New Jersey Law

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Appellate Division Rules for Municipality in Condemnation Case Regarding Environmental Remediation Cost Requirements.

On December 28, 2017, the Appellate Division issued an unpublished opinion, Township of Piscataway v. South Washington Ave, LLC, which addressed issues relating to how to evaluate the cost of environmental clean up in a condemnation matter, as well as the manner of calculating interest on a condemnation judgment. Under a 2003 decision by the New Jersey Supreme Court, where a property that is subject to condemnation is contaminated, the property is valued as if clean, but the funds equivalent to the cost of remediation are to be available for the public entity and are not to be distributed to the condemnee. One of the issues addressed in this case is whether the amount to be made available for the remediation was based upon the nature of the intended use of the property or the use that was the basis for the condemnation award, the highest and best use.

The Piscataway case involved condemnation of a 75 acre farm for use as open space. Consistent with New Jersey law, the jury decided the fair market value based upon residential use, the “highest and best” use of the property. The property was to be used by the Township for passive open space. The property, however, was contaminated with various substances that required remediation.

The primary environmental issue, therefore, was whether the Township was entitled to use the funds deposited in Court to clean up to residential standards or to the less stringent requirements for open space parkland. As noted above, although the property was intended to be used for open space, it was valued by the jury based upon its “highest and best” use, which is residential development. The Court ruled in favor of the Township. Since the trial court’s expert provided valuation based upon the remediation to open space standards, the Court remanded the case to the trial court for further determination as to the appropriate cost to meet the applicable remedial standards.

The Court also addressed the question of interest concluding that the interest shall accrue on the deposited funds until distribution to the condemnees is permitted at the appropriate rates of interest to be determined by the trial court.

In deciding in favor of the Township on the environmental issues the Appellate Court relied, in part on a 2016 decision, NJ Transit Corp. v. Franco, in which it held that “the escrow for any estimated costs of environmental clean up of a condemned contaminated property should be based upon the remediation necessary to achieve the highest and best use of the property used to calculate the amount of the condemnation award.” Logically, had the public entity only been permitted to withdraw funds from the escrowed money to remediate to a less stringent level of remediation than is required for residential purposes – the highest and best use – the property owner would have received a windfall to the detriment of the public. The Court saw the inequity and unfairness of such a position and ruled in favor of the Township, in other words, for the public good.

SAK:kc [Doc A1007653]

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