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Karam v. State of New Jersey, Department of Environmental Protection

157 N.J. 187, 723 A.2d 943 (1999)

REGULATORY TAKINGS; RIPARIAN LANDS—When ownership of riparian lands is coupled with a requirement that adjacent upland property remain in common ownership, a regulatory taking that affects only the riparian land is not compensable; the state always retains the right to regulate riparian lands.

An owner of riparian land took title under a grant. The grant required that the grantee always own certain adjacent upland property. It also limited development of the riparian land to construction of a dock or recreational pier. The owner then sought state approval for such construction, unaware that the riparian land was designated a “special restricted area” because it had a high concentration of uncontaminated shellfish. This designation was a matter of public record at the time the owner acquired the land. The application was denied by the New Jersey Department of Environmental Protection (DEP), and the owner brought an inverse condemnation action. Viewing the riparian land as a parcel separate from the upland property, the Chancery Division granted summary judgment in favor of the owner after finding that the DEP’s denial of a permit deprived the owner of all viable economic use of the property.

The Appellate Division disagreed. It recited the history of “takings” law under the Fifth and Fourteenth Amendments, and then stated that the diminution of land value, the impairment of marketability, and restrictions on use do not result in a taking unless the regulatory scheme denies an owner all viable economic use of the land. The Appellate Division found that the classification of the land as being within a “special restricted area” and the subsequent denial of a construction permit destroyed the only beneficial use of the riparian property. On the other hand, its analysis concluded that if the upland and riparian lands were considered as a single unit, the owner’s claim would be rejected because the regulation would only affect a minor “stick in the plaintiff’s overall bundle of rights.” Thus, the Court determined the operative question to be whether all contiguous acreage under the same ownership should be considered in determining how much land was taken, or whether the amount taken was to be based solely on the parcel subject to the restriction. After citing state and federal decisions on both sides of the debate, it concluded that the upland and the riparian land must be considered a single property unit. This decision was based on the premise that the riparian grant itself required that both properties be commonly owned and that the grant was to be voided if this contingency was not satisfied. Additionally, both lots were bought and sold as a single unit and were assessed for tax purposes as a single lot. Thus, the Appellate Division concluded that this particular denial of a development permit did not amount to a taking.

Although the case appeared settled, the Court went on to discuss other factors used in determining whether a taking has occurred, in particular whether the owner had any distinct “investment-backed expectations” at the time of acquiring the property that were destroyed by the regulation. The Court cited an 1892 United States Supreme Court decision for the proposition that ownership of, and sovereignty over, riparian land belongs to the state and that even though a state may convey riparian grants to private parties, the state never waives its right to regulate the use of that kind of property. Illinois Central R.R. Co. v. Illinois, 146 U.S. 387 (1892). Accordingly, the owner did not have the absolute right to construct a dock free of regulatory intervention. Not only was the restriction against development a matter of public record before it was purchased, but, because the restriction was passed by the legislature, “and heralded by the Governor with great fanfare,” the Court found that the owner in this case had constructive notice of the restriction. Accordingly, the Appellate Division concluded that the owner could not have reasonably expected to have unfettered discretion to do as it pleased with its land.


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