Realty Law Digest

, New York Law Journal

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Scott E. Mollen
Scott E. Mollen

Eminent Domain—Claimant Cannot be Compensated for Increase in Value that Resulted From the Plan for Which the Property Was Condemned—City's Expert Lacked Credibility as to Why Claimant's Properties Had Been Condemned

This decision involved the issue of which "zoning should be applied to the damage parcels…, for the purpose of determining the value of those parcels on the date they were acquired…through eminent domain."

The claimants' properties (properties) had been vested by the City of New York (city) pursuant to an "Urban Renewal Area Plan" (plan). The properties were taken to create a public open space and an "underground parking garage under the site [project]." On the vesting date, the properties "were zoned C6-4.5, which permits development of a floor area ratio (FAR) of 12." The properties were previously zoned as C6-1, which permitted development of an FAR of 6. They had been rezoned in 2004 to include "creation of an open space and underground parking facility." The salient issue was "whether the rezoning…to C6-4.5 was part of the [project] for which the [properties] were taken, and therefore should not be considered in valuing the property pursuant to the project influence or Miller rule." The properties had been rezoned at the same time that the plan had been amended to create the project.

U.S. v. Miller, 317 US 369 (1943), held that when valuing a property for condemnation purposes, "the property should be neither enhanced or diminished by the impact of the project on the value of the property." Miller explained that:

the "market value" of property condemned can be affected, adversely or favorably, by the imminence of the very public project that makes the condemnation necessary. And it was perceived that to permit compensation to be either reduced or increased because of an alteration in market value attributable to the project itself would not lead to the "just compensation" that the Constitution requires. On the other hand, the development of a public project may also lead to enhancement in the market value of neighboring land that is not covered by the project itself. And if that land is later condemned, whether for an extension of the existing project or for some other public purpose, the general rule of just compensation requires that such enhancement in value be wholly taken into account, since fair market value is generally to be determined with due consideration of all available economic uses of the property at the time of the taking"….

The claimants argued that the project was only the creation of a half block of public open space with an underground parking garage and that the rezoning of surrounding blocks was not part of the project, "but a generic area wide rezoning." They stated that it was unnecessary to rezone the properties to create the project, and that the creation of the project was not necessary to the rezoning. They further argued that "not valuing their [properties] based on the zoning in place at the time of vesting would constitute a denial of equal protection."

The city countered that the "project" included not just the open space and parking garage, but also "the entire rezoning of the blocks surrounding [the project], as well as the amendments the text of the zoning resolution, the amendments to the…[plan], and the special permits approved for various parking facilities." The city contended that "all of these actions were related and were part of a comprehensive plan that was aimed [at] stimulating private development of large office buildings in downtown Brooklyn."

Following a hearing, the court explained that "the term project can have different meanings in the different contexts." The court noted that:

New York State Eminent Domain Procedure Law defines a "Public Project" as "any program or project for which the acquisition of property may be required for a public use, benefit or purpose." EDPL §103(G) The term "program" is not a defined term and is somewhat elastic. However, there are certain characteristics of a program, as the term is commonly used, which can be read into the definition in EDPL §103(G). The use of the term "any program" to define a "public project" indicates that a project can include a series of related actions as opposed to being limited to a single distinct action or development. Also, the term program can encompass series of planned actions where not all of the included actions may be realized. Lastly, it also includes more than physical buildings or structures.

The court stated that "[g]iven the rationale of the project influence rule, a comprehensive land use plan can be considered a 'program' within the meaning of the definition of 'public project'" and "[t]he intent of the project influence rule is to ensure that a condemned property is valued as if the project never occurred." Appellate court decisions had applied the Miller rule "to exclude the effect of zoning overrides on the value [of] a property taken through eminent domain where the override and the taking were both part of a comprehensive plan."

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