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Housing Authority of the City of New Brunswick v. Suydam Investors, L.L.C.

177 N.J. 2, 826 A.2d 673 (2003)

EMINENT DOMAIN; ENVIRONMENTAL LIABILITY—For the purposes of valuation in an eminent domain taking, a property is to be treated as environmentally clean because the owner still has the obligation to remediate contamination, but it is proper to leave a portion of the condemnation proceeds in court as a fund to ensure remediation.

A municipal housing authority sought to condemn a parcel of private property. The owner did not oppose the taking and the lower court entered final judgment declaring that the housing authority had the power to condemn the property. The housing authority then moved to amend its condemnation complaint to allege environmental contamination on the parcel that affected the property’s value, to reserve the right to recover the cleanup costs, and to stay the valuation hearing for no longer than one year pending the completion of its environmental review. The lower court granted the housing authority’s motion, giving the housing authority a six month stay to complete its environmental review and cleanup. It also ordered that if the matter was not resolved within the six months, the property was to be valued as if it were clean and any litigation regarding environmental issues would be tried separately.

The owner appealed, and Appellate Division held that: (a) environmental condition was a relevant factor in determining a property’s value; (b) a court may not hold a portion of a condemnation award in escrow to satisfy environmental claims because that would constitute an interdicted prejudgment attachment; and (c) that the doctrines of waiver and estoppel do not prevent a condemnor from asserting that the environmental condition of the property affected its value.

The Supreme Court granted certification and reversed. It held that the environmental condition of the property cannot be a factor in determining a property’s value. For the purposes of condemnation, the property must be valued as if it were clean. The Court’s decision pointed that the property’s owner remains responsible for the cleanup of the property. It found that reducing the price based on the environmental condition would constitute a double taking because the owner was still required to clean up the contamination. In such a case, the condemnor would receive a windfall because it would receive a clean property at the discounted price of a contaminated property. The Court approved withholding a portion of the condemnation proceeds to fund a cleanup, holding that it was not an attachment. Instead, it is a common and widespread method of ensuring that a seller has ample funds to fund the remediation of a property after closing and is not unfair to the seller.

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