Appellate Division Affirms That Not Every Impairment In Property Value Will Establish A Government Regulatory Condemnation Claim

April 11, 2014 | No Comments
Posted by Afiyfa H. Ellington

In Scot Netherlands, Inc. v. State of New Jersey, Department of Environmental Protection, Docket No. A-5156-11T3 (App. Div. April 7, 2014), the Appellate Division reconfirmed that not every impairment in property value establishes a taking, noting that the allegation of an entitlement of intensive use will not avail the property owner if the project would not have been allowed under existing regulations.  Plaintiff, Scot Netherlands was denied a application for a fresh water and coastal wetlands permit by the Defendant, Department of Environmental Protection (“DEP”) to fill 17.44 and 1.36 acres of its 22.87 acre Atlantic City property to construct a surface parking lot and two storm water management basins, which Plaintiff contended constituted a regulatory taking based on the allegations that the regulatory scheme resulted in an alleged deprivation of economic benefit.  The trial court denied the Plaintiff’s claim of inverse condemnation with prejudice.

When the Appellate Division affirmed the trial court’s decision, the court noted that the Plaintiff’s property was valued at $200,000 despite the DEP’s regulations precluding further development as Plaintiff enjoyed an economically beneficial use of the property as rental for billboards for over 30 years.  Moreover, the testimony before the trial court through DEP’s expert supported the finding that the development as proposed would not have satisfied the requirements for issuance of a permit from the Army Corps. of Engineers.  The Appellate Division also held that the evidence supported the finding that the regulations did not destroy Plaintiff’s reasonable “investment backed expectations” as Plaintiff was aware of federal and state regulations governing the property.  Thus, Plaintiff failed to prove by clear and convincing evidence the three prongs necessary to show government regulation constitutes a compensable taking:  failing to demonstrate the proposed development would be viable but for the regulation; failing to offer evidence to demonstrate Plaintiff’s reasonable investment-backed expectations that it would not be subject to regulations; and failed to show that the character of the regulations burdening the property outweighed the harm which it addressed.

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