Following Gallenthin's Lead, NJ Court Invalidates Newark's Designation of the Mulberry Street Area as "An Area in Need of Redevelopment"


In-Sites Special

August 15, 2007

Following on the heels of the landmark New Jersey Supreme Court decision in Gallenthin Realty Development, Inc. v. Borough of Paulsboro, a Superior Court judge in Essex County very recently invalidated the City of Newark’s determination that the City’s Mulberry Street Area was an area in need of redevelopment. The decision in Mulberry Street Area Property Owner’s Group v. City of Newark, handed down July 19, 2007, was based on findings that the City’s only basis for the determination was that the area was “not fully productive.”

Citing Gallenthin throughout its decision, the Mulberry court found that the City could not deem the Mulberry Street Area an area in need of redevelopment solely under N.J.S.A. 40A:12A-5(e) “merely because it believes that the land is not fully productive and can be used for something more beneficial to the general welfare.” Rather, N.J.S.A. 40A:12A-5(e) applies to properties that have become stagnant and unproductive because of defects in title, diversity of ownership or other conditions of the same kind. The Mulberry court also noted that the Gallenthin Court carved out no exceptions to its holding that the constitutional requirement of blight is not met “where the sole basis for the redevelopment is that the property is ‘not fully productive.’” The Mulberry Street Area includes residential properties, restaurants, offices, retail, commercial and parking lots.

The court refused to find a basis for the City’s determination under “other conditions”, namely that the Mulberry Street Area is connected to a larger blighted area or that the lots contained therein are necessary for rehabilitation of a larger blighted area. Instead, the court found that N.J.S.A. 40A:12A-5(e) requires: “substantial evidence that the area has reached a stage of deterioration or stagnation that negatively affects surrounding areas, such as deteriorated and dilapidated homes and buildings, which are obviously beyond restoration . . .. It does not include ‘areas that are not operated in an optimal manner.’” [Quoting Gallenthin]

An important aspect of the Mulberry court’s holding was the determination of what constitutes “substantial evidence” under N.J.S.A. 40A:12A-5(e). The court determined that “substantial evidence” includes the review of: (1) building permit applications to determine dilapidated or unsafe conditions; (2) occupancy rates and number of employees to determine under-utilization; (3) usage of public transportation to determine under-utilization of parking lots; (4) physical inspections to determine whether structures are substandard; (5) economic activity and productivity; and (6) maps detailing land uses, blighting factors and tax delinquencies.

The facts relied on by the court in finding that the City fell “far short of the substantial evidence requirements” demonstrate that the City did not investigate building permits, code violations, the extent of private market real estate transactions or occupancy rates; conduct building inspections; speak to any parking lot owners; or inquire into revenue generated by municipal parking taxes.

The Mulberry court’s decision and its reliance on Gallenthin demonstrates what appears to be an evolving trend in the redevelopment law in New Jersey, wherein municipalities’ determinations of areas in need of redevelopment are being more carefully scrutinized and challenged.

The full text of the court’s opinion can be found here.