Greenbaum Rowe Smith & Davis Newsletter

Is Redevelopment Alive After Gallenthin?

By Robert Beckelman, Esq.



Last June, the New Jersey Supreme Court in Gallenthin v. Borough of Paulsboro decided its first redevelopment case since 1971. In the thirty-four years between the Court’s 1971 decision in Levin v. Bridgewater and 2005, there were relatively few cases concerning challenges to blight or redevelopment designations, with only a tiny fraction of those resulting in a redevelopment designation reversal. The status quo began to change, however, after the United States Supreme Court decision in Kelo v. City of New London in which the Court held that implementation of an economic revitalization development program designed to improve the general welfare of the community was a sufficient public purpose under the United States Constitution to justify the exercise of eminent domain to acquire private property to be redeveloped by another private interest.

Implications of Kelo and Gallenthin


Although Kelo was not surprising from the standpoint of legal analysis, the social and political implications of the decision were far-reaching, bringing the issue of eminent domain to the forefront of the nation’s conscience and triggering a flurry of legislative activity in states across the country designed to limit or curb the use of eminent domain for what was deemed “private redevelopment” or “economic development.” Although the impact of the decision certainly reached New Jersey and has resulted in legislative proposals still under consideration to limit the use of eminent domain for redevelopment, the reaction of the New Jersey judiciary was not particularly significant. This is no doubt due in large part to the fact that, unlike the economic development statute challenged in Kelo, New Jersey’s Local Redevelopment and Housing Law requires a finding of blight conditions before a municipality may exercise the power of eminent domain to acquire private property to carry out a redevelopment. New Jersey’s redevelopment law sets forth various criteria that must be met in order for a municipality to designate a property as blighted. Additionally, the New Jersey Constitution specifically provides that the redevelopment of blighted areas constitutes a valid public purpose justifying the use of eminent domain.



Although the Kelo decision did not substantially impact New Jersey’s redevelopment law, the State Supreme Court’s decision in Gallenthin has significantly altered the field of redevelopment in New Jersey. That case involved a challenge to Paulsboro’s inclusion of a 63-acre largely vacant parcel of property in a redevelopment area based on its stagnant and unproductive condition, resulting in an underutilized and not fully productive use of the property. Although the finding arguably fit within the terminology of the redevelopment law, the Court found that Paulsboro’s determination essentially led to the conclusion that a property may be deemed blighted based solely on its status as “not fully productive.” Based upon this reading, the Court reasoned that virtually any property may be deemed blighted and that such an interpretation was unconstitutional and could not serve as a proper basis for the acquisition of private property through eminent domain. The Court further held that with respect to the specific statutory provision at issue, which permitted a finding of blight for stagnant and not fully productive properties based upon conditions of title and diversity of ownership or other conditions”, the “other conditions” were not intended to be a catch-all but must be conditions relating to issues of title and diversity of ownership. The Court held that the meaning of blight inherently must include conditions that have a demonstrable negative impact on the community or surrounding areas. Finally, the Court emphasized that a redevelopment designation must be supported by “substantial” evidence, which would require far more than the net opinion of a planner.



On its face, the decision was well reasoned and balanced. The decision essentially holds that purely economic development, as was permitted in the Kelo decision, is insufficient to justify the exercise of eminent domain absent a finding of blight as that term was intended to be applied under New Jersey’s Constitution. Moreover, although the Court tightened the reins on what would be required for a finding of blight and made clear that such designations must truly be supported by “substantial” evidence and solidly grounded in professional opinions, it largely sustained the validity of the redevelopment law and acknowledged the need and legitimacy of eminent domain as a tool for carrying out redevelopment.



During the several months following the Gallenthin decision, however, there were as many reversals of redevelopment designations as there had been in the nearly sixty years since the adoption of the first redevelopment laws in New Jersey. In Land Plus v. Borough of Hackensack, the Superior Court in Bergen County reversed a redevelopment designation based on the Gallenthin holding that the only basis for the designation was the underutilization of the properties. Similarly, in Mulberry Street Property Owners v. City of Newark, the trial court in Essex County held that the redevelopment designation of an area consisting largely of privately owned surface parking lots, storage and vacant lots, and a mix of residential and commercial uses was based solely on the not fully productive condition of the properties and there was no finding that this condition had any negative impact on the surrounding area as required under Gallenthin. Redevelopment designations were also reversed, based explicitly upon Gallenthin in Maplewood, Lodi and Belmar. While the Lodi case was an Appellate Division decision affirming a trial court reversal of a blight designation, the two Belmar decisions by the Appellate Division reversed trial court affirmations of redevelopment designations.

Notice Issues And Development Rights


In addition to cases specifically dealing with a challenge to blight designations, the Courts have been grappling with other redevelopment issues that have significant implications upon municipalities and developers engaged in redevelopment projects. In the case of Vineland Construction v. Borough of Pennsauken, the Appellate Division affirmed the trial court’s dismissal of the complaint by a property owner claiming to be ready, willing and able to develop his own property consistent with the redevelopment plan and challenging the Borough’s selection of a master developer to carry out a comprehensive redevelopment of the entire area. The Appellate Division reasoned that this was a municipal determination and if made in good faith, the municipality’s decision to choose one developer to implement a comprehensive and integrated redevelopment over a sole property owner who would develop only his own parcel, would be upheld. There was a dissenting opinion in that case, however, stating that the redevelopment law permits condemnation only when “necessary” to implement a redevelopment plan and that because the plaintiff was capable of redeveloping his property, condemnation could not be deemed necessary.



Another recurring issue in the redevelopment context is the timeliness of a challenge where there is a substantial lapse of time between a redevelopment designation and a municipality’s efforts to acquire property by eminent domain to implement a redevelopment plan, which is often several or many years. Some courts have held that although a property owner must challenge a redevelopment designation within forty-five (45) days of its adoption (pursuant to court rules for challenges to municipal actions), a property owner should not be precluded from challenging that very same redevelopment designation as a defense to a condemnation, even if condemnation takes place many years later. Other courts have held that the question of whether a property owner may be permitted to challenge a redevelopment designation beyond the forty-five day period specified in the court rules, whether in the context of condemnation or otherwise, should be left to the judge’s discretion under the court rules permitting a late challenge based upon the particular circumstances and equities of each case.



Recently, in Harrison Redevelopment Agency v. DeRose, the Appellate Division resolved this perceived conflict and held that if a property owner did not receive personal notice at the time of the redevelopment designation that a potential consequence of the designation could be the exercise of eminent domain to acquire his or her property and that the designation must be challenged within forty-five days, that property owner would not be precluded from challenging the redevelopment designation years later in a condemnation proceeding. The Court was also clear that, in any case, trial courts maintain their discretionary power to relax the time limitation under the general powers of the court rules. Since the redevelopment law has never required notice specifically referencing the potential use of eminent domain or a time limit to challenge a redevelopment designation, virtually no municipality has likely done so and none will likely be presently prepared to address such challenges if and when it seeks to acquire any private property through eminent domain.

Looking Forward


Many in the development and local government community feel that the trial courts and Appellate Division are over-reading the Gallenthin decision and improperly taking its clarification of redevelopment and eminent domain as a critique calling for strict and suspicious scrutiny of all redevelopment activities. Private property advocates, on the other hand, are no doubt pleased with the reaction of the trial and appellate courts and support their reading of Gallenthin. However one may philosophically view Gallenthin and subsequent decisions and the impact upon the current state of redevelopment, the practical consequences of these decisions and their chilling effect upon redevelopment are undeniable. The post-Gallenthin decisions further raise the concern of potential vulnerability to previously established redevelopment areas, regardless of how far along a particular municipality may be in its redevelopment process or how much capital has been invested.



In this rapidly and ever changing climate of redevelopment, it is unclear what the future of redevelopment holds and there is little guidance from the state as to how municipalities should proceed with efforts at redevelopment. Indeed, the various state agencies and departments themselves appear to have conflicting agendas. For example, the Governor is looking for 100,000 new affordable housing units over the next 10 years, with newly-proposed rules by the Council on Affordable Housing calling for even substantially more than 100,000 affordable units. The Department of Environmental Protection continues to propose and amend rules to implement policies of preservation of natural resources and open space, making development and redevelopment increasingly difficult, costly, and time-consuming.



While these are laudable goals, none can be realized without redevelopment. With the shrinking availability of land intensified by development restrictions, it appears that the future of development in New Jersey lies heavily in its potential for redevelopment. The increasing limitations and restrictions being placed upon greenfield development and the State’s smart growth policies make it less likely that developers could (due to development restrictions) or would (due to economics) buy large tracts of vacant land (likely within farmland, wetlands, open space, or some other preservation area) to construct affordable housing. Rather, the opportunities for affordable housing and the realization of the State’s and the DEP’s goals of natural resource and open space preservation and conservation will depend upon redevelopment.



Nevertheless, there is pending legislation designed to further limit redevelopment and eminent domain and the State Public Advocate has declared war on the use of eminent domain for redevelopment. The state needs to coordinate its various departments and agencies to adopt a consistent policy concerning redevelopment that recognizes the significance of redevelopment for New Jersey’s future and the State’s goals. Any proposals by the Legislature should be carefully balanced and not ignore the significant impact of recent judicial activity (which has resolved substantial issues sought to be addressed by pending legislation) so that the law preserves the powers of redevelopment, including eminent domain, in its efforts to address perceived abuses.



Robert Beckelman is an associate in the Real Estate Department and Redevelopment Practice Group. He is admitted to practice in New Jersey.