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River Styx Eminent Domain: What is it? And what does it mean to you?

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River Styx Series Part 2: The Hopatcong Borough Council is moving towards a long-term plan to revitalize the River Styx area to increase property values, Contractor Investments and to become eligible for Federal & State grants. In this second article we will investigate further, what is Eminent domain and what does it mean to the people effected in this area?

What is Eminent domain?

Eminent domain is a tool in local government’s property acquisition toolkit to acquire property from its owner, while providing reimbursement at a fair market value.

The use of eminent domain in New Jersey is governed by the Eminent Domain Act, N.J.S.A. 20:3-1 et seq., which spells out in detail the procedures that must be followed to carry out a taking under the law:

  • The Local Redevelopment and Housing Law, N.J.S.A.40A-12A-8(c) authorizes the taking of property in redevelopment areas for the purpose of carrying out plans for the physical, social and economic development of the community
  • The Fair Housing Act, N.J.S.A.52:27D-325, authorizes the taking of property for the construction or rehabilitation of low and moderate income housing or conversion to low and moderate income housing; and
  • The Urban Redevelopment Act, N.J.S.A.55:19-56(c)(2) authorizes the taking of individual properties for clearance, development, redevelopment or repair of abandoned properties.

Note: In the state of New Jersey, the eminent domain process can only be stopped if the proposed taking does not meet the requirements for public purpose (see below).

Public Purpose: The justification which the government must establish in its powers of eminent domain to acquire private property. Examples of endeavors which satisfy the public purpose include roads, parks, schools, other public buildings, or any other endeavor where the purpose of the project serves a public good or need.

So what does this mean?

The United States Constitution, as well as New Jersey law, requires that all takings of property under eminent domain be at fair market value. While that principle is straightforward, the question of what constitutes fair market value in any particular situation is far more complicated.

The procedures required by the act is described step-by-step as follows:

Step 1: The appraiser must determine the full cost, including not only construction and site remediation, where necessary, but all relevant soft costs such as fees, permits, architectural or engineering costs, legal expenses and marketing expenses either (a) to rehabilitate the property or (b) to demolish the property and construct a new building on the site, under existing planning and zoning regulations (N.J.S.A. 55:19-102[a]).

Step 2: The appraiser must then determine what the realistic market value will be for the property after new construction or rehabilitation, as the case may be, taking into account the market conditions particular to the neighborhood or subarea of the municipality in which the property is located (N.J.S.A.55:19-102[b]).

The relevant market conditions for purposes of the appraisal are those of the immediate neighborhood or sub-area, not the city or region. This is particularly important, because in many urban areas, real estate values can change dramatically from one part of the city to the next, sometimes within a matter of a few blocks. If, under Step 1, the appraiser has analyzed both the new construction and rehabilitation options, the appraiser should determine the realistic market value at this point under both alternatives, since there may be some variation between the two values.

Step 3: The appraiser must compare the costs determined in Step 1 with the post rehabilitation and/or post-construction market value determined in Step 2. If the appraiser finds that the cost exceeds the value, the law provides that “there shall be a rebuttable presumption in all proceedings under this subsection that the fair market value of the abandoned property is zero, and that no compensation is due the owner.” If, on the other hand, the appraiser finds that the market value exceeds the cost, the appraiser can look at other factors, such as comparable sales or income ratios, as long as the combined cost of the “as is” value and the cost to reuse the property do not exceed the subsequent market value.

Bottom Line: If you are in the River Styx area, and the Borough enacts this provision, you are entitled to fair market value for your home. Which is protected by Federal and State law! Also, as related in the first article, the Mayor and Town Council are not looking to enact this provision, rather just seek the alternative methods first to increase the property values, Contractor Investments and to become eligible for Federal & State grants.

 

The team at Hopatcong Lake Regional News hopes that this helps to inform you on what’s happening, and gets you involved on the matters that are important to you!

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