New Jersey's Eminent Domain Laws and Property Rights

The following responses are intended to provide general information about eminent domain laws in the featured state. Such information does not constitute legal advice. Anyone interested in learning more about eminent domain law and the impact it may have on a given set of facts should consult with an OCA attorney or another attorney experienced in handling eminent domain cases.

• Who Can Exercise Eminent Domain Laws?

  The exercise of eminent domain power in New Jersey is delegated by the State Legislature under Articles I and IV of the New Jersey Constitution to a broad range of State, county and municipal local agencies, public authorities and boards, and also to public utilities. The enabling legislation for any government agency specifies the extent (and possible limits) of each agency’s eminent domain powers. Consequently, it is important to confirm at the outset of any case whether the entity seeking to exercise the power of eminent domain has received a lawful delegation from the State to do so, and whether that entity is properly exercising its eminent domain powers. All entities which have the power of eminent domain in New Jersey must follow the provisions of the NJEDA, except for bodies organized and administered as a result of or under compacts between New Jersey and other states.

• What Are the Legal Requirements for Exercising the Power?

  Under New Jersey law, property can only be condemned for a lawful public use or public purpose. There is a four-step process for condemnation in New Jersey: (1) an attempt to resolve the acquisition through bona fide negotiations before condemnation litigation is commenced; (2) determination by final judgment by a court that the condemning agency has the power of eminent domain and has properly exercised that power; (3) a non-bonding arbitration of the issue of just compensation by a panel of commissioners appointed by the court; and (4) trial by jury on the issue of just compensation.
  
  New Jersey’s legal process for eminent domain is set forth in the NJEDA, N.J.S.A. 20:3- 1, et seq., and implemented in special court eminent domain court rules at N.J.R. &:73- 1, et seq.

• What Limitations or Defenses Exist?

  Once a condemning agency has made the decision to proceed with a public project which requires the acquisition of property necessary for the project, governmental entity, the grounds to challenge the condemnation are limited under New Jersey law. Defenses can, however, be raised as to whether a proper public use exists for the condemnation or whether the prerequisite legal authority to condemn is present. In such situations the Court will review the submitted evidence and rule on the defenses. But in other matters deference is generally given to the condemning authority in its decision to condemn. For instance, the court will not review and substitute its opinion as to whether there is a need to take the property or whether the public project is feasible, unless it can be shown that the decision is so oppressive, arbitrary or unreasonable as to suggest bad faith. However, if the proposed taking is for local redevelopment purposes under the NJLRHL and there is a challenge that the taking is unnecessary, the court may schedule a trial to confirm whether the taking is, in fact necessary to achieve a valid public purpose.
  

• What Constitutes a Public Purpose?

  Like the U.S. Constitution, New Jersey’s Constitution limits the use of eminent domain to “public use,” a term which over time has come to include public purpose as well. Typical uses that satisfy a public use or purpose can include roads, parks, schools, other public buildings, or other projects or undertakings that serve a public good or need. For takings under the NJLRHL, the remediation of blighted conditions is also considered to be a valid public purpose under New Jersey’s Constitution, even though such takings are typically paid for by one private party who ultimately benefits as the designated “redeveloper” for a local redevelopment project.

• How is Just Compensation Determined?

  The definition of just compensation under New Jersey law constitutionally requires that payment be made in an amount which will make the owner whole for the loss of the property. This amount is usually measured by the fair market value of the property being taken from the landowner as of the date of taking. In partial takings, just compensation also includes any diminution in value to the landowner’s remaining property. Both the condemning agency and the owner are required to consider ways to mitigate the damages or impact to the landowner’s remaining property in partial takings cases – this concept is known as a “cure” for the impacts caused by a partial taking.
  
  Just compensation is first determined in New Jersey through a non-binding arbitration hearing, known as a condemnation commissioners’ hearing. The commissioners are three court-appointed arbitrators in the county where the property is located. After the commissioners’ award is entered, either or both parties can then appeal the award and request that just compensation be determined in a trial by jury in the Superior Court of New Jersey in the county where the property is located. In the event of such appeal to a trial, the award of the commissioners will not be considered by the court or disclosed to the jury.
  

• How Is Fair Market Value Defined?

  New Jersey law defines “fair market value” in a condemnation case as the “the price that would be mutually agreeable to a willing buyer and a willing seller, neither being under compulsion to act”, as of the valuation date. The valuation date is set by statute and is usually measured as of the date upon which the condemnation complaint is filed in the Superior Court of New Jersey. In making a determination of fair market value in eminent domain proceedings, the owner is entitled to received the value for the highest and best use of the property as of the valuation date, which can be its current use or any other use(s) for which the property has value, including future uses that may be reasonably probable to occur.
  
  Generally, the property’s fair market value is the subject of opinion testimony by expert real estate appraisers, who will often use different valuation approaches to determine the value of the property, the most common being the comparable sales, income and cost approaches.
  

• What About Recovering Damages to Remaining Property?

  For partial takings, just compensation does include any diminution in value (i.e. damages) to an owner’s remaining property. Thus, when a condemning authority takes a portion of a landowner's property, it is obligated to pay compensation not only for the part taken, but also for any loss in value to the property not being taken. To be compensated for damages to remaining property, such damages must result from loss of the portion of the original property condemned, rather than from the condemnor’s use of other land, or from another person’s use of that land. Unfortunately, in New Jersey a landowner is not entitled to claim damages for business loss caused by the public project on the theory that the business itself can be relocated, except in cases of temporary takings where business losses and damages may be compensable.

• Is the Landowner Entitled to Recover Reasonable Attorney Fees? Expert Fees? Litigation Costs?

  Unlike the law in several other states, attorney’s fees, expert witness fees, and other litigation expenses and costs incurred by an owner in defending a condemnation action are generally not recoverable. There are three exceptions to this rule, however. Such fees and costs fees may be recoverable if it is determined that the state does not have the right to condemn the property, N.J.S.A. 20:3-26, or if the condemning authority abandons the proceeding, N.J.S.A. 20:3-35, or in the event of an inverse condemnation.