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Township of Haddon v. Morgan Brothers, Inc.

A-6605-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

CONDEMNATION; ENVIRONMENTAL REMEDIATION — Although a tax sale certificate holder holds a property interest in a condemned property, where the value of the property is reduced below zero by reason of environmental remediation costs, there will be no surplus payable to the tax sale certificate holder from the condemnation award.

An investment partnership purchased four tax sale certificates on a property that was later the subject of a municipal condemnation as part of a redevelopment project. During the course of the condemnation proceedings, the municipality deposited $280,000 with the lower court. This represented the fair market value of the property as if it had been environmentally remediated. The partnership moved to intervene in the proceedings, seeking $125,000 which represented the redemption price of the four tax sale certificates. It sought to be paid from the funds deposited by the municipality. The lower court allowed the partnership to intervene, but denied its request for the disbursement of the deposited funds. It also found that the remediation cost would be more than a million dollars.

On appeal, the Appellate Division pointed out that a condemnee can only receive funds from monies deposited in an action involving remediation after the condemnor has been reimbursed for the cost of the remediation. It added that, with remediation costs considerably more than the amount deposited, there was little chance that the partnership would receive any payment. The partnership had argued that allowing a condemnor to recoup all monies expended on remediation before allowing a tax sale certificate holder to be paid out of deposited monies violated constitutional protections against unjust takings. This argument was rejected. The Court acknowledged that tax sale certificate holders hold a property interest, but pointed out that the value of the certificates usually depended on the property’s value and that the property in question had a negative value. It added that the tax sale certificates lost their value as a result of a loss in the property’s loss in value and not due to the actions of the condemning authority. Thus, the lower court’s decision not to disburse funds from the municipality’s deposit was affirmed.

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