October 3, 2013
by Rosemarie Diamond
Phelan Hallinan & Diamond, P.C. – USFN Member (New Jersey, Pennsylvania)
On September 6, 2013, Governor Christie signed into law a bill intended to codify several court opinions relating to eminent domain and to limit the use of eminent domain for municipal redevelopment projects as permitted under New Jersey’s “Local Redevelopment and Housing Law.” It also created an alternative to condemnation by authorizing municipalities to negotiate directly with a property owner without being required to declare an area blighted, which is the constitutional standard in New Jersey for redevelopment condemnations.
The bill reflects the legislature’s recognition of heightened public concern about the use of eminent domain to support municipal redevelopment activities, as expressed by the U.S. Supreme Court in Kelo v. City of New London, 545 U.S. 469 (2005), and the New Jersey Supreme Court’s emphasis in Gallenthin Realty Development, Inc. v. Borough of Paulsboro, 191 N.J. 344 (2007), that the use of eminent domain cannot be justified to acquire property unless the property is truly blighted, rather than in a state where it is not being put to its optimal use. Now, the property must be in an “unproductive condition.” The bill outlines the steps for a planning committee to authorize an investigation for consideration of the use of eminent domain in areas zoned for redevelopment, the publication of the results of the investigation, and the time period to object to any conclusions. The bill also sets forth minimal requirements for an area to be considered for the exercise of eminent domain.
The bill was not a response to recent attempts throughout the country to use eminent domain as a mechanism to address underwater mortgages. Nevertheless, like all parties with an interest in real property, lenders are protected by the tighter restrictions should efforts to exercise eminent domain through municipal redevelopment gain traction at the local level.
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