Case Law Summaries

The County of Monmouth v. Hilton

• Opinion Date: October 23, 2000
• Real Property Law
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CONDEMNATION; VALUATION; ASSEMBLAGES—In a condemnation matter, if an assemblage is possible, a jury must determine its probability and how that probability would affect the premium that a buyer would pay for the condemned property.

This is a condemnation case addressing “the question of whether and if so, the extent to which, the prospect of a future assemblage of the subject property with contiguous property owned by others in order to create a single integrated unit may affect the subject property’s fair market value and hence the compensation for its taking that must be paid by the condemning authority.” Here, the property measured about one-half acre with a frontage of 104 feet. It was directly across the street from a beach. A five family Victorian house was located on the property. It was located within a zone which excluded single-family residences and imposed a one-acre and two hundred front-foot minimum. Various types of multi-family developments and certain specifically enumerated commercial uses could be maintained on the property. The county government sought to enlarge a nearby ocean front park by the addition of the subject property and three vacant lots. The condemnation commissioners set a value on the property, but the property owner appealed to the courts. At a jury trial determined a slightly higher value. On motion by the property owner, a new trial was held and the second jury found the market value to be almost twice the original judgment. The standard for setting the value is the “highest and best use” formulation. This involves a four-prong test essentially determining the use that is: (1) legally permissible; (2) physically possible; (3) financially feasible; and (4) maximally productive. The original appraiser considered the property solely as it existed, i.e. as a one-half acre lot, but compared that value to a prospective assemblage including all four lots. The condemning authority’s appraiser, however concluded that market conditions did not suggest that the assemblage would be the appropriate highest and best use. The property owner hypothesized that the four lots could hold a building with 92 units and still comply with all bulk requirements and restrictions of the zoning ordinance. Even though no building permit had ever been applied for and no site-plan approval had ever been sought, the property owner’s expert testified that this configuration would be the highest and best use. Based on that plan, the property owner’s expert opined that the fair market value of the property was nearly three times that determined by the condemning authority’s expert. The Court rejected the property owner’s approach. It regarded “the basic premise of his methodology as erroneous.” Basically, it felt that appraising the value of the property “as if a four-lot assemblage had already taken place as of the date of taking and then basing the highest and best use on such an assemblage constituted a fundamentally untenable and legally unsupportable approach.” At an initial level, “a proposed future assemblage of parcels in different ownership cannot be the basis for application of a highest and best use analysis as of the date of taking because as of that date the parcels have not yet been assembled into the integrated unit required to support that use.” Therefore, the Court found that the tests of legal permissibility and present feasibility had not been met. The Court was willing to allow that “the prospect of such an assemblage” could be relevant to the fair market value of the individual parcels. The Court was “persuaded that this issue is conceptually no different from the effect on market value of a prospective zoning change.” The law with respect to prospective zoning changes includes the following concepts: “The important caveat is that the true issue is not the value of the property for the use which would be permitted if the amendment were adopted. ... At most a buyer would pay a premium for that probability in addition to what the property is worth under the restrictions of the existing ordinance.” Consequently, when considering the possibility of an assemblage, a lower court must make “an initial, gatekeeping determination of whether an assemblage was probable in the near future as measured from the date of taking based on the evidence before [it] relating to market conditions and the circumstances particular to the property.” If the lower court determines that an assemblage including the subject property is reasonably probable at a near-future time from the date of taking, then a “jury must be instructed to consider in its determination of fair market value the premium a willing buyer would pay for the probability of a future assemblage over and above the fair market value as represented by the existing use of the property.” This would require a jury to determine the degree of probability because that would have an effect on the premium that a buyer would be willing to pay.

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