Decades-Old Lease Haunts Property Owner in Eminent Domain Case

A recent New Jersey Appellate Division decision highlights why the valuation date matters so much in eminent domain litigation. The Berardi family learned this lesson the hard way when their shopping center was valued at 1994 prices—despite the Township not acquiring it until 2018.

The 24-year gap between valuation and taking demonstrates why property owners must understand how courts determine compensation dates. This case offers critical insights for anyone facing government acquisition of their property.

The Case Background: A 24-Year Wait for Resolution

Rocco and Antonia Berardi purchased the Browns Mills Shopping Center and an adjacent vacant lot in 1988 for $2.475 million. The property included an anchor tenant, ACME Markets, operating under a 1962 lease at just $0.77 per square foot—well below market rates.

In 1994, Pemberton Township designated the property as an “area in need of redevelopment.” But the Township didn’t initiate formal eminent domain proceedings until 2018. This created a crucial question: What date should courts use to determine “just compensation”?

The parties agreed to binding arbitration, which valued the shopping center and vacant lot at $2,947,216. The Berardis had sought $4.845 million. This nearly $2 million difference stemmed largely from which valuation date the court applied.

Why the Valuation Date Proved Critical?

The trial court set the valuation date as January 27, 1994—when the Township first declared the property blighted. The Township argued for a 2018 valuation, claiming the 24-year gap created an unfair windfall.

The Appellate Division disagreed. New Jersey’s Eminent Domain Act requires courts to use the “earliest” of several possible dates, including when a property is declared blighted. The law’s language left no room for interpretation.

This ruling meant the Berardis’ compensation reflected 1994 property values, not the potentially higher 2018 market. For property owners, this underscores a harsh reality: Government designations can freeze your property’s value for compensation purposes, even if acquisition happens decades later.

The 1962 ACME Lease: Old Contracts Still Matter

The Berardis tried to prevent the Township’s expert from considering the decades-old ACME lease in his valuation. They argued the below-market lease shouldn’t reduce their compensation.

The courts rejected this argument. A willing buyer in 1994 would have considered the ACME lease when determining the property’s value. The lease remained in effect until 1999, making it relevant to 1994 market calculations.

The arbitrator used a blended approach, considering both market rent and the actual ACME lease terms. This reduced the property’s overall value because the anchor tenant paid substantially less than market rate.

Property owners should note: Existing lease agreements—no matter how outdated—can significantly impact eminent domain compensation if they were in effect on the valuation date.

Expert Testimony on Furniture, Fixtures, and Equipment

The case also addressed how courts evaluate expert testimony regarding furniture, fixtures, and equipment (FF&E). The Berardis’ expert valued FF&E at $616,635. The arbitrator awarded just $163,035.

The Township challenged the Berardis’ expert testimony as a “net opinion” lacking factual support. The trial court found the expert’s methodology credible, though the arbitrator clearly found the valuation excessive.

The Appellate Division affirmed the trial court’s decision to admit the testimony. Courts act as gatekeepers for expert opinions but ultimately defer to arbitrators and juries on credibility. The significantly reduced FF&E award suggests the arbitrator considered the testimony but found much of it unpersuasive.

Critical Lessons for Property Owners

This case offers three essential lessons for anyone facing eminent domain:

• Understanding statutory timelines is crucial. The date government officials designate your property for redevelopment may become your valuation date—even if acquisition occurs years later. This can dramatically reduce your compensation compared to current market values.
• Document your property’s condition and value regularly. If a government entity designates your property for potential taking, begin documenting its value immediately. Don’t wait for formal proceedings to start.
• Existing contracts affect valuation. Review all leases and agreements on your property. Below-market leases can reduce compensation, while above-market agreements might increase it. Any property tax lawyer or eminent domain specialist should analyze these documents early.

When Government Designations Begin the Clock

Many property owners assume the valuation date begins when they receive notice of eminent domain proceedings. This case proves otherwise. The clock may start when:

• Government entities designate your property as blighted
• Officials declare an area in need of redevelopment
• Municipalities adopt redevelopment plans affecting your property
• Authorities file condemnation complaints

Each scenario carries different implications for how courts calculate just compensation. The specific statute governing your case determines which date applies.

The Importance of Early Legal Representation

The Berardi case demonstrates why property owners should retain an eminent domain attorney immediately upon any government designation—not when formal proceedings begin.

Early representation allows you to:

• Identify the relevant valuation date under applicable law
• Document property value at critical dates
• Challenge inappropriate designations before they become final
• Preserve evidence of property condition and income
• Negotiate favorable outcomes before litigation begins

McKirdy, Riskin, Olson & DellaPelle, P.C. has spent over 55 years helping property owners fight eminent domain actions. Our experience shows that early intervention produces significantly better outcomes than waiting until the government files formal proceedings.

Government entities possess significant legal advantages in eminent domain cases. They control timing, designations, and procedural decisions that can substantially impact your compensation.

Property owners need experienced advocates who understand these complexities. The difference between 1994 and 2018 valuations in the Berardi case likely amounted to hundreds of thousands—or millions—of dollars in lost compensation.

Don’t let outdated valuations or unfavorable lease agreements reduce what you’re owed. Constitutional protections guarantee just compensation, but “just” depends heavily on procedural details like valuation dates.

Protect Your Property Rights Today

Government designations can lock in your property’s value years before acquisition. Early legal action protects your rights and maximizes compensation. Get your free consultation today.