Will the Latest New Jersey Supreme Court Property Rights Decision Revive the Redevelopment Market?
Last week, a divided New Jersey Supreme Court ruled that condemning agencies do not have to prove that properties within an area “in need of redevelopment” have a deleterious effect on the surrounding area in order for those properties to be taken via eminent domain. The 3-2 majority opinion, authored by Justice Barry Albin, concluded that, so long as there is substantial evidence in the record that the legislative definitions set forth in New Jersey’s Local Redevelopment and Housing Law (“LHRL”) are met, a court is bound to affirm a local government’s redevelopment designation. The decision has stirred debate in the legal community as to whether the criteria for condemning property for redevelopment purposes has been eased, and whether it represents a departure from the Court’s landmark 2007 decision in Gallenthin Realty Development, Inc. v Borough of Paulsboro, 191 N.J. 344 (2007).
The recent case, 62-64 Main Street, LLC v. City of Hackensack, involved a 2008 determination by the Hackensack Planning Board that five downtown properties, consisting of two dilapidated buildings and poorly maintained parking lots, satisfied the statutory criteria of the LRHL set forth in N.J.S.A. 40A:12A-5(a)(b) and (d) for an area “in need of redevelopment” . In particular, the Board concluded that the buildings were boarded up, were “substandard and unsafe for occupancy”, and that adjoining parking areas were “unsightly and not well-maintained”. The Board’s recommendations led to the designation by the Hackensack City Council in 2011 that these 5 parcels, together with 6 others, qualified as an area “in need of redevelopment”. The property owners challenged the designation on the basis that their properties did not meet the constitutional standard for blight set forth in the 2007 Gallenthin decision. The trial court disagreed, holding that the heightened criteria of Gallenthin only applied to properties designated under N.J.S.A. 40A:12A-5(e), and thus upheld the designation. In an unpublished opinion, the Appellate Division reversed the trial court’s decision, finding that Gallenthin required a determination that the property in question suffered from “deterioration or stagnation that negatively affects surrounding areas”. The Supreme Court agreed to hear the case in 2013.
The Supreme Court held that the Blighted Areas Clause of the New Jersey 1947 Constitution is an affirmative grant of authority to local agencies to redevelop and revitalize areas that have become blighted, and that both the framers of the Constitution and the subsequent Legislatures were mindful of the importance of the constitutional property rights at stake, including those who crafted and adopted the LRHL in 1992. As such, the Court reasoned that the legislative classifications of blight set forth in the LRHL and in prior statutes were adequate, except for the redevelopment/blight classification of N.J.S.A. 40A:12A-5(e), which is limited to “underutilized” properties and was found in Gallenthin to require additional evidence that such underutilized state also negatively affected other properties in order to pass constitutional muster. Accordingly the Hackensack Court concluded that blight designations under other criteria of the LHRL can and do presume that the blight exists if substantial evidence is presented in satisfaction of that legislative criteria, without having to prove any separate negative effect on the surrounding area.
Chief Justice Stuart Rabner issued a blistering dissent, finding that the Court had taken a step backward from Gallenthin, and that any blight determination should require that both components of Gallenthin — “deterioration or stagnation” and negative impact upon “surrounding properties” in order to proceed and allow the use of eminent domain.
The impact of the Hackensack ruling is not likely to be felt for some time. Critics of the opinion have suggested that the criteria for condemning properties under the LHRL has now been eased, and that it may have opened the door for another round of abuse of property rights in New Jersey that was common prior to the 2005 decision of the United States Supreme Court in Kelo v. New London, and more directly the 2007 New Jersey high Court decision in Gallenthin, a variety of other cases which followed where local redevelopment powers were more closely scrutinized and, in many instances, curtailed. That trend, coupled with the economic recession which started several years ago, caused a dramatic downturn in local redevelopment activity in New Jersey. Will Hackensack help bring it back?
A copy of the Court’s opinion in the Hackensack case is available here.
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