The Governing Statute?

In the State of New York, the condemnation procedure is governed by the Eminent Domain Procedure Law (EDPL) which applies to all condemnations, including those undertaken by the State, municipalities, and state and local agencies.

The question of the effect of an environmental condition on the valuation of the property for condemnation or just compensation purposes is still an open issue. As of the date of this brochure, no New York appellate court has rendered a definitive determination on how costs of remediation fit into the valuation of property where there is an environmental condition. The position of the government is that these costs must be deducted from the gross market value to determine the net market value of the property and the position of the claimant/property owner is that it would be improper to impose costs of remediation as a deduction, especially where the property taken has been operating without interference with this condition. Trial courts which have addressed the issue have largely found that either the costs of remediation may not properly be deducted from the award, or that the amount of costs of remediation which can be deducted are limited by various circumstances. This is still a developing area of condemnation law and you, as property owner, should feel free to contact us to discuss this problem if the situation applies.

Any person with an interest in the property taken has a potential claim. This includes, of course, the fee owner of the property. But it also can include lessees, and mortgagees, as well as owners of fixtures and equipment affected by the taking (see Sections 16, 17 and 27 below).

If there are building department or health department violations which have been placed on the property and not officially removed, the cost of clearing up such violations could become a deduction from the market value as of taking date. The property owner, so as to effectively deal with any attempt by the condemning authority to take such a deduction, should:

(i) Maintain a copy of the notice of violation(s).

(ii) Detail what work was done (if any) to remove the violations or any part of them, even though not officially removed.

(iii) Preserve all documents showing that the work was done to remove any violations, including contracts and cancelled checks.

If violations have not been removed, an estimate should be obtained from a contractor or an engineer on the cost of the removal of these violations. This could become an important issue in the valuation trial or settlement.

When the government takes your property, the Constitution of the United States (and every state Constitution) requires that you must be paid “just compensation” (i.e., fair market value) for the property it has taken, as well as compensation for damages to the part it has not taken (if the taking is partial) (see Section 7 below).

The answer to this question is a qualified “yes,” but it is extremely difficult to prove.

In recent years, much attention has been focused on these so-called regulatory or “de facto” takings. These are situations where the regulatory authorities place such onerous restrictions on the use of the property that the property owner claims that the government has “de facto” (as opposed to formal or “de jure”) taken the property, entitling the property owner to just compensation. Traditionally, the remedy for a de facto taking was known as an “inverse condemnation.”

A recent spate of cases from the Supreme Court of the United States, in conjunction with a number of lower state and federal court cases, gave rise to the sense that a major change in the standards of de facto condemnation was being implemented by the courts. See, e.g., First English Evangelical Lutheran Church of Glendale v. Los Angeles County, 482 U.S. 304 (1987); Nollan v. California Coastal Commission, 483 U.S. 825 (1987); Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992); and Dolan v. City of Tigard, 512 U.S. 374 (1994).

The Supreme Court of the United States seemed to be moving toward a concept of requiring compensation (or at least recognizing a de facto condemnation requiring payment of compensation) whenever local regulations resulted in substantial market depreciation in the value of the property.

The New York courts are generally not receptive to de facto condemnation claims requiring a very powerful showing that the property has been destroyed by government action. Gazza v. New York State Dept. of Envtl. Cons., 89 N.Y.2d 603, 657 N.Y.S.2d 555 (1997).

However, in certain circumstances, New York’s statutory scheme does provide some relief to recover for a “de facto” condemnation where the government’s application of the environmental rules and regulations deprive a property owner of substantial value. See, ECL 24-0705(7) which provides:

“In the event that the court finds the action reviewed constitutes a taking without just compensation, and the land so regulated merits protection under this article, the court may, at the election of the commissioner, either (i) set aside the order or (ii) require the commissioner to proceed under the condemnation law to acquire the wetlands or such less than fee rights therein as have been taken.”

The statute requires a two-step analysis. It must first be determined whether the administrative denial of the permit is rational and supported by substantial evidence. Once this is established, it must be determined whether the denial of the permit constitutes an unconstitutional taking of petitioner’s property. See, Spears v. Berle, 48 N.Y.2d 254, 422 N.Y.S.2d 636 (1979).

A precautionary note. The law on the question of “de facto takings” is changing very rapidly. Decisions have come down even as this brochure was being prepared refining and redefining the legal standards. The above review should therefore be viewed as only the broadest outline of this area and any property owner who believes that they are the victim of a de facto condemnation must consult with their counsel to be assured that they are evaluating their situation under the most recent standards.