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Borough of Paulsboro v. Essex Chemical Corporation

A-6577-06T5 (N.J. Super. App. Div. 2007) (Unpublished)

CONDEMNATION; EVALUATIONS —In appraising a property for condemnation purposes, contamination issues should be reserved for a separate, cost-recovery action such that any appraisal should be for property as if remediated.

A riverfront tract, which was a former industrial site with an encapsulated, closed landfill, was subject to a state condemnation proceeding. The owner of the tract had entered into a long term lease with an energy company. The lease allowed the energy company to maintain a solar energy facility on the landfill site. Its tenant had the obligation to perform monitoring and maintenance activities at the closed landfill sites. The governing municipality determined that the area encompassing the riverfront tract was “in need of development” pursuant to the Local Redevelopment and Housing Law. It hired an expert who utilized a comparable sales approach to value, and who appraised the tract. The municipality offered the appraisal amount to the owner, and offered to enter into a separate agreement with the tenant on the same terms as under the existing lease. The owner rejected the offer, and the municipality obtained a judgment of possession. Condemnation commissioners were appointed. The owner appealed the judgment on the grounds that the municipality had not engaged in bona fide negotiations prior to its filing its complaint, as is required in eminent domain proceedings. Specifically, the owner claimed that the municipality did not determine the value of the property as if remediated.

The Appellate Division affirmed the lower court’s ruling. It first stated that a one price offer can be sufficient to satisfy the statutory requirement of bona fide negotiations, if that offer constitutes a genuine determination of fair market value. It also stated that any contamination issues should be reserved for a separate cost-recovery action such that any appraisal should be for property as if remediated. The Court agreed that the lower court appropriately found that the municipality’s appraisal report as having applied a per acre price as to the entire tract, including for the contaminated landfill. The appraisal report noted that the property had been the site of contaminated landfill and it also explicitly recited that it was “considering all factors.” The Court also was satisfied that the appraiser’s failure to inquire about the value of any services rendered by the energy company and to conduct any further analysis in that regard did not render the appraisal report invalid.

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