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McNeill, P.C.

Recent Amendments to State Redevelopment Law Statute

Posted on Tuesday, November 5, 2013 by E. Neal  Zimmermann , Judy Y. Kim

On September 6, 2013, Governor Christie signed into law Assembly Bill 3615, which made several important changes (the “Amendments”) to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A:1 et seq. (the “Redevelopment Law”).

Areas in Need of Redevelopment  Prior to the Amendments, a property owner would receive a notice from the municipal planning board of a public hearing to determine whether his or her property would be declared to be an area in need of redevelopment (an “AINR”).  But the property owner would not know whether such a declaration would mean that his or her property was subject to eminent domain.  Subsequent to the AINR declaration, the municipality would adopt a redevelopment plan, which might or might not make the property subject to eminent domain.

Thus, the property owner receiving a notice of an AINR hearing had to decide whether to hire counsel and expert witnesses to contest a possible AINR designation at the hearing before the planning board without knowing whether such a designation could lead to a taking of his or her property. If the municipal governing body did, in fact, designate the property as an AINR, the property owner again would have to decide whether to appeal that designation in the Superior Court without knowing whether the municipality might adopt a redevelopment plan (or a subsequent amendment to that plan) which would make the property subject to eminent domain.

The Amendments provide substantial relief to a property owner in that situation.  The Amendments create two types of AINR, i.e., Condemnation Redevelopment Areas and Non-Condemnation Redevelopment Areas.  When the governing body authorizes the planning board to conduct a preliminary investigation and to determine whether the property is an AINR, the authorizing Resolution must indicate whether, if an AINR designation is issued, the property might become a Condemnation Redevelopment Area..

When the planning board sends a notice of public hearing on the proposed AINR, the notice must indicate whether the property is proposed to be a Condemnation Redevelopment Area or a Non-Condemnation Redevelopment.  Additionally, if the governing body makes an AINR determination, it must send a Notice of Determination to all affected property owners within 10 days of the date of the determination.  If the property has been designated as a Condemnation Redevelopment Area, the Notice of Determination must so state and must advise the property owner that he or she has 45 days from receipt of the notice to challenge the determination in Superior Court or be barred from raising a challenge later.

A municipality may not exercise eminent domain based on the Redevelopment Law unless it complies with all of the procedural requirements as to Condemnation Redevelopment Areas in the Amendments.

The Amendments also made certain technical changes to one of eight tests in the Redevelopment Law as to what constitutes an AINR.  This revision essentially codifies the decision of the State Supreme Court in Gallenthin Realty Development, Inc. v. Borough of Paulsboro,191 N.J.344 (2007).

Areas in Need of Rehabilitation  The Redevelopment Law also provides for the designation of a parcel as an Area in Need of Rehabilitation.  An Area in Need of Rehabilitation can support a 5 year tax abatement, but an AINR designation is needed to support a Long Term Tax Abatement. An Area in Need of Rehabilitation designation also cannot be the basis for eminent domain. Accordingly, the test for an Area in Need of Rehabilitation has always been less stringent than the test for an AINR.

The Amendments basically liberalize the test for an Area in Need of Rehabilitation, so that such a designation will be easier for the governing body to make.  Under the Amendments, after the required recommendation from the planning board (without the need for a public hearing), the governing body may determine that a parcel or an entire municipality is an Area in Need of Rehabilitation if the following tests are met:

             A.        A program of rehabilitation may be expected to prevent further deterioration and promote the overall development of the community, and

             B.        One of the following additional six criteria is met:

             1)         A significant portion of the structures are in a deteriorated or substandard condition;

             2)         More than half of the housing stock is more than 50 years old;

             3)         There is a pattern of vacancy, abandonment or underutilization of properties in the area;

             4)         There is a persistent arrearage of property tax payments on properties in the area;

             5)         Environmental contamination is discouraging improvements and investment in properties in the area; or

             6)         A majority of the water and sewer infrastructure in the area is at least 50 years old and is need of substantial repair or maintenance.

While an Area in Need of Rehabilitation designation will not support a long term tax abatement, it will support the adoption of a Redevelopment Plan, the designation of a redeveloper and the entry of a Redevelopment Agreement with the redevelopment authority.  While it is possible that the designated redeveloper would be someone other than the property owner, that rarely happens in an Area in Need of Rehabilitation because the absence of the power of eminent domain would not give any non-property owner redeveloper any control over the property.

In some cases, the designation of a parcel as an Area in Need of Rehabilitation can be a net “plus” for the property owner, because it allows for greater flexibility and property owner input into the zoning limits for the property through the adoption of a redevelopment plan and because it allows for a 5 year tax abatement.

Summary The revisions to the Redevelopment Law requiring the municipality to take a position at the outset whether it may seek the authority to acquire a parcel by eminent domain are a major help to affected property owners.  Many owners will not contest an AINR designation if they know that there is no possibility of eminent domain. In the past, some owners challenged the AINR designation because of the uncertainty as to the municipality’s intentions. The Amendments should cure that problem.

The liberalization of the test for an Area in Need of Redevelopment also can be a help to a property owner in certain situations.  However, that issue must be analyzed on a case by case basis.

For more information please feel free to contact Neal Zimmerman at nealz@lawwmm.com or Judy Kim at jyk@lawwmm.com.

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