july 2007

New Jersey Supreme Court Narrows A Criterion For Condemnation In Redevelopment Cases

BACKGROUND

In June, the New Jersey Supreme Court invalidated a municipal redevelopment area designation that would have triggered the municipal power of condemnation. In Gallenthin Realty Development, Inc. v. Borough of Paulsboro, the Court determined that the municipality had misapplied the “stagnant or not fully productive” criterion under the Local Redevelopment and Housing Law on which it had solely relied in designating a redevelopment area.

In its interpretation of this section of the law, which permits redevelopment of land which is “stagnant or not fully productive” due to “other conditions” of the property, Paulsboro had construed “other conditions” to include property which was merely unimproved and not being utilized in what the municipality deemed a fully productive manner.

Referring to the Constitutional provision that limits municipal redevelopment to “blighted areas,” the Court rejected the municipality’s interpretation of this criterion as unconstitutionally broad. The Court concluded that the criterion applies only to property that is “stagnant or not fully productive” due to issues of title, diversity of ownership or similar conditions.

POTENTIAL IMPACT OF THE GALLENTHIN DECISION

This case narrowly construed one of several available criteria under the Local Redevelopment and Housing Law for a municipality to designate a redevelopment area in order to preserve its constitutionality. The other available criteria for declaring an area in need of redevelopment under the statute remain valid and unaffected.

The Court did, however, strongly caution that a municipal designation of a redevelopment area must be supported by substantial evidence in the record and not upon “net opinions” that simply recite the language of the statutory criteria.

WE RECOMMEND

Whether you are a redeveloper or a party subject to possible condemnation, review should be undertaken to ascertain that a municipal redevelopment area designation is supported by substantial evidence in the record and proper application of the available statutory criteria.

If you have any questions concerning the exercise of municipal redevelopment power and condemnation for redevelopment purposes, please contact John J. Reilly.