Where is the Temporary Commission on Eminent Domain?

By M. Robert Goldstein and Michael Rikon

March 14, 2008

As a result of the U.S. Supreme Court decision in Kelo v. City of New London, 545 U.S. 469 (2005), 42 states have now enacted legislative reform. The New York State Bar Association named a special task force to study eminent domain.

Twenty-one New York attorneys and academics (including M. Robert Goldstein) were appointed to the special committee. The task force held several meetings in Albany and listened to the presentations of members of the Judiciary, law professors, and practitioners in the area of eminent domain.

The task force issued a final report in July 2007. In its earlier March 2006 report it noted that 17 bills were pending at that time in the state Legislature which would affect eminent domain. Since that date, the Legislature only adopted two bills which were extremely limited. The task force observed the lack of state-specific research and data to accurately assess both the need for, and impact of, many of the proposed reforms. It was reported that in the 30 years since the enactment of the Eminent Domain Procedure Law (EDPL), little recodification has occurred. ‘Actually, the vast majority of provisions remain in its original form.’

We have made several comments about the need to amend the EDPL. (See, ‘Need to Amend the Eminent Domain Procedure Law,’NYLJ, Oct. 25, 2000 p. 3). We suggested that the Legislature define ‘public purpose and blight.’

Does the EDPL’s language of exclusivity need to be reinforced? If the law is truly exclusive, how does a condemnor attempt to evict property owners in the Village Justice Court without complying with EDPL 405A which requires the payment first of a good faith advance payment? The EDPL should be clarified to state unequivocally that the justice presiding in the Condemnation Court alone has jurisdiction over a writ of assistance to remove condemnees.

Traditionally, condemnation judges are in a better position to assure compliance with the EDPL, whether the advance payment has been paid, whether it is a good faith advance payment and whether sufficient time and assistance have been accorded for a condemnee to relocate. Condemnation judges also are keenly aware of the harshness of removing a trade fixture claimant and will not do so if the condemnor cannot demonstrate actual need for the site.

The practice is, however, particular to the specific court. There is certainly need for codification of fundamental guidelines.

Should the EDPL be revised to provide a set period to file a claim for compensation? If the state of New York appropriates your property, one has three years to file a claim in the Court of Claims from the date of personal notification of the taking. However, in all other takings, the Supreme Court is authorized to set the time period for a condemnee to file a claim. EDPL §503(B). While the periods vary, many courts select one year. Why? These are not slip and fall cases, but the taking of property and there seems to be no rationale or constitutional reason to limit a party from filing a claim to one year.

It is necessary for the Legislature to define what exactly is ‘blight.’ It seems to us that ‘blight’ is in the eyes of the beholder. Since a court will not review a blight designation, justice and fairness require a solid definition.

In another column (See, ‘Will 2007 Change Eminent Domain Proceeding Law, ‘ NYLJ, Dec. 29, 2006, p. 3), we suggested additional areas requiring legislative review:

  • Should there be a shorter limit on how long a condemnor can condemn property once it determines to take it? Present conditions provide for a three-year period and up to 10 years if the acquisition is done in stages. This creates a cloud of condemnation which affects property values.
  • Should there be at least three years to file a claim for compensation when property is condemned? If the state takes your land, one has three years to file a claim in the Court of Claims. In Supreme Court, it is open to the justice to provide a time period.
  • What is the appropriate interest to be paid. If the state or a state agency takes your property, it pays 9 percent, if a local government acquires, it pays 6 percent. It seems inappropriate and illogical for the agency with the lower credit rating to pay less. Should the interest rate fluctuate and should it be compounded?
  • Should there be one uniform system for public hearing and review? Condemnations should not be exempted from EDPL procedures because other statutes provide for land-use review.
  • Should pre-vesting offers by condemnors be true good faith offers based on proper appraisals? And should these appraisals be by independent appraisers, not by in-house staff? Should the offers include amounts for trade fixtures as well as real estate owners and should such prevesting offers be a jurisdictional requirement before a petition to condemn is filed?
  • Should a jury trial be a right in a condemnation? New York may be the only state in America that does not provide for a jury trial in a condemnation. Why should one have the right to a jury in a false arrest case but not when one’s property is taken?
  • Should an award be made for the loss of a business’ good will? In a normal business transaction, good will has substantive value and is taken into account in the valuation of a business. The loss is real and there should be compensation.
  • Why should there by any limit for relocation expenses?
  • The EDPL provides for the special proceeding to be expeditiously disposed. But they are not. There are no judicial guidelines for condemnation cases. There should be continuous calendar and status conferences of condemnation claims as is conducted in Kings County Supreme Court.
  • Legal fees, appraisal fees and related disbursements should be awarded in the court in full when the condemnor’s offer or trial appraisal is increased by 25 percent.
  • A condemnor must have sure and certain compensation available to pay all advance payments immediately on vesting and the final award promptly.
  • Should there be a requirement that once taking property is completed it actually be used for the intended purpose within a period of time or the project be deemed abandoned and returned to former owner?
  • Should a condemnor be allowed to make a substantial change in the scope of a proposed economic development project without new public hearings?
  • Should the Legislature define what is a ‘compensable trade fixture?’
Need for Legislative Action

The task force report stated, ‘there is critical need today for codification in the substantive law of eminent domain.’ A total of eight recommendations were made which involved significant change to the existing law.

  • The use of eminent domain should not be restricted to specified public projects.
  • Local governments should not have a veto over exercises of eminent domain by public authorities of larger entities within their borders.
  • Agencies exercising eminent domain for economic development purposes should be required to prepare a comprehensive economic development plan and a property owner impact assessment.
  • The present 30-day statute of limitations in EDPL §207 for judicial review of the condemnor’s determination and findings should be expanded.
  • A new public hearing under EDPL §201 should be required where there has been substantial change in the scope of a proposed economic development project involving the exercise of eminent domain.
  • No exceptions to the EDPL are necessary for acquiring property for public utility purposes.
  • Acquisitions should not be exempted from the EDPL’s eminent domain procedures simply because other statutes provide for land-use review.

The last recommendation was that a Temporary State Commission on Eminent Domain should be established, resolving issues such as defining public use, the appropriate level of judicial scrutiny, just compensation, and others will be accomplished through study by a variety of stakeholders to assure that all viewpoints are represented. This was two years ago. Nothing has happened to put the task force recommendations in place. There exists no Temporary Commission.

Ohio’s Key Changes

Ohio recently passed a broad revision of its eminent domain law. Ohio Senate Bill 7 made significant changes, the result of a task force created by the Ohio Legislature in response to the Kelo decision. One of those revisions imposed significant restraints on the use of eminent domain to take property for private development. Interestingly, the new law changed the existing burden of proof as to issues regarding the right or necessity to condemn. It is now the condemnor’s burden to establish the right and necessity to use the power of eminent domain. The law added other significant property owner’s rights including the requirement of personal service or certified mail of notice which must provide proper notice of the proceeding and also advise the owner that it has the right to seek attorney’s fees and costs. In addition, the condemnor must obtain an appraisal of the property prior to submitting a good faith offer and must provide a copy of the appraisal to the owner when it makes its offer. Other significant provisions of the new Ohio law include payment for ‘good will.’ Attorney’s fees will be awarded if any award is 125 percent of the condemnor’s offer. Either party may request nonbinding mediation and a trial is supposed to take place 60 days after the condemnation is approved. If Ohio is capable of such reform, why can’t the Empire State?

Atlantic Yards

The Second Circuit rendered a decision in Goldstein v. Pataki on Feb. 1, 2008. This was one of many challenges brought to stop the Atlantic Yards Project which will include an arena for the Nets basketball team, office buildings, and housing. The decision focused on plaintiff’s argument that the proposed condemnation violates the Public Use Clause of the Fifth Amendment, while there was little doubt that the arena would serve a public purpose. But the project’s public benefits were serving as a ‘pretext’ that masks its actual raison d’être: enriching the private individual who proposed it and stands to profit most from its completion. The Circuit Court was not persuaded by the pretext argument. The court rejected the notion that in a single sentence, the Kelo majority sought to overrule prior precedent and require federal court to give close scrutiny to the mechanics of a taking rationally related to a classic public use as a means to gauge the purity of government motives. This is an interesting statement which might not follow what New York courts are doing when pretext takings issues are before it as was demonstrated in Matter of 49 WB, LLC v. Village of Haverstraw, 44 AD3d 226 (2nd Dept. 2007).

Now, what is really intriguing about Goldstein v. Pataki is its last sentence in which it dismissed the federal claims with prejudice and the state claims without prejudice. Normally, one has 30 days to challenge a determination and findings to condemn by filing a petition pursuant to EDPL §207 directly in the Appellate Division. The time period has been strictly construed. The federal lawsuit commenced by the Goldstein plaintiffs contains an amended complaint which contains a supplemental EDPL §207 complaint. Since federal law allows the filing of a state claim within 30 days after dismissal, it seems that a petition can still be filed since state legislation cannot divest a federal court of jurisdiction.

Reprinted with permission from the March 14, 2008 edition of the New York Law Journal © 2011 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.