New Jersey Legislature Introduces Bill to Address Loss of Business, and Resolution Proposing a Constitutional Amendment to Limit Takings

by: Anthony F. Della Pelle
9 Feb 2010

The New Jersey State Legislature introduced two proposed bills on February 4, 2010, to address compensation and “public purpose” issues.  SCR63 would amend Article VIII, Section III, paragraph 1, of the New Jersey Constitution, to remove “[t]he clearance, replanning, development or redevelopment of blighted areas” as a public purpose, while more narrowly defining a public purpose as “utility and transportation corridors, educational facilities, airports, correctional facilities, solid waste handling facilities, landfills, sewage treatment facilities, storm water management facilities, in-patient health facilities, and recreational facilities.”  Following the adoption of the Constitutional amendment, blight designations would remain a public purpose limited to declarations that an area is designated in need of rehabilitation.  The Legislature’s adoption of SCR63 would only be the first step toward amending the State’s Constitution.  The amendment would then be submitted to the public by ballot for a vote during a general election.

 Senate Bill No. 1042  would amend and add new language to both the Local Redevelopment and Housing Law (LRHL) and the Eminent Domain Act of 1971.  In addressing the LRHL, S1042 seeks to provide adequate notice to “affected property owners and the general public of a municipality’s interest in starting or adopting a redevelopment program by requiring a municipality with a website to post notice of related hearings, plans, and ordinances for public review.  It also requires municipalities to permit certain people to present witness testimony, and to review and discuss alternative remedies to a redevelopment or rehabilitation plan.  S1042 also prohibits certain municipal officials from accepting election fund donations as part of “pay-to-play” deals.

 A small section of this proposed legislation addressing the Eminent Domain Act, specifically N.J.S.A. 20:3-6 and 29.1, addresses one of the most troublesome aspects of the eminent domain process – the level of just compensation a business should be entitled to when a condemnation action interferes with the business’s operations.  S1042 would amend subsections 6 and 29.1 to “compensate the condemnee for any loss of income resulting from the interference of the condemnation proceeding with the conduct of business in an amount determined in a manner consistent with the assessment of business income coverage in the insurance industry, separate and apart from compensation for the fair market value of the property.”  This important amendment would clarify that an operating business is entitled to compensation for a loss of income related to a condemnor’s actions as well as any real property that is being condemned. 

 McKirdy & Riskin addressed this issue recently when it represented the owners of the Palace Car Wash in State v. Arifee  .   There, a temporary taking deprived the business of any income while roadwork in front of the business being was completed.  Historically, condemnors have argued that businesses are only entitled to the value of the property actually being taken business losses are too speculative to measure.  S1042 would codify the holding in Arifee while also providing a standard method to value the business’s loss. 

 The property owners in State v. Arifee, Mohammed and Jawed Arifee and the Palace Car Wash, were represented by McKirdy & Riskin’s Edward McKirdy, Anthony Della Pelle and Joseph Grather at trial and on the appeal.  The Appellate Division’s opinion can be read here , while more can be read about the case on our New Jersey Condemnation Law Blog here.   

The author wishes to acknowledge the assistance of Cory K. Kestner, Esq., of McKirdy & Riskin, PA, in the preparation of this article.