Appellate Court Broadens Property Owners' Right to Challenge Redevelopment Designations in New Jersey

In a significant decision, the New Jersey Appellate Division in Harrison Redevelopment Agency v. DeRose for the first time articulated a set of clear standards which define the parameters under which an owner of property in a designated redevelopment area can contest the use of eminent domain based on defects in the redevelopment designation process. The court’s opinion, which consists of 88 pages and some 28 footnotes, provides a thorough and comprehensive analysis of the interplay between the Local Redevelopment and Housing Law (“LRHL”), the Eminent Domain Act, and constitutional due process requirements.

The central issue in the case involved the adequacy of notice prescribed by the LRHL. The Town of Harrison, following statutory procedures, designated an “area in need of redevelopment” in 1997, and subsequently adopted a redevelopment plan in 1998, but did not commence eminent domain proceedings until 2006. In contesting the use of eminent domain, the property owner sought to challenge the 1997 “area in need of redevelopment” designation as failing to satisfy statutory requirements. The problem was that the 45-day appeal period applicable to such challenges had long since elapsed.

The LRHL only requires notice to property owners of the public hearing concerning the preliminary investigation conducted by the planning board precedent to its recommendation to the governing body relative to whether those properties should be designated as an “area in need of redevelopment.” There is no statutory requirement that property owners be notified that a designation has been made, that the designation carries with it the right to exercise the power of eminent domain, and that the property owners’ right to contest the designation lasts for only 45 days.

According to the Harrison decision, the LRHL notice requirements do not meet constitutional parameters because they fail to sufficiently advise property owners of the possible drastic consequences of a redevelopment designation. In order to avoid invalidating the LRHL, the Appellate Division crafted a creative decision which allows its notice requirements to stand, but at the same time cures the statute’s constitutional deficiencies. Harrison holds that a property owner may contest a redevelopment designation in a subsequent eminent domain proceeding, even one brought long after the 45-day appeal period expires, unless the municipality, following the redevelopment designation, provides individual written notice that fairly alerts the property owner that (1) the property has been designated by the governing body as being “in need of redevelopment”; (2) the designation operates as a finding of public purpose and authorizes the exercise of eminent domain against the property owner’s will; and (3) that the property owner has 45 days to challenge the an “area in need of redevelopment” designation. If the municipality elects not to provide this additional notice beyond that which the LRHL requires, the property owner retains a constitutional right, despite the usual 45-day limitations period, to challenge the redevelopment designation in defense of an eminent proceeding. In theory, the limitations period could essentially be tolled for years, depending on how long the municipality takes to file an eminent domain proceeding.

The Harrison decision has the potential to directly affect every ongoing redevelopment project in New Jersey that requires the use eminent domain because, if property owners were not noticed as dictated by the Harrison decision, they will be given a second chance to contest the designation. Since these new requirements go well beyond the LRHL, it is unlikely that such notice was given in the vast majority of cases. Thus, redevelopment projects may see unanticipated delays as a result.

At this time it is difficult to fully appreciate the long-term impact that Harrison will have on redevelopment in New Jersey. However, one thing is clear: municipalities, redevelopment agencies, and redevelopers involved in ongoing and future redevelopment projects need to consult with counsel with respect to the notice requirements and to determine, in situations where notice does not comport with Harrison, whether such defects can or should be remedied prior to the commencement of eminent domain proceedings.

Future redevelopment projects or those in their infancy can seize the opportunity to satisfy due process requirements from the beginning by ensuring that notices sent to property owners meet the criteria enunciated in Harrison. There is no question that as a result of Harrison, property owners contesting the right of eminent domain will have a significantly greater ability to assert challenges to prior redevelopment designations.