Condemnation in New Jersey: No Place to Run; No Place to Hide? Mount Laurel Township vs. Mipro Homes, L.L.C.

What a year it has been for owners of private property!

This past spring, in Kelo v. City of New London, ___U.S. ___, 125 S. Ct. 2655 (2005), the United States Supreme Court stunned many with its ruling that condemnation of residential and mixed use property for private development that is ostensibly intended to enhance the tax base is a "public use", and therefore, permissible under the takings clause of the Fifth Amendment of the U.S. Constitution -- even if it benefits the private developer.

Then, this past summer, going to the other end of the spectrum, the Appellate Division of the Superior Court of the State of New Jersey upheld the use of the eminent domain power under New Jersey statutory and constitutional laws to acquire property for the purpose of slowing residential development and preserving open spaces for passive use.

The background of the Mipro Homes case begins in 1997. In that year, Mount Laurel, a town that already was heavily developed, began to develop a policy to preserve open spaces in the Township. This policy gave priority to the acquisition of large parcels zoned for residential use, because such properties are less expensive than non-residential properties and typically do not result in a net increase property tax revenues because residential uses are more intense users of municipal services. Thereafter, various public referenda and revenue raising measures were adopted in support of the Township's open spaces policy.

In 2001, Defendant, Mipro Homes purchased a 16 acre parcel. (That parcel was not then on the list of properties to be acquired under the open spaces initiative, because it had not previously been zoned for residential use.) Mipro Homes filed for rezoning for single family detached residential development and other approvals for 23 "upscale" single family homes; and in 2002 the Mount Laurel Planning Board granted final subdivision approval for the 23 house development.

Upon learning of Mipro's development plans, the governing body of Mount Laurel immediately adopted a resolution placing the 16 acre parcel on the priority list of properties to be acquired for the open spaces program, and notified Mipro of that fact. Twenty-two days after the Township Planning Board granted final subdivision approval, Mount Laurel commenced this action to condemn the 16 acre parcel.

Mipro contested the taking on several grounds, arguing, among other things, that the "real" (and allegedly improper) purpose of the condemnation was to prevent more residential development, and that the stated purpose of the taking, i.e., to preserve open space, was a mere pretext. The trial court agreed with the argument of Mipro Homes, held that the statutory power of eminent domain may not be exercised to prevent residential development, and granted summary judgment dismissing the condemnation petition.

The Appellate Division rejected Mipro's "improper purpose" argument, citing a lengthy list of statutes that recognize that the preservation of open space and curbing runaway development are "public uses," and that authorize the exercise of eminent domain and the use of public funds for such purpose. The condemning authority does not have to demonstrate a "need" for taking the specific property; nor must it have previously adopted plans for active, recreational use of the acquired property. Absent fraud, bad faith or manifest abuse, a reviewing court should defer to the judgment of the condemning authority in determining whether a taking is for a public use.

Although not part of the holding of the Mipro Homes court, the Appellate Division noted that the outcome in that case might have been different if the property to be condemned had been or was to be developed as a medical or nursing facility, or affordable housing or "implicated other significant public interests."

The combined effect of Kelo and Mipro Homes is that previously developed private property (including residential property) may be condemned to allow redevelopment by a private party and that previously undeveloped private property may be condemned to prevent residential development or to preserve open spaces. To the beleaguered property owner, it seems as if "anything goes" so long as a condemning authority is involved. The exception for fraud, bad faith or manifest abuse, a fairly high standard to meet, does not give much comfort to worried property owners.