Tenants' Rights Scrutinized in Kearny Redevelopment Taking
A New Jersey appellate court recently analyzed the rights of a tenant who challenged a town’s right to use eminent domain to extinguish its leasehold interest in a municipal redevelopment project. Town of Kearny v. Discount City of Old Bridge, et als, Docket No. A-6220-07T3.
In this case, two commercial tenants appealed from trial court rulings upholding the Town of Kearny’s right to condemn and terminating their leaseholds. The tenants occupied their properties under leases entered into with the same landlord in 1994 and 1995. They were located in a riverfront area designated by Kearny as the “Passaic Avenue Redevelopment Area” in 2001. In 2007, the tenants’ landlord was designated by Kearny as the redeveloper for the project under New Jersey’s Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-8. Under the Redeveloper Agreement, Kearny agreed to use its eminent domain powers to acquire property needed to advance and complete the redevelopment project. While the landlord/redeveloper was required to attempt to terminate the leases through negotiation, the Redeveloper Agreement provided that the redeveloper could request that Kearny take the leaseholds by eminent domain, which occurred in 2008.
The tenants opposed the condemnation, claiming that it could not proceed because the Town had not negotiated with them before instituting suit, and that notice of the planned redevelopment activities was not provided. They also asserted that the landlord/redeveloper’s construction plans were not consistent with the uses specified in the Town’s redevelopment plan. These arguments were rejected by the trial judge, who upheld Kearny’s exercise of eminent domain.
The appellate panel held: (1) under New Jersey’s Local Redevelopment and Housing Law (“LRHL”), a municipality has the authority to condemn a tenant’s leasehold interest separate from the landlord’s fee simple interest; (2) there was no separate obligation of the condemning agency to negotiate because the landlord/redeveloper’s attempt to negotiate the termination of the tenant’s leasehold before the town filed the condemnation complaint was sufficient to meet the negotiation obligation under the Eminent Domain Act, N.J.S.A. 20:3-6; and (3) a tenant has no right to individual notice of a proposed blight designation as the LRHL only requires notice to property owners. However, the court also held that the matter should be remanded in order to determine whether the landlord/redeveloper’s proposed project is consistent with the redevelopment plan, and also whether the leases’ condemnation clause precludes the tenants’ right to just compensation where the landlord/redeveloper’s property interest was not being condemned.
A copy of the appellate court’s slip opinion is available here.
