Eminent Domain Law

Property Valuation Should Encompass Possibility That Landowner Could Obtain Special Permit

Longridge Associates, L.P. v. Metropolitan Transportation Authority

NYLJ 12/28/12, p. 21, col. 5

Supreme Ct., Putnam Cty.

(LaCava, J.)

In an eminent domain proceeding, condemnor sought to value the subject property as most valuable for future speculative use, while condemnee sought to value the property as a retail shopping center. The court valued the property for retail use, holding that the need to obtain a special permit for that use did not preclude retail valuation.

The subject 52 acres is vacant land taken by the MTA as part of a commuter parking lot expansion project for its Brewster North station. The parcel was zoned in an Economic Development district that would have permitted retail use with the grant of a special permit, but landowner had not applied for such a permit. Although landowner had once submitted preliminary plans for retail development, it subsequently decided to wait to see whether a neighboring shopping center succeeded. In addition, a portion of the site had been designated as wetlands, apparently without landowner's knowledge. Based on these facts, the MTA's experts argued that the highest and best use of the property was to hold it for speculation, and contended that the property's value was $700,000. Landowner, by contrast, argued that the property's highest and best use was for retail purposes, and, using a set of supposedly comparable sales numbers, arrived at a value of $6 million.

The court ultimately valued the property at $4,375,000. In reaching that figure, the court rejected the MTA's contention that the property could not be developed and that its highest and best use was to hold the property for future use. The court emphasized that potential rezoning of the property may be taken into account in valuing property, and here, landowner's experts had testified that the town typically grants the special permits that landowner would have needed to pursue retail development. The expert testified that over the previous six years, the town had received 22 special permit applications and approved all of them. Based on these facts, the court concluded that development for retail purposes was the land's highest and best use. The court, however, concluded that not all of the “comparables” cited by landowner's expert were truly comparable, and after excluding non-comparables and making adjustments for other comparables, reached a value of $4,375,000.

COMMENT

If at the time a property is condemned there was a “reasonable probability” that it would have been rezoned, the condemnee is entitled to compensation based on the rezoning. For instance, in

Matter of Town of Islip, 49 N.Y.2d 354, 362, the Court of Appeals held that an award was inadequate because it ignored the likelihood that a residential plot's zoning restrictions would be held unconstitutional. The court emphasized that, in a prior case, it had invalidated the town's residential use restrictions with respect to land situated similarly to the condemned land, making it likely that the restrictions on the condemned land would not survive a court challenge. Likewise, in Masten v. State of New York, 206 N.Y.S.2d 672, 673, aff'd, 9 N.Y.2d 796, the Court of Appeals held that the probability that the owner of the condemned land would have obtained a traffic flow variance on a condemned property's value should be considered in determining just compensation ' even though the variance had not been granted ' because many nearby businesses had been granted similar variances and no applications for that type of variance had been denied.

To obtain compensation based on potential zoning changes, condemnees have the burden to produce sufficient evidence that the rezoning was reasonably probable. Hence, in

In re Shorefront High Sch., City of New York, Borough of Brooklyn, the Court of Appeals rejected a condemnee's request to include the value of a Mitchell-Lama subsidy in a condemnation award because there was a “total absence in the record of any evidence concerning the chances of success or failure in obtaining a [zoning change].” 25 N.Y.2d 146, 150. The condemnee failed to show reasonable probability because he simply made the argument, unsupported by any evidence, that he could have obtained the subsidy.

In the few cases that courts found reasonable probability and awarded compensation based on potential rezoning, it was exceptionally clear that the landowner would have been able to take advantage of a more liberal rezoning. Thus, as in

Matter of Town of Islip, when a landowner demonstrated, based on prior recent case law, the existing ordinance's likely unconstitutionality, he met his burden 49 N.Y.2d at 362. Similarly, as in Masten, a landowner can meet her burden by demonstrating that neighboring owners have consistently obtained variances. 206 N.Y.S.2d at 673-74, aff'd, 9 N.Y.2d 796.

Property Valuation Should Encompass Possibility That Landowner Could Obtain Special Permit

Longridge Associates, L.P. v. Metropolitan Transportation Authority

NYLJ 12/28/12, p. 21, col. 5

Supreme Ct., Putnam Cty.

(LaCava, J.)

In an eminent domain proceeding, condemnor sought to value the subject property as most valuable for future speculative use, while condemnee sought to value the property as a retail shopping center. The court valued the property for retail use, holding that the need to obtain a special permit for that use did not preclude retail valuation.

The subject 52 acres is vacant land taken by the MTA as part of a commuter parking lot expansion project for its Brewster North station. The parcel was zoned in an Economic Development district that would have permitted retail use with the grant of a special permit, but landowner had not applied for such a permit. Although landowner had once submitted preliminary plans for retail development, it subsequently decided to wait to see whether a neighboring shopping center succeeded. In addition, a portion of the site had been designated as wetlands, apparently without landowner's knowledge. Based on these facts, the MTA's experts argued that the highest and best use of the property was to hold it for speculation, and contended that the property's value was $700,000. Landowner, by contrast, argued that the property's highest and best use was for retail purposes, and, using a set of supposedly comparable sales numbers, arrived at a value of $6 million.

The court ultimately valued the property at $4,375,000. In reaching that figure, the court rejected the MTA's contention that the property could not be developed and that its highest and best use was to hold the property for future use. The court emphasized that potential rezoning of the property may be taken into account in valuing property, and here, landowner's experts had testified that the town typically grants the special permits that landowner would have needed to pursue retail development. The expert testified that over the previous six years, the town had received 22 special permit applications and approved all of them. Based on these facts, the court concluded that development for retail purposes was the land's highest and best use. The court, however, concluded that not all of the “comparables” cited by landowner's expert were truly comparable, and after excluding non-comparables and making adjustments for other comparables, reached a value of $4,375,000.

COMMENT

If at the time a property is condemned there was a “reasonable probability” that it would have been rezoned, the condemnee is entitled to compensation based on the rezoning. For instance, in

Matter of Town of Islip, 49 N.Y.2d 354, 362, the Court of Appeals held that an award was inadequate because it ignored the likelihood that a residential plot's zoning restrictions would be held unconstitutional. The court emphasized that, in a prior case, it had invalidated the town's residential use restrictions with respect to land situated similarly to the condemned land, making it likely that the restrictions on the condemned land would not survive a court challenge. Likewise, in Masten v. State of New York, 206 N.Y.S.2d 672, 673, aff'd, 9 N.Y.2d 796, the Court of Appeals held that the probability that the owner of the condemned land would have obtained a traffic flow variance on a condemned property's value should be considered in determining just compensation ' even though the variance had not been granted ' because many nearby businesses had been granted similar variances and no applications for that type of variance had been denied.

To obtain compensation based on potential zoning changes, condemnees have the burden to produce sufficient evidence that the rezoning was reasonably probable. Hence, in

In re Shorefront High Sch., City of New York, Borough of Brooklyn, the Court of Appeals rejected a condemnee's request to include the value of a Mitchell-Lama subsidy in a condemnation award because there was a “total absence in the record of any evidence concerning the chances of success or failure in obtaining a [zoning change].” 25 N.Y.2d 146, 150. The condemnee failed to show reasonable probability because he simply made the argument, unsupported by any evidence, that he could have obtained the subsidy.

In the few cases that courts found reasonable probability and awarded compensation based on potential rezoning, it was exceptionally clear that the landowner would have been able to take advantage of a more liberal rezoning. Thus, as in

Matter of Town of Islip, when a landowner demonstrated, based on prior recent case law, the existing ordinance's likely unconstitutionality, he met his burden 49 N.Y.2d at 362. Similarly, as in Masten, a landowner can meet her burden by demonstrating that neighboring owners have consistently obtained variances. 206 N.Y.S.2d at 673-74, aff ' d, 9 N.Y.2d 796.