Unsightly? Protective? Both?
Tropical Storm Sandy, which devastated the Jersey Shore almost a year ago, has prompted much head-shaking, collective soul-searching and the expenditure of a great deal of ink. In addition to the engineering and scientific challenges raised by Sandy and its aftermath, age-old legal concepts about private property rights, government’s obligation to protect the public, and how to reconcile those concepts in practice are being re-examined.
It is a basic legal principle that under some circumstances the government may take private property for important public uses and that when doing so it must fairly compensate the owner for the property. While the individual property owner may be forced to give up his property for the benefit of the public, he is entitled to be paid for its value with public funds. This requires answering two important questions: what kinds of public uses are important enough to justify “taking” someone’s property; and how much should the public have to pay for it? Both of these questions have given rise to extensive litigation between citizens whose property has been condemned and the government entities which have taken their properties. It should come as no surprise that property owners and government officials often disagree as to the fair value of condemned property.
A recent case in by the New Jersey Supreme Court addressed the question of how to value condemned property in the context of beach erosion and protection. Although the lawsuit was filed well before Sandy, it was decided after. It is hard to believe that consciousness of the Sandy catastrophe had no influence on the court’s decision.
In Borough of Harvey Cedars v. Karan, the Supreme Court ruled on the correct way to value the taking of private property for public purposes. The case began when Harvey Cedars condemned an easement over the Karans’ million-dollar-plus beach-front property to build a dune to protect the shore. (An easement is a right to use someone else’s property for a particular purpose, and it has to be paid for. Condemning an easement is known as a “partial taking.”) Although all agreed that Harvey Cedars had to compensate the Karans for the partial taking, the parties disagreed as to how to calculate the amount.
One element to be considered when establishing the value of an easement is whether the intended use of the property by the government benefits the property in some specific way, rather than merely providing a general benefit to the public. If so, the value of the property could be enhanced to some degree by the partial taking and the calculation of the just compensation would take that into account.
The Karans said that just compensation was the amount by which the fair market value of their property was reduced by the presence of the 22-foot high dune, which blocked their view of the ocean from the first floor. Experts hired by the Karans offered testimony at trial as to how much, in their professional opinion, the presence of the new dune would reduce the fair market value of the Karan property. Harvey Cedars was willing to admit some loss in value, but wanted to offer competing expert testimony that the loss in value would be offset, either partially or completely, by increased protection from storm damage. According to the borough’s view, the calculation of the impact of the taking on the property value should take into account both positive and negative factors, so that the negative factor of the lost view might be offset by the positive factor of enhanced storm protection.
The trial court decided that the dune would provide a general benefit to the community rather than a specific benefit to the Karan property, and did not permit Harvey Cedars to introduce any evidence to show that the dune might enhance the value of the property. The jury – which during the trial was transported to the Karan house to observe first hand the sweeping ocean view – decided that losing the view would cause a reduction in the fair market value of the property by $375,000 and awarded that amount to the Karans. Harvey Cedars appealed.
The Supreme Court decided that the application of the traditional special/general benefits rule would not necessarily result in just compensation. The court held that in order to yield just compensation, calculation of the impact of the taking on the property value should include consideration of both positive and negative factors, both the reduced view and the enhanced storm protection. Harvey Cedars would still have to provide evidence that a buyer would pay some amount more for a property better protected from storms. In the short run, this might be difficult to do given that there may be little historical data available on the dollar value of storm protection, while there is lots of data on the value of unobstructed ocean views. In the future, however, real estate professionals may observe that enhanced storm protection is worth more money to a property buyer than before Sandy and translates into higher property values. If so, they will be permitted to testify on behalf of municipalities such as Harvey Cedars.
If a municipality can establish a monetary value for providing storm protection, it will substantially reduce the amounts of compensation it will have to pay for the partial takings needed to construct a comprehensive dune system. This could open the door to greater protection from storm damage for Shore communities.
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Dunes on the Beach
Unsightly? Protective? Both?
Tropical Storm Sandy, which devastated the Jersey Shore almost a year ago, has prompted much head-shaking, collective soul-searching and the expenditure of a great deal of ink. In addition to the engineering and scientific challenges raised by Sandy and its aftermath, age-old legal concepts about private property rights, government’s obligation to protect the public, and how to reconcile those concepts in practice are being re-examined.
It is a basic legal principle that under some circumstances the government may take private property for important public uses and that when doing so it must fairly compensate the owner for the property. While the individual property owner may be forced to give up his property for the benefit of the public, he is entitled to be paid for its value with public funds. This requires answering two important questions: what kinds of public uses are important enough to justify “taking” someone’s property; and how much should the public have to pay for it? Both of these questions have given rise to extensive litigation between citizens whose property has been condemned and the government entities which have taken their properties. It should come as no surprise that property owners and government officials often disagree as to the fair value of condemned property.
A recent case in by the New Jersey Supreme Court addressed the question of how to value condemned property in the context of beach erosion and protection. Although the lawsuit was filed well before Sandy, it was decided after. It is hard to believe that consciousness of the Sandy catastrophe had no influence on the court’s decision.
In Borough of Harvey Cedars v. Karan, the Supreme Court ruled on the correct way to value the taking of private property for public purposes. The case began when Harvey Cedars condemned an easement over the Karans’ million-dollar-plus beach-front property to build a dune to protect the shore. (An easement is a right to use someone else’s property for a particular purpose, and it has to be paid for. Condemning an easement is known as a “partial taking.”) Although all agreed that Harvey Cedars had to compensate the Karans for the partial taking, the parties disagreed as to how to calculate the amount.
One element to be considered when establishing the value of an easement is whether the intended use of the property by the government benefits the property in some specific way, rather than merely providing a general benefit to the public. If so, the value of the property could be enhanced to some degree by the partial taking and the calculation of the just compensation would take that into account.
The Karans said that just compensation was the amount by which the fair market value of their property was reduced by the presence of the 22-foot high dune, which blocked their view of the ocean from the first floor. Experts hired by the Karans offered testimony at trial as to how much, in their professional opinion, the presence of the new dune would reduce the fair market value of the Karan property. Harvey Cedars was willing to admit some loss in value, but wanted to offer competing expert testimony that the loss in value would be offset, either partially or completely, by increased protection from storm damage. According to the borough’s view, the calculation of the impact of the taking on the property value should take into account both positive and negative factors, so that the negative factor of the lost view might be offset by the positive factor of enhanced storm protection.
The trial court decided that the dune would provide a general benefit to the community rather than a specific benefit to the Karan property, and did not permit Harvey Cedars to introduce any evidence to show that the dune might enhance the value of the property. The jury – which during the trial was transported to the Karan house to observe first hand the sweeping ocean view – decided that losing the view would cause a reduction in the fair market value of the property by $375,000 and awarded that amount to the Karans. Harvey Cedars appealed.
The Supreme Court decided that the application of the traditional special/general benefits rule would not necessarily result in just compensation. The court held that in order to yield just compensation, calculation of the impact of the taking on the property value should include consideration of both positive and negative factors, both the reduced view and the enhanced storm protection. Harvey Cedars would still have to provide evidence that a buyer would pay some amount more for a property better protected from storms. In the short run, this might be difficult to do given that there may be little historical data available on the dollar value of storm protection, while there is lots of data on the value of unobstructed ocean views. In the future, however, real estate professionals may observe that enhanced storm protection is worth more money to a property buyer than before Sandy and translates into higher property values. If so, they will be permitted to testify on behalf of municipalities such as Harvey Cedars.
If a municipality can establish a monetary value for providing storm protection, it will substantially reduce the amounts of compensation it will have to pay for the partial takings needed to construct a comprehensive dune system. This could open the door to greater protection from storm damage for Shore communities.