Are You Ready for Redevelopment?

by William W. Northgrave on January 1, 2011

The recent resurgence of activity in industrial and commercial markets, with some limited retail and the occasional residential project, makes this the perfect time to make sure that your community is ready for redevelopment.  As with the federal 2009 American Reinvestment and Recovery Act (“ARRA”) program, if your community is not “shovel-ready” for redevelopment, developers will make their investments elsewhere.

The initial and most basic step each community should take is to make certain that the designation of any redevelopment area can withstand a legal challenge.  There have been a number of recent decisions that may question whether a redevelopment area was properly designated.  In Gallenthin v. Paulsboro, 479 N.J. 344 (2007), the New Jersey Supreme Court reviewed the designation of a redevelopment area and found that although the municipality’s designation met the statutory criteria set forth in the Local Redevelopment and Housing Law (N.J.S.A. 40A:12A-1 et seq.)(the “Redevelopment Law”), simply meeting those criterion was insufficient to establish the constitutional “blight” required to designate any area.  While not every redevelopment criteria under the Redevelopment Law was challenged in Gallenthin, many of the investigations conducted prior to Gallenthin could suffer from the same infirmity found by the Supreme Court in Gallenthin.  If your community has designated redevelopment areas within your borders prior to 2007, the investigation of the study area should be reviewed by your counsel (in conjunction with your planner) to determine the adequacy of the investigation and the findings supporting the redevelopment area desigation.

While Gallenthin questioned the substance of a redevelopment designation, the Appellate Division in Harrison Redevelopment Agency v. De Rose, 398 N.J. Super. 361, 942 A.2d 59 (App. Div. 2008) questioned the process employed to designate a redevelopment area.  When undertaking to study and designate a redevelopment area, the Redevelopment Law simply requires public notice as to the date and time an area is to be studied.  The court in DeRose found that more notice was required because a property owner would have only 45 days from the date that a resolution designating a redevelopment area was adopted to challenge that designation.  That 45-day period could pass well before the property owner realized, many times not until years later, that the designation could lead to the taking of the property by eminent domain.  The DeRose court ordered that, unless the property owner (a) was actually on notice as to the impact of a designation (i.e., that the property could be subject to condemnation) and (b) had the opportunity to contest the findings leading to a designation of a redevelopment area, that property owner could challenge the designation at any time.  In other words, the property owner would not be time-barred from raising a challenge to the original redevelopment area designation even if the challenge came years later.  The problem with that open-ended ability to challenge is that it creates tremendous uncertainty as to whether the vision in the redevelopment plan can be achieved.  Further, if the challenged property is the lynchpin of a project (which is common in most, if not all, cases requiring condemnation) the municipality’s ability to implement a comprehensive redevelopment project can be stalled, if not stopped completely.

Understanding the impacts of these recent decisions on the implementation of redevelopment, we recommend a review of both the substantive and procedural issues surrounding the designation of a redevelopment area in order to ensure your community is ready for redevelopment.

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