, and new ones are hard to come by. This not only causes the landlord to lose rents but can lead to ... foreclosure---- Businesses also move out when they can to avoid the economiс trauma of being displaced by the condemnation when it eventually comes.” Gideon Kanner, Condemnation Blight and Inverse Condemnation, SB14 ALI-ABA 377, 382 (1996). A property owner confronted with such devastating consequences may institute an inverse condemnation action against the condemning authority to recover damages incurred for the loss of land value caused by the precon-demnation activities. Condemnation Blight, supra, C730 ALI-ABA at 195. The New Jersey Eminent Domain Revision Commission also expressed its concerns over the type of situations in which precondemnation activities could have devastating effect upon rental properties.
During [the precondemnation] period, the tenants, advised of the proposed taking, vacate. Vandalism occurs. Only speculators will purchase. In business areas, re-rentals are limited to tenants at greatly reduced rents. No one will equip or establish a new business in the area Tenants will vacate a large percentage of the properly, and the income collected from the occupied portion [will be] rarely sufficient to pay carrying charges.
[Report of Eminent Domain Revision Commission 25 (1965).]
In New Jersey, a compensable taking exists when the threat of condemnation has had such a substantial effect as to destroy the beneficial use that a landowner has made of the property. Washington Mkt., supra, 68 N.J. at 122,
Initially, PMA sought the remedy of an inverse condemnation action. As noted from the procedural history cited by the majority, ante at 120,
As an alternative remedy to an inverse condemnation action, the property owner may wait until an eminent domain action is filed to present a claim for compensation by answer or counterclaim. Once the action is filed, the owner may seek an earlier date of valuation, from which to determine just compensation, or the owner instead may attempt to recover the lost value of the property as an element of damages caused by the cloud of blight hovering over thе property.
Many jurisdictions now allow compensation based on the value of the property at the time of taking “as if it had not been subjected to the debilitating effect of the condemnation.” Condemnation Blight, supra, C730 ALI-ABA at 208; see City of Cleveland v. Carcione, 118 Ohio App. 525,
The South Dakota Supreme Court considered the standards for evaluating a de facto taking. In City of Brookings v. Mills,
New Jersey law provides that the date of taking will be the earliest of the following events: (1) the date possession of the property being condemned is taken by the condemnor in whole or in part; (2) the date of the commencement оf the action; (3) the date on which action is taken by the condemnor which substantially affects the use and enjoyment of the property by the con-demnee; or (4) the date of a declaration of blight. N.J.S.A. 20:3-30. New Jersey Sports and Exposition Authority v. Giant Realty Associates, 143 N.J.Super. 338,
In PMA’s case, the Appellate Division correctly found that the July 1988 letter was nothing more than a “preliminary step to a potential future condemnation.” The court also found that the Township’s master plan made it “crystal clear” to PMA that their land was potentially subject to condemnation long before the July letter. West Windsor v. Nierenberg, 285 N.J.Super. 436, 450-51,
The majority seems to wish to benefit property owners by giving to them a more flexible method of determining a valuation date. The thesis of the majority will come back to haunt property owners in a rising real estate market. Dating the valuation from the earlier date of interest will cause owners to lose properly
The New York Court of Appeals once observed in similar circumstances:
We simply have a manifestation of an intent to condemn and such, even considering the protracted delay attending the final appropriation, cannot cast the municipality in liability upon the theory of a “taking” for there was no appropriation of the property in its accepted legal sense____
Moreover, strong public policy considerations prohibit a finding of a De facto taking in the instant case. To hold the date of the Announcement of the impending condemnation, whether directly to the condemnee or by the news media, constitutes a De facto taking at that time, would be to impose an “oppressive” and "unwarranted” burden upon the condemning authority. At the very least, it would serve to penalize the condemnor for providing appropriate advance notice to a property owner. And to so impede the actions of the municipality in preparing and publicizing plans for the good of the community, would be to encourage a converse policy of secrecy which would but raise (greater) havoc with an owner’s rights,
[City of Buffalo v. J.W. Clement Co., 28 N.Y.2d 241, 321 N.Y.S.2d 345, 269 N.E.2d 895, 903-04 (1971) (internal quotations and citations omitted).]
So too here, rather than to discourage a policy of secrecy, the Court instead discourages municipalities from informing property owners about possible plans to acquire their property. All the evidence in this case shows that the negotiating process was open and above board. The minutes of the confidential sessions of the governing body demonstrate full and frank discussions of the acquisition. It is not easy to spend three million dollars of the municipal taxpayers’ money for the acquisition of property. (Green Acres funds were insufficient to pay for the acquisition.) Despite the best of intentions, the Township had many problems in persuading the voters that the acquisition and proposed zoning changes were in the public interest. That it wanted to acquire the land is not enough to demonstrate a substantial interference with the use and enjoyment of the property. Cf. Washington Market, supra, 68 N.J. at 123-24,
For the foregoing reasons, I would affirm the decision of the Appellate Division.