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New Jersey Supreme Court Holds Redevelopment Designation Cannot Be Based Solely On Not Fully Productive Use of Property


In-Sites Special

June 18, 2007

By: Howard D. GeneslawJason R. Tuvel

On June 13, 2007, the New Jersey Supreme Court, in Gallenthin Realty Development, Inc. v. Borough of Paulsboro, decided an issue of first impression with respect to the controversial topic of redevelopment in New Jersey, specifically concerning the proper application of the “not fully productive” statutory criteria for a redevelopment designation.

In this appeal, the Supreme Court held that because the New Jersey Constitution authorizes redevelopment of only blighted areas, the Legislature did not intend N.J.S.A. 40A:12A-5(e) to apply in circumstances where the sole basis for the redevelopment designation is that the property is “not fully productive.” Rather, subsection 5(e) applies only to those areas that, as a whole, are stagnant and unproductive because of title, diversity of ownership, or other similar conditions.

This holding is significant because it prevents a municipality from utilizing its condemnation powers simply because a property is not as developed as it could be or is being operated in a less than optimal manner. As noted by the Supreme Court, if this were allowed, most of the property in New Jersey would be eligible for designation as an “area in need for redevelopment.”

In addition, this holding puts municipalities and redevelopers on notice that the substantial evidence presented at the “area in need of redevelopment” preliminary investigation, which is conducted by municipal planning boards, must be supported by more than the net opinion of an expert and should not constitute a mere recitation of the applicable statutory criteria and a statement that those criteria are met. Instead, the undertaking by a municipality and/or redeveloper must be a thorough and complete investigation of the properties to be designated in need of redevelopment and such investigation, if it relies on the “not fully productive” criteria, must demonstrate an essential characteristic of blight, namely, that the properties’ deterioration or stagnation arises from conditions involving title, diversity of ownership or other similar conditions, and has a negative affect on surrounding properties. In essence, the Supreme Court has enunciated a rule that makes it more difficult for municipalities to designate properties “in need of redevelopment.”

The full text of the Court’s opinion can be found at: http://www.judiciary.state.nj.us/opinions/supreme/A-51-06.pdf.