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Iron Mountain Information Management, Inc. v. City of Newark

405 N. J. Super. 599, 966 A.2d 62 (App. Div. 2009)

REDEVELOPMENT; LANDLORD-TENANT; NOTICES — A tenant does not have the same right as a property owner to receive personal notice of hearings that convene to determine whether an area is blighted and in need of redevelopment.

A commercial tenant filed suit to invalidate a municipality’s resolution that had declared the area in which its premises were located to be blighted and in need of redevelopment. The tenant also challenged the validity of the ordinance adopting the redevelopment plan. The lower court found that the tenant was precluded from challenging the municipality’s blight designation because it did not file its suit within the forty-five day time limit required by Court Rule 4:69-6(a). In doing so, the lower court rejected the tenant’s arguments that it was entitled to receive personal notice of the hearings, just as the property owner was entitled to receive.

The tenant appealed, but the Appellate Division affirmed. The tenant argued that it was entitled to individualized personal notice of the hearings, and that since it did not receive such notice, the forty-five day time limit should not have barred its challenge. The tenant’s argument was based on another Appellate Division case in which the Court found that property owners were entitled to fair, adequate, and contemporaneous notice. In that decision, the Court held that absent such notice, a property owner could challenge the blight designation beyond the forty-five day time limit. Here, the tenant argued that a commercial tenant is entitled to the same notice and tolling of the time limit as a property owner if it does not receive personal notice. The Court disagreed, holding that determining whether due process considerations required such enhanced notice to commercial tenants, the three-prong test utilized by the United States Supreme Court in Mathews v. Eldridge, 424 U.S. 319 was to apply.

The first prong of the test involves determining if the tenant has a protectible interest for the purposes of receiving personal notice. Under Mathews, the owner of a property right has a protectible interest. The Court found that, except in limited circumstances, a tenancy is treated as a contractual right and not a property right. The second prong requires determining if there is such a significant risk of erroneous deprivation of the interest at stake that additional notice would eliminate that risk. In this case, the question before the Court was whether the tenant had rights after the blight designation that would serve as an acceptable substitute for giving individual notice during the blight designation process. The Court found that the Eminent Domain Act provides a commercial tenant with clear and sufficient safeguards to protect its leasehold interest after a blight designation because tenants are afforded the right to challenge the authority of the municipality to condemn the property after it has been designated in a blighted area. In addition, tenants are entitled to compensation for losses that result from a leasehold termination. The third test requires an analysis of the fiscal and administrative burdens on a municipality if it were required to notify both property owners and tenants. The Court found that there was a significant administrative burden in locating and notifying the tenants. In addition, with the possibility that tenants may vacate a property and new tenants may move in, there could be an endless cycle of challenges to the redevelopment process as each new tenant would be given an opportunity to challenge the blight designation. The Court found that the possibility of such endless challenges had the capacity of creating an unreasonable burden on the redevelopment process. Thus, it concluded that commercial tenants do not have a protectible interest requiring enhanced notice of a blight designation, that they had ample protections to challenge the condemnation and receive compensation, and that enhanced notice requirements would unreasonably burden a municipality.

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