Saturday, August 18, 2012

New Jersey Provides Guidance for Valuing Contaminated Property in Condemnation Matter

As many jokes as there are about New Jersey, many people miss the irony that New Jersey is named the "Garden State" but rivals nearly every state for most contaminated sites.  New Jersey's long history of manufacturing created those contaminated sites, and the landscape is littered with the vestiges of vacant factories and manufacturing plants whose time has long passed.

A recurring issue in New Jersey is determining the value of those properties when towns decide to repropriate their use in condemnation proceedings. With the companies that caused the contamination long out of business or unable to afford remediation efforts, the value of the land is difficult to determine taking into account the cost to remediate the land.

A recent New Jersey Appellate Division case clarifies the process of valuing contaminated property in a condemnation action, and finds that where the cleanup has been completed, even if contamination remains at the property, the property owner is not required to escrow additional monies for any further cleanup.

In 2003, in the Housing Housing Authority of the City of New Brunswick v. Suydam Investors case, the New Jersey Supreme Court set forth the process for valuing contaminated property in a condemnation matter: the property is valued as if the contamination has been remediated, with a portion of the condemnation award necessary to fund the cleanup being escrowed. This rule avoids a “double-take,” in which the condemning authority pays less for a property because it is dirty, but then gets the property cleaned-up by forcing the former owner to pay for the cleanup.

In Borough of Paulsboro v. Essex Chemical Corp., decided July 16, 2012, the Appellate Division was asked to decide whether the Suydam methodology applied where the NJDEP approved the cleanup and capping of a landfill.  Because the NJDEP approved the landfill closure and Essex Chemical had no further cleanup liability.

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