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Desai v. Board of Adjustment of the Town of Phillipsburg

360 N.J. Super. 586, 824 A.2d 166 (App. Div. 2003)

ZONING; INVERSE CONDEMNATION—A court can offer a municipality the choice of granting a property owner’s use variance application or buying the property, in order to avoid paying damages on an inverse condemnation claim arising out of an earlier denial of the owner’s use variance application.

A buyer purchased a building in an area that had just been rezoned from one that permitted single and multi-family residential units and neighborhood-type business establishments to one that only permitted single family residential units. Four to five years before the purchase, the building contained a pizza parlor on the first floor, but that parlor had been closed for approximately three years. The third floor had been used as a meeting room, but it was unclear when that use ceased. About five months after the purchase, the buyer applied for a use variance to operate a convenience store on the first floor “as a preexisting non-conforming use, and to convert the third floor into two two-bedroom apartments.” The application was denied. Two months later, he returned to request a use variance for a “beauty parlor/ice cream parlor or a pizza parlor/deli.” That application was also denied. The owner sued in the Law Division and included a request that the court declare that an inverse condemnation had taken place. The lower court remanded the matter to the zoning board to consider the issue of abandonment. On remand, the zoning board concluded that both floors had been abandoned. After the case returned to the Law Division, it was again remanded to the zoning board “for consideration of appropriate uses for the first and third floors.” The board initially decided to allow a convenience store in most of the first floor and a small retail/commercial use in the balance. The board also agreed to permit the third floor to be used for the two-bedroom apartments. Upon those terms, a settlement was reached between the parties, but when the board held a public hearing, there was strenuous objection and “the Board reversed its prior decision and refused to consider any other uses of the first and third floors.”

Another appeal ensued and the lower court requested appraisals from each party “in anticipation of the ruling on inverse condemnation.” The lower court then “concluded that the actions of the Board amounted to inverse condemnation” and further ordered delay damages equivalent to ten months’ rent. The decision was appealed and the Appellate Division, during a prior visit of this matter to the Court, agreed that inverse condemnation had occurred and that the property owner was entitled to just compensation for his property. Nonetheless, it remanded the matter to the lower court “for a hearing on the value of the property and more specific findings on delay damages.” On remand, the lower court reaffirmed its opinion of value and its award of delay damages, but “afforded the Board the opportunity to avoid payment under inverse condemnation if it would permit re-zoning of the property to allow [the property owner] the benefit of the uses of the first and third floors of the property.” In the alternative, it gave the board the option to purchase the premises or to permit the owner to use the premises in a manner that the owner had requested.

Ultimately, the property owner returned to the Appellate Division, arguing that the lower court “impermissibly deviated from [the Appellate Division’s first] determination that he was entitled to just compensation for his property by fashioning an alternative to the [zoning board’s] obligation to pay the condemnation award. The Appellate Division disagreed with the property owner, holding that “[i]n crafting this alternative, the judge fashioned a permissible remedy.” Regardless of the property owner’s preference for money, “[g]enerally speaking, condemnation should be ordered only where eventual acquisition appears inevitable ... or where equitable considerations mandate that remedy.”

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