"Special" Valuation Rules N/A To Environmentally Remediated Property

Name: McKirdy & Riskin, P.A.
Address: 136 South Street, Morristown, NJ, 07850
Telephone: 973-539-8900

Home » Condemnation Law » "Special" Valuation Rules N/A To Environmentally Remediated Property

by: Anthony F. Della Pelle

17 Jul 2012

Yesterday a New Jersey appellate court narrowed the scope of a property owner’s liability for environmental remediation when the owner’s property is taken via eminent domain. In Borough of Paulsboro v. Essex Chemical Corporation, the Superior Court, Appellate Division (Skillman, J.A.D.) held that a property owner that had obtained approval of a closure plan for a landfill was not subject to any additional liability for remediation of the property, and therefore would receive the full fair market value of its property in the condemnation proceeding.

In Essex Chemical, the property owner had obtained approval from the New Jersey Department of Environmental Protection for the closure of a 17-acre landfill (containing a 40-foot high mound of gypsum) located on a 67-acre riverfront parcel with frontage on the Delaware River and the Mantua Creek. the property was condemned by the Borough of Paulsboro, which did not originally value the property “as if remediated” as required by Housing Authority of New Brunswick v. Suydam Investors, 177 N.J. 2 (2003) and N.J.Transit Corp. v. Cat in the Hat, LLC, 177 N.J. 29 (2003). However, when the property owner moved to withdraw the Borough’s estimated compensation which was on deposit with the Superior Court Trust Fund, the Borough objected, contending that the funds should be escrowed to remediate the landfill. The trial court held that the costs of remediating the landfill (by removing the mound of gypsum) would not fall within the concept of recoverable remediation costs contemplated by Suydam, and denied the Borough’s application to create an environmental trust escrow. The Borough then appealed.

The appeals court affirmed the decision below, and reasoned that in situations where a site has already been remediated with approval from the NJ Department of Environmental Protection, the condemnee is not subject to any additional liability for remediation, and the “special” valuation methodology established by Suydam and Cat in the Hat, causing the property to be valued “as if remediated” therefore does not apply. Although the parties in Essex Chemical agreed that the property — containing an “immutable condition” of a 40-foot high mound of inert gypsum — was less valuable than a flat, easily-developable property, and the valuation experts for both parties took that physical attribute into account in their appraisals, that fact did not entitle the condemning authority to contend that the landfill removal costs were “remediation” costs which could be subject to the environmental trust escrow, because no further environmental remediation could be required of the subject property.

A copy of the appellate court’s opinion is available here. Coverage by the Gloucester County Times is available here.

This case represents a victory for property rights and should represent a warning to condemning authorities that properties which have obtained approvals for remediation or are in the process of being remediated should not be subject to claims for further remediation by the condemnor.