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Township of West Orange v. 769 Associates, LLC

198 N.J. 529, 969 A.2d 1080 (2009)

CONDEMNATION; ATTORNEYS FEES — If a condemnation action is filed and then discontinued, then the property owner is entitled to reimbursement for reasonable expenses incurred based on a reasonable defense strategy, from the time the property was first targeted for condemnation.

A developer entered into an agreement with a municipality to build a complex of single family homes adjacent to an existing residential development. In order to afford access to the new residential homes, the developer needed a right of access across a neighboring property. The development agreement provided that if the developer was unsuccessful in negotiating an access agreement with the property owner, the municipality would file a condemnation action. The municipality adopted an ordinance authorizing the municipality to condemn, and then acquire, an easement across the neighboring owner’s property. The developer then applied for subdivision approval. It was granted subject to the developer’s acquisition of the right of access across the other owner’s property. The neighboring owner challenged the approval. It argued that the municipality should not have granted the conditional subdivision approval, but should have delayed approval pending the outcome of the condemnation proceeding. The lower court dismissed the suit, finding that the municipality had the authority to approve the subdivision conditioned on the condemnation of the neighboring owner’s property. The municipality then adopted an ordinance authorizing condemnation of the neighboring owner’s property and it subsequently filed a condemnation complaint to acquire a portion of the owner’s property.

The neighboring owner asserted that the municipality’s action constituted an unlawful taking because it was being done for a private purpose, to benefit the developer. The lower court found that the taking advanced a public purpose.

On appeal, the Appellate Division reversed. On further appeal, the Supreme Court reinstated the lower court’s decision, holding that a proposed taking of a public roadway is a valid public purpose despite its benefits to a private developer.

Later, the parties entered into a consent order dismissing the condemnation complaint. The neighboring owner then filed a motion seeking reimbursement of its fees incurred in opposing the condemnation pursuant to N.J.S.A. 20:3-26(b). That statute provides for the awarding of attorneys’ fees and expenses when a court declares that condemnation is improper or when the action is abandoned by the municipality. The lower court found that the condemnation had been abandoned and that the neighboring owner was entitled to reimbursement from the time its property was first targeted for condemnation, and not years later when the condemnation complaint was filed. It then determined that the award of attorneys’ fees was subject to the factors enumerated in RPC 1.5(a), which include an assessment of the success of the owner’s efforts in the condemnation proceedings.

The municipality appealed, and the Appellate Division reversed in part, finding that a property owner’s right to recover costs and fees incurred in defending a condemnation action was not dependant on the owner’s success in defending the action. However, the Appellate Division also concluded that in order to qualify for reimbursement pursuant to N.J.S.A. 20:3-26(b), the costs incurred by the owner had to be incurred after the filing of the condemnation action. Therefore, any costs incurred prior to the actual filing of the condemnation complaint were not subject to reimbursement. Another appeal ensued, and the Supreme Court reversed. The Court held that once a condemnation action is abandoned, an owner is entitled to reasonable attorneys’ fees and costs incurred from the time the property is targeted for condemnation. The Court noted that the legislature’s intent was to make the owner whole for expenses incurred in defending a condemnation action and to encourage care by a municipality in exercising its condemnation powers. The Court also found that in order to trigger the reimbursement provisions of the statute, a condemnation action must have been filed. If a property is targeted for condemnation and a condemnation action is later filed, then the property owner is entitled to reimbursement for expenses incurred before the complaint was filed. However, if the property was targeted for condemnation but the municipality elected not to file a condemnation complaint, a property owner would not be entitled to reimbursement at all. It also found that the attorneys fees award must be reasonable, and the owner’s defense strategy must have been reasonable. However, the Court found no requirement that the strategies succeed in order for the owner to be reimbursed.

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