CAN GOVERNMENT DESIGNATE PROPERTY TO BE ACQUIRED AND RESTRICT FUNDAMENTAL RIGHTS?

The North Carolina Supreme Court held that the filing of a map which designates property for future highway acquisition and prohibits development in the interim is a taking.  Kirby v North Carolina Dept. of Trans., 368 N.C. 847 (2016).

The Court held, “upon NCDOT’s recording of the highway corridor maps at issue here, the Map Act restricted plaintiffs’ fundamental rights to improve, develop, and subdivide their property for an unlimited period of time.  These restraints, coupled with their indefinite nature, constitute a taking of plaintiffs’ elemental property rights by eminent domain.”

The Court noted that “property” clearly includes the right to improve, develop, and subdivide, which were severely and indefinitely restricted by the Map Act.  The North Carolina court further held that this indefinite restraint on fundamental property rights is squarely outside the scope of the police power.  While the reduction in acquisition costs for highway development is a laudable public policy, economic savings are a far cry from the protection from injury contemplated under the police power.

The Kirby court held that there was an inverse condemnation.  It stated, “[a] taking effectuated by eminent domain does not require ‘an actual occupation of land,’ but ‘need only be a substantial interference with elemental rights growing out of the ownership of the property.’ ”

This holding is completely consistent with the law, so how do we explain Matter of City of New York (Zahav LLC), 106 AD3d 418 (1st Dept 2013).  This is the Hudson Yards case in which our firm is litigating several claims.

In January, 2005, all of Hudson Yards was rezoned from manufacturing to commercial, with the exception of the properties that were to be condemned by the City of New York.

Two years later the City condemned the earmarked parcels for a park and boulevard.  The City valued the properties based on the archaic M1-5 (manufacturing) zoning in place.  There was no question that the improper zoning was specifically kept in place because the land was to be condemned and this would lower the just compensation which must be paid for it.

The trial court held that this was permissible because it was “City policy.”  Not only that, the court also held that the claimants were precluded from establishing a reasonable probability of rezoning.  The basis for the rejection of a fundamental part of the concept of highest and best use was that the rezoning of all other property in Hudson Yards was part of a single interdependent “project.”  Thus, according to the lower court, the commercial zoning everyone else received was enacted as part of that “project.”  But there is more to this madness, the court’s holding was that the probability of rezoning could not be considered because it violated the Project Influence Rule promulgated in U.S. v Miller, 317 U.S. 369 (1943).

How can that be?  38 blocks were rezoned to C6-4.  This is an enormous amount of land.  The only parcels left in the archaic M1-5 zoning were those slated to be condemned.  The evidence was clear that there was no land use or zoning rationale otherwise supporting the retention of the M1-5 zoning.  At trial, no City witness testified that retaining the M1-5 zoning was proper.

The Court’s adoption of the City’s argument that the Project Influence Rule applies was way off base.  Indeed, importantly, the Rule also holds that a property condemned can be affected, adversely or favorably, by the imminence of the very public project that makes the condemnation necessary…to permit compensation to be either reduced or increased because of an alteration in market value attributable to the project itself.  U.S. v Reynolds, 397 U.S. 14, 16-17 (1970).  This was certainly the case here.

On appeal to the Appellate Division, First Department, the order was affirmed with the First Department holding that the retention of the M1-5 zoning designation as part of the rezoning of the Hudson Yards area for properties condemned for development of a park and boulevard was part of a comprehensive redevelopment plan.  Matter of City of New York (Zahav LLC), 106 AD3d 418 (2013).  A decision not supported by the facts, law or logic.

The claims are presently scheduled for trial in June 2017.  We will then move for permission to appeal to the Court of Appeals to correct this injustice.

Posted in Highest and Best Use, Inverse Condemnation, Zoning
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