Goldstein Rikon Rikon & Houghton P.C.



Payment for Abandonment

Anyone familiar with condemnation proceedings is familiar with EDPL §701 which provides for additional allowances. Not many are familiar with §702 with the innocuous title of “Incidental Expenses.” Run Shepards and you find a total of four cases, one dealing with §702(A)(1) providing for reimbursement of “recoding fees, transfer taxes and other similar expenses,” one dealing with §702(c), which provides for reimbursement of expenses incurred in successfully prosecuting a claim for a “de facto” or “inverse” condemnation and the third merely noting the section. Not reported are any decisions dealing with or interpreting §702(B), except one. Yet, this section of the law, as far as condemnors are concerned, is a time bomb waiting to go off.

It states in §401: (A) “The condemnor may commence proceedings under this article to acquire the property necessary for the proposed public project up to three years after conclusion of the later of (1) publication of its determination and findings pursuant to section two hundred four, or (2) the date of the order or completion of the procedure that constitutes the basis of exemption under section two hundred six, or (3) entry of the final order or judgment on judicial review thereof.” (B) “If the condemnor has not commenced the proceedings under this article to acquire the property prior to the expiration of such three year period the project shall be deemed abandoned and thereafter, before commencing proceedings under this article the condemnor must again comply with the provisions of article two; . . .”

It states in §701: (B) “In the event the procedure to acquire such property is abandoned by the condemnor, or a court of competent jurisdiction determines that the condemnor was not legally authorized to acquire the property, or a portion of such property, the condemnor shall be obligated to reimburse the condemnee, an amount, separately computed and stated for actual and necessary cost, disbursements and expenses, including reasonable attorney, appraisal and engineering fees, and other damages incurred by such condemnee because of the acquisition procedure.”

History of Condemnation

A little background to the subject is in order. Under the Condemnation Law of the State of New York, since repealed and replaced by EDPL, when the right of eminent domain was exercised, title did not pass to the condemnor until the final judgment was paid. Condemnation proceedings were instituted, a trial to fix value held, decision rendered and even appeal heard and decided without there being a vesting of title. However, under the Condemnation Law, an application could be made to the court to abandon the proceeding prior to the vesting of title.

Even under the City of New York’s Administrative Code it was possible for the Board of Estimate, in adopting a resolution providing for the institution of condemnation proceedings, to provide for the vesting of title at the time of the entry of the final decree fixing the amount of the award. Under such procedure, a proceeding could be abandoned prior to the vesting of title. Various statutes, including Condemnation Law §18, provided that in the event of an abandonment of the proceeding, the owners were entitled to be reimbursed for expenses they incurred in the aborted condemnation proceedings. There was no provision to pay the condemnee for any other damages it may have suffered by reason of the proceeding.

EDPL set up an entirely new procedure in approving projects and added the right of the condemnee to be paid damages, in addition to legal and appraisal expenses in the event of the abandonment of a proceeding. Under EDPL, no longer can there be a trial fixing just compensation prior to the vesting of title. Instead there is a public hearing process followed by “Determinations and Finding” justifying the exercise of the condemnation power. Proceedings begin with petition asking for the vesting of title or, in the case of an appropriation, the filing of the vesting map.

Damages to Condemnee

Because of the damages visited on property owners by the long delay between the announcement of a project and its approval, followed by a taking, EDPL put a limit on how long it would take between approving condemnation and its actual institution by the vesting of title. Under the common law, damages visited on the property because of the delay in the planning process were damnum absque injuria (City of Buffalo v. J.W. Clement Co., NYS2d 345 (1971)). The Eminent Domain Commission, in drafting EDPL for the legislature, set in the new statute an attempt to limit the damage that could be done without limiting the public discussion stage leading to approval of the project. It also provided that if condemnation proceedings are approved, being no longer just in the discussion stage, and if the project takes more than three years to institute, thus being abandoned, the condemnee could be paid the damages he could not get under the common law.

The statute now provides that once a project has gone through those discussions and procedures and “Determinations and Findings” have been made by the appropriate body authorizing the institution of a condemnation proceeding, that the approved proceeding could not hang over the property indefinitely. EDPL §401 provides that once the determinations and findings have been published, the proceeding to condemn or appropriate the property must have commenced within three years or the “project shall be deemed abandoned.” In the event the project is being taken in segments, instead of all at once, the first segment must have been taken within three years, but the balance may be taken within ten years or the project is deemed abandoned. There are certain exceptions not germaine to this discussion.

Some of these provisions have been interpreted by the courts. In Binghamton Urban Renewal Agency v. Manculich, 503 NYS2d 548 (1986), the court denied the right to condemn when proceedings were not instituted within three years of the approval of the project, under exempt substitute procedures for approval in place of EDPL, even though there were, in the interim, three different amendments to the project plan approved by the governing body and a substantial number of properties being purchased in lieu of condemnation in the interim. Since the formal public hearing process had not been followed in approving the amendments, the court ruled the proceedings were deemed abandoned since no condemnation proceeding had been instituted within three years of the original project approval. The court noted that EDPL §401 provides that, once the determinations and findings have been published, the proceedings to condemn or appropriate the property must have commenced within three years or the “project shall be deemed abandoned.” The court noted that the agency was not foreclosed from acquiring the property, but to do so, it had to hold all the hearings and make all the findings required for any new project, the prior project having, in effect, been abandoned.

It is interesting to note the use of two different terms in the statute — “procedure” and “proceedings.” “Procedure refers to the steps taken to approve the taking of the property and “proceedings” refers to the actual condemnation or appropriation itself. In EDPL §702(B), it is the abandonment of the “procedure” which gives rise to the right to reimbursement for fees and damages and it is the three years to commence “proceedings”, after which there is deemed an abandonment.

Recently, an action was brought for both reimbursement and damages pursuant to EDPL §702(B) in Buffalo Airport Center Associates v. Niagara Frontier Transportation Authority (Eric County Supreme Court, Index No. 1995-1706). The basis of the action was an abandonment of the project by reason of the failure to commence proceedings within three years after publication of the determination and findings. Allegations were made in the complaint of very extensive damages caused by wholesale abandonment of the 2,500,000 square foot industrial/warehouse building by the tenants after approval of the project, to the point where the building is now a vacant shell. Partial summary judgment was granted on the issue of liability, despite a number of defenses, including one that there was no actual intent to abandon the project and that at an unspecified time in the future it would go forward. The decision was unanimously affirmed by the Appellate Division, Fourth Department, based on the decision below in 649 NYS2d 858 (1996). Since we have been counsel to plaintiff’s attorneys in this case, we will not comment further except to note that the trial on the issue of damages has not yet been head and, of course, the issue of liability along with other issues is still subject to a possible review in the Court of Appeals when the damage phase has been finished.

Interestingly, no one has sought to challenge UDC on its 42nd Street project on similar grounds. In 1984, the findings and determinations for that project were published and thereafter reviewed on appeal. Later, it was determined to take it in sections. The first of the takings took place in April 1990, the application to condemn being made just within the three-year deadline more than six months previous. Now, more than 10 years later, there is a section of the project, as originally contemplated, that still has not bee taken. Isn’t there something wrong about keeping a threat of condemnation over property for 13 years, with no end in sight?

Reprinted with permission from the August 27, 1997 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

Cost to Cure – Only In My Back Yard

Generally speaking, there are two kinds of takings in condemnation proceedings – total and partial. Of the two, all else being equal, the total taking is the easier valuation problem. Although it is not as simple as it sounds, all the parties and the Court usually have to determine is the price the property would have sold for, had it been for sale and were there no condemnation.

Partial takings, however, are an entirely different animal. We must, of course, determine the value of the part taken. Then we must consider what, if anything, has happened, as a result of the taking, to the remainder of the property. The generic term for that concept is consequential damages. Care must be taken not to confuse consequential damages with severance damages which is only one of two elements that make up consequential damages. The other element is also called consequential damages, confusing as that may be.

Severance damages are those damages that occur to the remainder of the property simply by virtue of the fact that the part appropriated is no longer in the condemnee’s ownership. An example of this is the taking that changes the configuration of the property so that it can not be used with the same utility it had before. Consequential damages, those that are not severance damages, refer to damages by reason of the use to which the portion taken is to be put. (South Buffalo Rwy Co. v. Kirkover, 176 N.Y. 301, Hill & Aldrich v. Mohawk & Hudson River Rwy Co., 7 N.Y. 152, County of Erie v. Friedenburg, 221 N.Y. 389, Bohn v. Railway Co., 129 N.Y. 576). Obviously, a partial taking for a sewage disposal plant, a landfill or an airport runway is going to affect the remainder in a different way than a passive park. For the purposes of this article, we will refer to both as consequential damages.

It is of great practical importance to know that the concept of the total taking or of the direct taking of part of a property is not the same as a consequential damage in that the value of the whole or part directly taken, is determined on a taking basis and that may not be diminished in any way. What the condemnor takes must be paid for. There may be no mitigation or offset for benefit. A consequential damage, on the other hand, is just that, a damage. There is an obligation to mitigate and there may be an offset. In condemnation, however, sometimes the rules for mitigation are not the same as elsewhere.

Usually, in condemnation proceedings, the mitigation is called a “cost to cure.” Many people know of the “cost to cure” concept but, experience tells us not too many fully understand it. One of the common sense rules, in condemnation, involving “cost to cure” is that the cost may not exceed the amount the consequential damages would be were there no “cost to cure.” A lesser known and, in some circles, sometimes forgotten rule, pertaining to “cost to cure” in condemnation proceedings, is that you may not look outside the boundaries of the subject property to find a “cost to cure.” An exploration of some of the cases that have expounded this rule is necessary, we believe, to understand its application. Many of the cases, but not all, involve the question of access or its denial to the remainder property because the denial of access can not be cured without going outside the boundaries of the remainder property.

Reading Yochmowitz v. State of New York, 47 Misc.2d 85, a 1965 Court of Claims case, it is important to understand that decision in the context of the case it cited as support. In dealing with finding a “cost to cure” the access that had been denied to the remainder property, the Court said:

“The Court is in accord with claimant’s posture that the traditional `cost to cure’ theory utilized to fix the maximum limit of consequential damages in normal permanent easement acquisitions should not be applied to the case at bar, since such an approach must necessarily be predicated on a clear and unequivocal stipulation by defendant’s Department of Public Works that not only access to the highway as improved will be guaranteed in perpetuity but also that this agency will approve the removal of the fill required to restore access. Wolfe v. State of New York, 23 A.D.2d 136, 259 N.Y.S.2d 13….”

“The Court finds that the express reservation contained in the aforesaid representa-tion…does not meet the minimum requirements of the stipulation heretofore mandated by the Appellate Division in Wolfe v. State of New York, supra. …Therefore, claimant is entitled to an award for consequential damages not limited to the cost to cure but based upon the proof introduced as to the diminished value of claimants remaining property by reason of the denial of access…”

In effect, the Court of Claims, relying on the Appellate Division decision in Wolfe v. State of New York, held that there was a denial of access to the remainder property which could be cured by going outside the subject property’s boundaries if the condemnor would unequivocally agree to give that access over its property (the permanent easement). But the Appellate Division’s decision in Wolfe was later reversed (Wolfe v. State of New York, 22 N.Y.2d 292) on the basis that the access, which, of necessity, had to be outside the property, had to be there at the time of the taking, not by a subsequent “cure.” Clearly, then, substituting the Court of Appeals decision for the Appellate Division decision, the “cost to cure” in the Yochmowitz case, occurring outside the property, could not be made to apply by a subsequent act of the condemnor.

Three years later, the Appellate Division, Third Department, stated it in terms that leave no doubt. In St. Patrick’s Church, Whitney Point v. State of New York, 30 A.D.2d 473, 294 N.Y.S.2d 275, the condemnee actually cured the problem by purchasing land adjacent to the appropriated property fourteen months after the appropriation and the State offered the price paid for the land as the “cost to cure.” The Appellate Division, Third Department said, at 294 N.Y.S.2d 277:

“We are not here dealing with any mitigation of damages by something that occurred or could occur upon the property remaining after the appropriation as in Mayes Co. v. State of New York, 18 N.Y.2d 549, 277 N.Y.S.2d 393, 223 N.E.2d 881 where the `cost to cure’ theory was allowed because the cure was to occur within the bounds of the claimant’s lands. Sound reason requires that the theory cannot be used in cases of subsequent acquisitions of lands outside the bounds of the appropriated property; nor should a condemnee’s right to compensation be made to depend upon whether adjacent land could easily be purchased. These established principles are clearly recognized in 4 Nichols, Eminent Domain (3d ed.) (S 14.22, p. 525) where, in referring to the rule of cost of restoration, it is stated that `the restoration must be possible without going outside the remaining portion of the tract in controversy,’….That the adoption of the novel theory advanced by the State, illogical in its foundation, might well lead to confusion and havoc in the use of well-reasoned and judicially founded principles of providing just compensation for the taking of a citizen’s lands, is all too evident.”

The same Appellate Division restated that position in 1972, in Campbell v. State of New York, 39 A.D.2d 615, 331 N.Y.S.2d 75, where it said, “The State’s `cost to cure’ theory of damages was properly rejected since the lack of access could not be cured without using land outside of the subject property.”

Following these two decisions, two cases arose with the same issue. We represented claimants in both of those cases. The first one, Pollak v. State of New York, 41 N.Y.2d 909, 394 N.Y.S.2d 617 was a taking for a grade crossing elimination, depressing the grade of the road below the grade of the property, thereby cutting off all practical access to the property. During construction, they built a detour that carried vehicles by the remainder property and provided physical access to it but neglected to create a legal street. After claimant’s appraisal, on exchange, alerted the State to its error, it attempted, at that late date, to cure the access problem by creating a legal road across their own and another’s land to the remainder property where the detour had been built. The Court of Claims held that the State had thereby cured the problem and declined to award damages on the basis of loss of access. We argued to the Appellate Division that, based on the cases we recited above, and some others, including Wolfe, that the State could not, after the appropriation, cure the problem they caused by creating an access outside the boundaries of the property. The Appellate Division reversed the decision of the Court of Claims (50 A.D.2d 201, 377 N.Y.S.2d 259) and the Court of Appeals affirmed the decision of the Appellate Division, saying:

“The fact is that deprivation of the legal right to access rendered claimants titles unmarketable. In like circumstances, we have held that the absence of an explicit reservation of a right to access in the original appropriation may not be cured by provisional expedients, offered by and subject to the grace of the State.”

Had the “cure” been of the type that it could be effected within the property’s boundaries, an obvious impossibility in that case, and thereby, inherent in the property, the result probably would be different.

The second case we referred to above, following on the heels of the Pollak case, was Matter of County of Suffolk (Arved, Inc.), 63 A.D.2d 673, 404 N.Y.S.2d 676. In that case, Suffolk County, in building a limited access highway, took property from Arved, “without access” to the remainder. It did provide access at a point further down where they believed another road existed that led to the remainder property. It was shown that the road, if it ever existed, even though it was on local maps, was not shown to be at the point argued for by Suffolk County leaving another person’s property between Arved’s property and the new highway. We also argued that even if the legal right to use the area described was at that point, the “road” was not improved and could not be used as an access road. The trial court declined to find a damage based on a loss of access and the Appellate Division, Second Department, reversed, saying, inter alia, at 404 N.Y.S.2d 678:

“Finally, we are of the view that requiring claimant to cure its access problem by constructing a new road on the alleged roadbed of Old Town Road which bisects Gifford’s property, from its own westerly property line to the beginning of the County’s paved road, is a prohibited application of the cost-to-cure doctrine. Claimant had no right or permission from the County, Town or Gifford, at the time of the taking to extend the road to its property line; the cure must be accomplished without going outside the boundary lines of the subject property if severance damages are to be mitigated (see Gluckman v. State of New York, 37 A.D.2d 870, 325 N.Y.S.2d 99).”

The Second Department repeated this in 1983 in B&B Food Corp. v. State of New York, 96 A.D.2d 893, 466 N.Y.S.2d 60 when it said, “Furthermore, the `cost to cure’ theory of damages, proffered by the State may not be used to mitigate consequential damages where the cure must be accomplished by going outside the tract in controversy.” Also, see Footnote 1 in Matter of County of Schenectady, 194 A.D.2d 1004, 599 N.Y.S.2d 674 (1993).

As part of this concept, the Courts have included what, to us, is basically the same proposition but applied to a different type of fact situation. It is that the “cost to cure” method of mitigation may not be used if the cure involves getting a permit or permission from an outside source such as a government agency, even though the physical work might be accomplished within the boundaries of the subject property. It really grew out of the Arved case, supra, and Gluckman v. State of New York, 37 A.D.2d 870, 325 N.Y.S.2d 99. Although Gluckman involved the right, asserted by the State, to improve an area as a road that was outside the subject property when there was an easement of access over that area, the Third Department held that the “cost to cure” may not mitigate damages when it must be accomplished outside the subject property. As the Court stated, it was based, in part, on the fact that, “the extension would have to be constructed over a public right of way and claimants neither had a permit from the town to complete the road nor even a permit or any document or other evidence that the State, as of the appropriation, had granted them a right to complete the road.” In Arved, the Second Department, although holding that there was no public road, said that even had there been one, Arved did not have permission to build on it and, therefore, the proposed cure could not be used.

This application of the concept was referred to more specifically by the Appellate Division, Third Department and the Court of Appeals in Donaloio v. State of New York, 99 A.D.2d 335, 472 N.Y.S.2d 946, aff’d 64 N.Y.2d 811, 486 N.Y.S.2d 924). The Appellate Division said at 472 N.Y.S.2d 950:

“We also must reject the trial court’s concept of a `partial cure’ as found in these circumstances. It is clear from the testimony that the proposed cure, being an on-site sand filtration system, requires a discharge of effluent through facilities provided, or to be provided, by the State in order to be discharged into the Susquehanna River. Obviously, this requires the use of land outside the subject property, as well as permits from governmental authorities, a concept which has consistently been rejected by the Courts of this State in determining consequential damages.” (Emphasis ours)

This was followed by the decision of the Court of Appeals at 624 N.Y.2d 811 which said:

“The only feasible alternative method demonstrated at trial for claimants to dispose of the sewage generated by their restaurant required governmental approval of the use of certain State facilities not previously committed to this purpose. Representations at trial, years after the appropriation, that the necessary authorizations would be forthcoming upon application by claimants do not satisfy the requirement — if the proposed cure is to affect a mitigation of damages — for timely unequivocal assurance by the State, the condemnor, that this alternative would be implemented.”

From all that we have recited above, it is clear that, in condemnation or appropriation proceedings, when there is a partial taking and a consequential damage, a “cost to cure” method of mitigating damages may not be used if, after the acquisition, it requires accomplishing it by going outside the boundaries of the property, including seeking governmental approvals not existing at the time of the condemnation or appropriation.

Reprinted with permission from the February 26, 1997 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

The Criscuola Decision – The Sparks Are Still Flying

When New York State’s highest court, the Court of Appeals, handed down Criscuola v. Power Authority of the State of New York, many hailed the decision as the missing piece of the puzzle which would provide the means to obtain monetary damages due to diminu-tion of property values caused by being in close proximity to an electromagnetic radiation field (EMF).

Criscuola became the subject of numerous articles and seminars. In their excellent column on Environmental Law, Stephen L. Kass and Michael B. Gerrard wrote an article in the New York Law Journal entitled “Emotional Distress and Property Values After Criscuola.” NYLJ, October 22, 1993, p. 3, col. 1, and ventured that Criscuola would be applicable in cases involving contaminated property, toxic torts, superfund cases, tax assessments, zoning cases and SEQRA matters.

On March 14, 1994, at p. S1, col. 1, the New York Law Journal featured an article by Eric Bregman and Andrew J. Gershon, two renowned environmental law practitioners, “Utilities Shocked by Suits Charging Property Damage.” Bregman and Gershon opined, “Criscuola thus provides an important precedent for those who would seek compensation for the impact of electromagnetic fields on their properties, whether in the context of an eminent domain proceeding or through inverse condemnation.”

Criscuola was a well reported decision. And, although hailed as a landmark decision by the New York Times, the Wall Street Journal and other national and international publications, as will be discussed later, the decisions which followed Criscuola indicate a reluctance to follow the Court of Appeals’ clear message.

Three years later, one observes the aggressive use of the holding in many different types of lawsuits as predicted. Certainly it is being used in eminent domain cases. The Criscuola doctrine is also being utilized in inverse condemnation cases and in a host of other situations diverse as the fertile imagination of learned counsel would allow.

Judge Bellacosa wrote in Criscuola that “Evidence of fear in the marketplace is admissible with respect to the value of property taken without proof of the reasonableness of the fear2.”

In the key holding the New York Court of Appeals ruled:
1. There should be no requirement that the claimant must establish the reasonableness of a fear or perception of danger or of health risks from exposure to high voltage power lines, and

2. Whether the danger is a scientifically genuine or verifiable fact should be irrelevant to the central issue of its market value impact.
A claimant, however, is not relieved from giving any proof to establish his claim and just compensation damages. Criscuola v. P.A.S.N.Y., mandates that a claimant must still establish some prevalent perception of a danger emanating from the objectionable condition.
Quoting the Ryan decision once again, the Court of Appeals stated, “No witness, whether expert or non-expert, may use his or her personal fear as a basis for testifying about fear in the marketplace. However, any other evidence that fear exists in the public about the dangers of high voltage lines is admissible.” (emphasis supplied)

Judge Bellacosa stated:
“Claimants should have to connect the market value diminution of the property to the particular fear in much the same manner that any other adverse market effects are shown, e.g., by proffering evidence that the market value of property across which power lines have been built has been negatively affected in relation to comparable properties across which no power lines have been built (see generally, 4 Nichols, Eminent Domain Sec. 12.02) [Sackman 3d, ed. 1994]3.”

There have been two recent New York Appellate Court decisions which should be reviewed since they were decided after the Court of Appeals decided Criscuola, Jonas v. Power Authority of the State of New York4 and DeMarco v. Power Authority of the State of New York5.

Both decisions arose from the same Marcy South transmission line takings which took part of the Criscuola brothers’ property. Indeed, it was the same Second Department of the Appellate Division which previously affirmed Zappavigna v. State of New York6 holding that scientific proof was necessary to establish “cancerphobia” consequential damages. This holding was, of course, reversed in Criscuola.

In Jonas, the Appellate Division held, “We find that the Court of Claims properly declined to award the claimants consequential damages for, among other things ‘negative view’ ‘cancerphobia’ and ‘noise pollution.’ The claimants failed to demonstrate that [the market value of property adjacent to or near land upon which power lines have been built] was diminished by such factors in relation to comparable properties which are not adjacent to or near power lines.” (see, Criscuola v. Power Auth. of State of N.Y., 81 NY2d 649, 654; Niagara Mohawk Power Corp. v. Olin, 138 AD2d 940, 941; Matter of Niagara Mohawk Power Corp., 118 AD2d 891, 893).

“The claimants contend that the trial court erred in precluding them from offering evidence relating to the reasonableness of the public fear of health risks from exposure to high-voltage power lines. However, in light of the decision in Criscuola v. Power Auth. of State of N.Y. (supra), that it is not necessary to prove the reasonableness of the public fear in order to establish a diminish-ment in market value, the preclusion of such evidence was not error.”

The second quoted paragraph does not seem to be logical. Claimants were precluded from introducing evidence relating to the reasonableness of the public fear of health risks from EMF. The appeal focused on the trial court’s denial of any consequential damages for “cancerphobia.” Thus, to state that it wasn’t necessary anyway in view of Criscuola, begs the question. It would have been far preferable to remand for additional testimony in view of the Court of Appeals decision.

In the DeMarco decision, the Appellate Court, likewise, held that, based on the record, the trial court properly declined to award consequential damages for negative views or visual pollution. Citing, inter alia, Criscuola v. Power Auth. of State of New York.

Another decision of interest is Filipowski v. State of New York7. Filipowski was one of the last Marcy-South partial appropriations. In a well written decision, Court of Claims Judge Jerome F. Hanifin, wrote, at page 59:

“Because the Court has concluded in this Claim that the proof presented does not support Claimant’s position that there is an adverse effect of the subject appropriation outside of the physical taking lines, the Court has not examined the Zappavigna record. Perhaps that was the only course of action available in view of the Court of Appeals’ expressed views with regard to testimony by “electromagnetic power engineers, scientists or medical experts” (Criscuola, p. 652) Whether that is the case or not, this Court, in arriving at its findings, acted on the assumption that there was indeed an electromagnetic field that permeated space beyond the permanent taking lines on the subject property. Whether this electromagnetic field created a fear, reasonable or unreasonable, may or may not be the case. What the electromagnetic field did not generate, based on the proof presented to the Court, was a fear that in turn caused a reduction in market value of the subject remainder outside of the permanent easement taking lines.”

In an inverse condemnation setting, seeking damages because of a loss in value of a residence located near a pre-existing high voltage power line, summary judgment was granted, dismissing the complaint against a utility in Westchester Supreme Court. In Borekind v. Consolidated Edison Corp.8, the Court stated:
“The ‘taking’ or disseisin claim of plaintiff, in the sense that some of the value of the appreciation of their property was taken by defendant or loss to them by virtue of the power lines pre-existing their own taking of title does not bear analysis. While it is true that in Criscuola v. Power Authority of the State of NY, 81 N.Y.2d 649, 602 N.Y.S.2d 588, 621 N.E.2d 1195 (1993), the Court of Appeals, in formulating the condemnation award to the plaintiff, did allow for depreciation of the plaintiff’s remaining property for this perception reason when a portion of the property was being condemned as a right-of-way for new power lines and that the plaintiff needn’t be required to provide the reasonableness of the public fear, such is not the case here since there is no new, or for that matter of, taking or disseisin from these plaintiffs themselves.”

The dismissal in Borekind led the same Westchester County Supreme Court Justice to grant summary judgment in Reiss v. Consolidated Edison9 which similarly alleged inverse condemnation damages because of the close proximity of the power lines to their residence. The Reiss’ were mentioned in an article written by the Wall Street Journal “Power Lines Short-Circuit Sales, Homeowners Claim” which discussed EMF property devaluation on a national basis10.

In 1994, the Village of Tarrytown in Westchester County passed a local law creating a moratorium on installation of cellular telephone antennas. On appeal following the denial of a preliminary injunction, the Appellate Division, Second Department reversed, holding that the moratorium was not a valid exercise of the Village’s police or zoning powers and was, therefore, invalid. The Village cited Criscuola to support their claim that the perception of health risks need not be reasonable or scientifically based in order to justify the local law. The Court held that this contention was without merit. “The Criscuola decision has no bearing on the issue of whether a municipality may enact legislation restricting property rights based solely upon the public’s unreasonable fear of health risks, an issue which, on the present record, must be resolved in favor of the plaintiff11.”

On the other hand, in New Jersey, the Appellate Division of the Superior Court gave Criscuola greater consideration in effort to stop the Borough of Spring Lake Heights from leasing municipal property for use as a cellular facility including transmission antenna, holding in Sellitto v. Borough of Spring Lake Heights12,

“On the other hand, plaintiff has brought to our attention Criscuola v. Power Authority of the State of New York, 81 N.Y.2d 649, 602 N.Y.S.2d 588, 621 N.E.2d 1195 (Ct. App. 1993), which he claims supports the proposition that the Mayor and Council should have considered the public’s perception that a transmitting facility, such as that proposed, may be dangerous, and should therefore have considered the effect such perception would have on local property values, even though plaintiff is unable to present proof that a danger actually exists.

We reverse that part of the order of May 24, 1994, which held that the subject lease was not subject to public bidding and remand for the trial court to restrain the borough from enforcing its lease with Bell Atlantic.”

As predicted by Kass and Gerrard, Criscuola was relied on in a toxic tort case brought against an installer of foam insulation. In Cottonaro v. Southtowns Industries, Inc.13, the Appellate Division, Fourth Department, stated:

“…Damages from the diminished market value of real property as a result of public fear of exposure to a potential health hazard constitute consequential damages (see, Criscuola v. Power Auth. of State of N.Y., 81 N.Y.2d 649, 602 N.Y.S.2d 588, 621 N.E.2d 1195). The relevant claim accrual date for Statute of Limitations’ purposes “does not change merely because continuing consequential damages are alleged” (Quinn v. County of Nassau, 162 A.D.2d 514, 556 N.Y.S.2d 712).

The cases involving pure eminent domain claims for power lines, which were decided thus far after Criscuola, did not have the proper appraisals which, consistent with the Court of Appeals, contained evidence of some prevalent perception of a danger emanating from the high voltage lines. If the requisite proof is supplied, consequential damages must be awarded. Inverse condemnation claims may be more difficult in concept to understand but they are well established under New York Law. Eventually, Criscuola will be the basis for inverse property devaluation claims. One thing is certain, the practitioner must be alert to the continuing metamorphis of the law. Further clarification may be required by the Court of Appeals setting forth the perimeters of Criscuola’s application to other claims.

1. Criscuola v. Power Authority of the State of New York, 81 NY2d 649, 602 NYS2d 588, 621 NE2d 1195 (1993).
2. Quoting Ryan v. Kansas Power and Light Co., 249 Kan 1,7,815 p.2d 528, 533.
3. Criscuola v. P.A.S.N.Y., 81 NY2d 649, 654, 602 NYS2d 588, 590 (1993).
4. 210 AD2d 453, 620 NYS2d 991 (2nd Dept. 1994).
5. 211 AD2d 612, 621 NYS2d 883 (2nd Dept. 1995).
6. 186 AD2d 557, 588 NYS2d 585.
7. Claim No. 74005, filed February 28, 1995.
8. 164 Misc2d 808, 626 NYS2d 414 (Sup. Ct. West. Co., 1995).
9. (Index No. 10243/94, Decision and Order 6/14/95) Appeal Perfected to Second Department.
10. Wall Street Journal, Dec. 8, 1993, p. B1.
11. Cellular Telephone Company v. Village of Tarrytown, 209 AD2d 57, 624 NYS2d 170 (2nd Dept., 1995).
12. 284 N.J. Super 277, 664 AD2d 1284 (1995).
13. 213 AD2d 993 (4th Dept. 1995).

Reprinted with permission from the April 24, 1996 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

Relocating a Busines

Rose v. State of New York, 24 N.Y.2d 50 (1969) effectuated a change in the common law of New York. Whereas, prior to that decision, there was no common law right to be compensated for the costs of relocation, after it, a condemnee was given the right to be paid for the costs of relocating his fixtures, including machinery and other equipment, as part of his compensation in a condemnation proceeding. While it did not include the costs of relocating his non-fixtures, such as stock, there were other statutes which covered some of that gap.

General Municipal Law, Sec. 74 (b) provides that every “Municipal Corporation”, except a City of less than one million people, was to pay relocation expenses of not more than $25,000 to commercial condemnees (apparently Public Benefit Corporations were excluded, we assume inadvertently, from the definition of Municipal Corporation, Dormitory Authority of the State of New York v. Security Mutual Insurance Co., 63 A.D.2d 633, 405 N.Y.S.2d 253 (1st Dept. 1978)). The statute also provides that where federal funds are used in the acquisition, the relocation payments are to be in accordance with federal law.

The Uniform Relocation Assistance and Real Property Acquisition Policies Act. of 1970, as amended, 42 U.S.C. 4601 et. seq., provides that, where federal funds are used in real property acquisition, the provisions of that statute must be followed in order to qualify for the grant. In that statute, the only limitation on the amount of relocation assistance is that it be “actual, reasonable and necessary”. Accordingly, we find Highway Law, Sec. 30 (10) provides that the New York State Department of Transportation is to establish rules and regulations for relocation assistance, authorizing the payment of “actual reasonable and necessary moving expenses of occupants of property acquired pursuant to this section.” We also find the rules and regulations of the Housing and Development Administration, Department of Relocation and Management Services of the City of New York, published on April 19, 1973 and republished on April 26, 1973, adopted pursuant to General Municipal Law, Sec. 74-b and 503 (i) and Sec. 1160-1.0 (now Sec. 26-301) of the Administrative Code of the City of New York providing for the payment of “actual reasonable expenses in moving”.

Between the expanded common law right and the various statutes providing from up to $25,000 to an unlimited right to recover relocation expenses in the City of New York and elsewhere where federal funds are used, one would assume condemnees would opt to relocate their fixtures and equipment rather than claim for their value in the condemnation proceeding, if they were going to stay in business. After all, if they chose not to relocate their equipment, but rather reequip new, they have a virtual guarantee they would be out of pocket when they set up their new plants. Since the measure of damages is new cost as of the date of the taking, less actual (not book) depreciation, they know, unless their machinery is new, that they must receive less than for new replacement machinery on that date. They must also pay attorney and appraisal fees and other disbursements of litigation, which will reduce the net proceeds available to them. They also take the risk of litigation, not a light consideration.

Since there often is a delay of several years between the valuation date, the day of taking, and the receipt of most of the money, they must assume they will have to pay higher prices than that upon which values had been fixed in the condemnation proceeding. If to beat this latter problem, they buy replacement machinery as soon as the property is condemned, unless they have large cash resources, and must people do not, they will have to borrow money at substantially higher rates of interest than they will receive, further reducing their net proceeds. While the cost might be reduced by buying used equipment, most such items are not available on the market. It is true with most equipment that, when you want it, you can not find it for sale, and when you want to sell it, there are no customers. That is one reason why machinery and equipment are deemed specialty items.

But aside from availability, the losses in plant production that come from even one faulty used machine make most buyers leery of buying anything but new. Such losses often exceed the supposed saving effected. The machine that is working fine in one plant may be different after it has been disassembled for moving and reassembled again in a new location. Even with their own equipment, this is a problem, but someone else’s unknown equipment, for most, is just not worth the risk, even considering a lesser initial cost.

Now they have the problem of financing. Most businessmen do not have the cash resources to pay for a new plant. Mostly, their assets are tied up in the condemned premises between capital equipment, stock and goods in production. They cannot receive their award until their case is disposed of and the time lag often is measured in years. Banks will not lend on the security of a potential award. Financing the machinery being bought by equipment loans only pays for a portion of the cost and at high interest rates in comparison to what they are getting. A business which travels this route can choke and die on the carrying costs of these loans and their lack of cash availability.

Now they have the worry of machinery deliveries. Most condemning authorities want site occupants out fairly rapidly. Certainly, condemnees cannot be assured of any certain, much less lengthy, tenure of the condemned premises. If new equipment is to be purchased, it rarely is in stock, and must be manufactured to order. Delivery times are lengthy and uncertain. There is always the risk that a tenant will be forced out of the site before the delivery of ordered equipment which will cause the shut down of the entire plant. The loses which result may be enough to ruin the business.

Weighed against the above is a variety of problems. The moving of a business and setting it up in a new location, then getting the reassembled machinery and/or equipment to work properly and in synchronization with the entire plant so as to get production going very often involves a substantial period of time. During that time there is little, if any production. Not only does overhead continue, but so must salary of personnel. The owner’s time is fully taken up with the move and start up. There is no time for getting business or handling customers.

Meanwhile, for practical purposes, the plant is out of business. Orders are not being taken or filled and customers are being lost. If it is a competitive business and very few are not there will be, because of the shutdown, only the most loyal customers left to resume business with, and they may be a fraction of those the business had before the move. Most customers will give their business elsewhere if you cease to service their accounts and you cannot service it if you are out of production. When finally in production, it will be like a new business, just starting out with few, if any, customers. Of course, any profits that could have been made have been lost and the owner can be thankful if the business has not been lost as well. One may lose money by building a new plant, but at least the business is intact. One may save money by moving the equipment, but you end up with no business.

There are still other worries. Machinery and equipment properly serviced, repaired, renewed and taken care of will continue to work in a plant for an indefinite period of time. Most new models of machinery put out do not change from basic design concepts of older machinery, thus older plants continue to operate as well as new ones and are competitive with them.

But move those machines, especially if they have been operating for some time, they just do not operate right again. It may be many months of trial and error until they do. Some machinery which has been in operation for some time, particularly when it has been exposed to water, steam and/or heat just will not survive disassembly, a move and reassembly, no matter how easy it may appear. Moveover, one just cannot be sure what will happen once you start. Does an owner take the risk of moving and committing to a position based upon this and then find that the machine is no good? What happens to the business if one first has to order new machinery then and it is not available for many months? If essential to the operation, the results may be drastic. In the meanwhile, one has waived the claim for its value in condemnation proceedings by having moved it. (Great A. & P. Tea Co. v. State of N.Y., 22 N.Y.2d 75, 1968). Then there is the problem if the site of the new location is any distance from the old, of retaining trained employees. Without them, until new ones can be trained, production suffers greatly. While said quickly here, it is a major problem.

These are not easy choices under the best of circumstances but, come condemnation, they must be faced, answers found and usually under pressure, with little time to find solutions. And they must be solved, with the risk from a wrong choice being as drastic as the loss of the business.

This is not a problem born out of our imagination. We have been the observer of too many bankruptcies and business failures of apparently healthy companies who relocate their businesses after a condemnation. If we had to pick one absolute essential for a business to survive after a condemnation, it is adequate financing. It can buy time to solve other problems. The next is an assurance that the operation is ready to do business at the new location as soon as the old is closed down. However, as to the latter, even with the best made plans, it is a given that something will go wrong.

We had one printing plant client who not only received a six million dollar settlement but the right to remove all his equipment. It seemed the right solution for the business to survive. In the end, the machinery did not work in the new premises, despite working well in the old, and six millon dollars was not enough to make up for the inevitable losses. Bankruptcy resulted.

Then there was the client, in a business which absolutely required daily deliveries to all of its clients, who built an absolutely new facility supposedly ready to operate the day the old facility closed, with new computers, new telephones, new everything. He even operated the two plants for a short time, shipping out of the old where he could and restocking only the new, operating with two work forces. But who knew the computers would not work properly in the new facility and, for the crucial weeks after the move, when they were totally operating in the new one, found they not only had no inventory control, but could not tell whether orders were being received or deliveries made. On top of it, the new telephone system was out of commission for the first week. They continued to survive, but it was hairy.

Then there was the client with the food processing plant who moved all of his food processing equipment, after first setting up the new plant with all of its infracture installed, ready to receive the equipment being moved. But despite the best organized plan, the move was not smooth and there was a considerable down time when there was no production in the facility. Blessed with adequate financing and in order to maintain his customers, he bought product in the open market from his competitors, supplying them to his customers at a loss until his production was back on line. Despite receipt of relocation payments, the actual costs and uncompensated losses far outstripped what was received from administrative payments.

Then there was the long established oriental rug cleaning and dyeing plant which set up a totally new facility, not willing to take the risk of down time after relocating from the condemned premises. As a huge consumer of water (its operation in some respects being similar to a laundry), it relied on its own well in the old and City water in the new plant. It did not find out, until it started operating in the new plant, that its rug dyeing formulas, while working very well in its old plant, were incompatible with the water at its new location, discoloring the rugs being cleaned and dyed. It was the hard way to find out that all water is not the same. It took many months and a lot of losses until it solved the problem and almost lost its business.

The bottom line is that there are no easy answers in relocating a business. What is needed is careful planning, adequate time to put it into effect, abundant cash resources and a lot of luck.

Reprinted with permission from the October 25, 1995 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

Using the Political Process Instead of the Courts

Often, when a property is the subject of a proposed condemnation, the owner asks two questions: “What is this, Nazi Germany?” and, “How can we stop this?”

The first question is relatively easy to answer. Of course we are not Nazi German. A country need not embrace dictatorial philosophies to acquire property by eminent domain. Historically, eminent domain was and is the inherent right of all governments; the United States did not invent it. It did, however, limit it. It did so by including, at the end of the Fifth Amendment, the phrase, ” . . . nor shall private property be taken for public use without just compensation.”

In truth, eminent domain was not an important concern of our forefathers. The function of government was so much more limited in the early part of our history that not much land was required for public use, and nobody seemed to care much, since it did not come up often. It was not debated at the Constitutional Convention and was not included in the body of the original document but was added as an afterthought, at the end of the Fifth Amendment. When it was added, the evil to be corrected was not takings for public use but lack of compensation. The operative phrase was “without just compensation,” not “for public use,” which leads us to the answer to the second question.

The Eminent Domain Procedure Law (EDPL) is the comprehensive law that uniformly dictates the procedures that must be followed by the state, municipalities and other entities with the power of eminent domain. With certain exceptions, not relevant here, public hearings must be held before the condemnation may take place. Following those hearings, the condemnor must make a determination and findings and publish a “brief synopsis.”

The determination and findings must include the “public use, benefit or purpose” of the proposed project, the approximate location and the reasons for selecting the location and the general effect on the environment and residents and whatever else they consider relevant (EDPL §204).

The Judicial Challenge

The section that deals with the judicial challenge to the proposed condemnation is EDPL §207, and that leaves a very small window of opportunity. Within 30 days after the completion of the publication of the determination and findings, as required by EDPL §204, those persons who are “aggrieved,” may seek judicial review. The definition of persons “aggrieved” could probably be the subject of a column by itself.

These persons must file a petition in the Appellate Division in the judicial department where the proposed condemnation is to take place. The petition must be accompanied by proof of service of a demand on the condemnor to file a written copy of the transcript of the record of the proceeding, i.e., the public hearing, and a copy of the determination and findings. Note that the initial hearing is in the Appellate Division, not the Special Term of the Supreme Court where the petition for an order of condemnation is to be brought. If more than one Appellate Division is involved, the petition may be brought in either one, but only one.

The jurisdiction of the Appellate Division is exclusive, and its order is final but subject, of course, to review in the Court of Appeals. The section gives the proceeding a lawful preference over other matters.

EDPL§207(C) limits the scope of review in the Appellate Division to whether:

  1. the proceeding was in conformity with the federal and state constitutions,
  2. the proposed acquisition is within the condemnor’s statutory jurisdiction or authority,
  3.  The condemnor’s determination and findings were made in accordance with the procedures set forth in this article and with article eight of the environmental conservation law, and
  4. a public use, benefit or purpose will be served by the proposed acquisition.

It is interesting to note that Par. (4) used to only require a public use but, in 1982, it was changed to “public use, benefit or purpose.” The Legislature was unduly cautious, for “public use” had been construed to mean that long before the enactment of the amendment.

In 1991, 13 years after the original effective date of EDPL, Par. (3) was amended to include the reference to Article 8 of the Environmental Conservation Law. This brings to mind the celebrated proposed Westway condemnations. It is believed, incorrectly, by many people that this project was defeated in the courts because it disturbed the breeding areas of striped bass. It was only delayed in the courts. The project, which was hotly disputed in the media and City Council, was killed afterward politically, not in the courts. A much less controversial improvement to the Westside Highway is now planned.

Limitations on the Courts

But, all of this begs the question. The procedure is only part of the answer and is for lawyers, not condemnees. The client wants to know whether or not using the procedures provided, the condemnor can be stopped from taking his or her property. Our answer to the clients who ask this question is usually, as a practical matter, not in the courts. If it is going to be stopped at all, it must be stopped in the political process of studies and public hearings. This is because the courts are limited in their scope of review by EDPL §207(C), and it is very difficult, if the condemnor has done its homework, to defeat the condemnation on those grounds.

Par. (3) is probably the easiest with which to deal. Assuming the worst, i.e., that the condemnor’s determination and findings were not made in accordance with the procedures required by EDPL Article 2 and the Environmental Conservation Law, Article 8, all you can do is delay the process.

If the condemnor is determined to go ahead with the project, it will go back and follow the procedures it neglected to follow the first time. All the condemnee will have done is to delay it and hope to then defeat it politically. This, however, is not necessarily good from the condemnee’s point of view for , if he or she can not kill it politically, all that has been done is to have extended the period when the property is subject to the threat of condemnation. Tenants may move out and not be replaced. Rents may have to be lowered. Buyers will not want to buy into a condemnation with its litigation and delays, and the owner will be reluctant to put any substantial improvements on the property lest their cost be lost in the valuation process.

Source of Power

Par. (2) is a little more cut and dry. The state has the original power of eminent domain, and the municipalities and various authorities that have it have been specifically given that power by the state, by legislative enactment. The power is usually found in the legislation that gave the municipality or authority the right to exist, and that is often limited in the purposes for which the municipality or authority is permitted to condemn.

Therefore, the question of whether the proposed acquisition is within the condemnor’s statutory jurisdiction or authority is answered by looking to the source of the power. If the authority is not there, the municipality or authority may not condemn.

This was the basis of the challenge to the acquisition by the New York State Department of Environmental Conservation (DEC) of 1,067 acres of land owned by Benjamin Wechsler and of his exclusive hunting, fishing and trapping rights in an 1,800-acre parcel owned by the state, both of which were part of the Neversink River Gorge. The stated purpose of the acquisition was to preserve and protect the natural beauty and unique character of the area, clearly within the authority of the DEC, and to allow for increased public access, not within the delegated authority.

The Court of Appeals, in Wechsler v. NYSDEC, 76 NY2D 923 (1990) found that DEC, in seeking to preserve the area of great natural beauty was within the legislative grant of authority. They then added, “That the acquisition may also incidentally serve other identified goals, such as increasing the public’s access to, and recreational use of, these lands does not detract from the propriety of the agency’s proposed use of ‘unique’ area project funds to advance the primary goal of preservation.”

The incidental use concept was not new, but we fail to understand how the acquisition of Mr. Wechsler’s exclusive hunting, fishing and trapping rights on land already owned and preserved by the state only incidentally serve the goal of increasing public access and recreational use, not otherwise within DEC’s authority.

Court’s Reluctance

We believe this illustrates the courts’ reluctance to defeat an acquisition by condemnation. As has happened on several occasions, however, Par. (2) has been circumvented by a simple expediency: Public authorities that do not have the delegated authority to condemn for a certain purpose enlist the aid of other authorities with the authority to do it for them.

Pars. (1) and (4), we believe, are redundant. As we noted above, Par. (4) originally required that a public use will be served. In 1982, they added a public “benefit or purpose” also need to be served. An examination of the cases over the past 100 years or so indicates very clearly that a “public use,” as required by the Fifth Amendment to the U.S. Constitution and Article 1, §7(a) of the New York State Constitution has been interpreted to include a public benefit or purpose. To serve these purposes in Par. (4) is to also satisfy Par. (1), which requires the taking to be in conformity with the federal and state constitutions.

The issue raised by Pars. (1) and (4) is the subject of probably most of the challenges to takings. A full examination of this subject would be too long for the balance of this column. It should and will be the subject of another column on another day. A short overview, however, is called for and we will attempt that.

As we stated earlier in this column, the evil sought to be addressed by tagging on the takings clause to the Fifth Amendment was the nonpayment of just compensation. Public use was not a concern nor did it become one for about 100 years, because land was plentiful and government had a more limited role. It not having become an issue, its definition had yet to be determined. In the past 100 years, the definition of public use broadened as the role of government increased and land became less available.

The Railroads

From the outset, no one questioned that a road, over which the public was to travel, was a public use. In the latter part of the 19thCentury, however, railroads became more a pat of American life and were a major factor in the commerce of the country. Railroads, however, were privately owned, so how could an acquisition for a railroad right-of-way be for a public use. Clearly, without the power of eminent domain, the railroads could not be built.

In 1888, the Court of Appeals answered the question by stating, ” . . . railroads are highways furnishing means of communication between different points, promoting traffic and commerce, facilitating exchanges, in a word, they are improved ways . . . The duty of providing public ways is . . . a public duty.” The court did not consider that the use was carried out by a private corporation to its own profit changed the nature of the public use. (Matter of Niagara Falls & Whirlpool Railway Co., 108 N.Y. 375).

Of course, the question of how much of the public must be served for it to be a public use had to come up, and it did in Pocantico Water Works Co. v. Bird, 130 N.Y. 249. In that case, the power to condemn was delegated to a private water company so that it could build a dam and create reservoirs to provide water to certain specified towns.

The Court of Appeals said in that case,

It is doubtless true that in order to make the use public, a duty must develop upon the persons or corporations holding the property to furnish the public with the use intended. The term implies the “use of many” or “by the public” but it may be limited to the inhabitants of a small restricted locality, but the use must be in common and not for a particular individual.

The same court declared, as have many other in similar circumstances, that while the necessity of taking is to be determined solely by the Legislature the decision whether the taking is for public use is a judicial one. Some courts, however, have held that declarations by the Legislature that the taking is for public use would be persuasive evidence of that fact.

Public Housing

In 1936, the New York courts expanded the concept beyond that of a simple use by the public. The New York Housing Authority sought to condemn a substandard area for a low income housing project. The stated purpose was the clearing of the area. This was challenged on the basis that the public could find nothing to use in the clearing of a blighted area. Therefore, it could not be a public use.

The Court of Appeals addressed the issue directly. It said, “. . . use of a proposed structure, facility or service by everybody and anybody is one of the abandoned universal tests of a public use . . . the Courts have vainly attempted to define comprehensively the concept of a public use . . . to formulate anything ultimate even though it were possible, would, in an inevitably changing world, be unwise if not futile . . . The law of each age is ultimately what the age thinks should be the law.” (Matter of N.Y.C. Hsg. Auth. v. Muller, 270 N.Y. 333).

This set the tone for what has become an almost limitless expansion of the term public use. In K & C Realty, Inc. v. State of New York, 32 NY2d 664, the Court of Appeals upheld a lower court finding that §10, Subd. 24-d of the Highway Law is constitutional even though it provides for condemning the property of one person to give access to the otherwise landlocked property of another when the landlocking is caused by the simultaneous acquisition of the property by a condemnation.

Beyond the clearing of substandard areas, §72-N of Article 15 of the General Municipal Law authorized the taking of predominately vacant areas that are economically dead and impair the community’s growth. This was upheld in Cannata v. City of New York, 11 NY2d 210, App. Dism. 371 U.S.4. There have been decisions allowing the City of Yonkers to acquire land to give to private industry for expansion so as to keep jobs from leaving, and the U.S. Supreme Court allowed the State of Hawaii to break up large plantations and distribute them to smaller farmers.

How available, then, are Pars. (1) and (4) for defeating a condemnation. The answer is, not very. We repeat the advice we have given many clients. If you want to keep them from taking your property, do it politically, before it every gets to the courts.

Reprinted with permission from the December 27, 1994 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

Costs of Remediation in Condemnation

It has long been held in New York State that the jurisdiction of the condemnation court is limited by statute solely to condemnation proceedings and that a non condemnation action may not be joined to a condemnation action (Culver Contracting Corp. v. Humphrey, 268 N.Y. 26 (1935); Matter of City of New York (Triborough Bridge), 159 Misc. 617, aff’d, 257 App. Div. 940, leave to app den, 282 N.Y. 808). Despite this, the issue of title to the condemned property, as well as priority of liens, is deemed a condemnation issue and is thus to be determined in the condemnation court (In re Jefferson Houses, 306 N.Y. 278 (1954); Hemon v. Comptroller of the State of New York, 197 A.D.2d 807, 603 N.Y.S.2d 78 (3d Dept., 1993); In re Board of Water Supply, 179 A.D. 877, 880, 107 N.Y.S.2d 531 (1917); Schiff v. Gold et al., 176 Misc. 119, 26 N.Y.S.2d 392 (Sup. Ct., West. Co., 1991).

This creates an interesting situation in condemnation proceedings where the property taken is contaminated. What happens where the property owner is not the contaminator or not the sole contaminator and would have a right to seek to recover the costs of remediation or seek contribution for same. That right is triggered by the cleanup of the property, either by him or by the condemnor. But the valuation of the property in condemnation, where the value is reduced based upon cost of remediation, assumedly does not trigger that right. Or suppose he knowingly bought a property which was contaminated and secured a contract from the seller indemnifying him against any cost of remediation. Or worse still, suppose we are dealing with non toxic contamination, an oil or gasoline spill, where, under the Navigation Law, Article 16, only the present owner of the property can sue the party responsible for the cost of remediation. Once the condemnee is out of title, he no longer has that right.

In the normal course of events, in the case of a toxic or hazardous contamination, under pertinent statutes (eg. CERCLA), where remediation is ordered, he has a right to seek a recovery from the actual perpetrator(s) for all or part of the cost. Thus, if he innocently bought a contaminated property and the EPA sued him, he could bring the prior owners into the suit and possibly secure indemnification from the actual culprit(s). But, as the present law stands in condemnation proceedings, if the condemnor seeks what is, in effect, an offset against the value of his property of the cost of remediation, assuming, for this purpose, that it is a valid approach to value (cf. Inmar Associates, Inc. v. Borough of Carlstadt, 112, N.J. 593 (1988)), the condemnee cannot shift the cost of remediation to the party ultimately responsible in that law suit. Having the value of his property reduced by the cost of remediation, he must bring a plenary action to seek to be made whole, where the determination of the condemnation court as to both the condition and the cost of remediation will not bind the party he alleges to be ultimately responsible for remediation costs, but might bind him on the basis of collateral estoppel. In this way, it is entirely possible for the condemnation court to make findings disparate with the findings in the plenary suit, leaving the condemnee not only with the possibility of being unjustly stuck but faced with double litigation costs. Or suppose the condemnation court uses the cost of remediation as the basis for finding a value, but does not make a specific finding as to the cost of remediation, but only the ultimate finding of value. Now what does he do. That also impacts on the condemnee who brought the property based upon a contract of indemnification from his credit worthy buyer. It also provides no basis for relief from the actual contaminator. Worse yet, it might be argued that the impact on market value is totally different from the cost of remediation and then how do you seek contribution and that is to assume the mere reduction in value for a potential remediation will give him that right as opposed to actual remediation, a very large assumption indeed.

Take the instance of the property contaminated by an oil or gasoline spill on adjacent property which found its way into the water table and has migrated onto the condemned property. Under New York State law only the present owner of the property may bring suit to recover the cost of remediation. But once the property is condemned he no longer is the owner and the condemnor is the sole party which holds that right. What happens then when the condemnor seeks an offset from the value of the property by reason of the cost of remediation and succeeds. What happens if it succeeds but does not remediate or does not remediate to the extent claimed. What about his loss of a right to bring suit against a prior owner who may have been responsible for the spill while finding the value of his property has been penalized by the cost of remediation and he has been denied any remedy by reason of the condemnation. If, indeed, New York Courts will hold to their long standing position of the limited jurisdiction of the condemnation court and the cost of remediation can be sought to be collected by the condemnor in the guise of a deduction from the value of the property, we are looking at the potential for very obvious injustices. Other states have other answers. In New Jersey the whole issue of property contamination, cost of remediation and fixing of liability can be tried together with the condemnation proceedings. We have seen it happen in connection with the Newport City Development condemnation proceeding. At least one Appellate Court in the State of Illinois has found a different answer where, similar to the situation in New York, its statute provides that the condemnation court’s jurisdiction is limited to the condemnation proceeding itself.

In Department of Transportation of the State of Illinois v. Parr, 633 N.E.2d 19 (App. Ct., 3d Dist., 1994), the lower court refused to permit in evidence the alleged costs of an environmental cleanup of the property. In that case the IDOT had sought to value the property “at zero due to the alleged presence of environmental hazards on the property and the costs of removing the hazards”. The case was appealed with a certified question. As the Court stated; “we are called upon to determine whether environmental remediation costs are admissible in eminent domain proceedings to determine the fair market value of the subject property.” The Court agreed with the trial court and ruled environmental clean up costs were not admissible in a condemnation proceeding. Some of the language of the Court is of interest.

“We also find that even if environmental remediation costs were admissible under section 7-119 (Eminent Domain Act), such admission would violate the procedural due process rights of the owners of condemned property. We determine that the Costs’ admission in a condemnation proceeding without the procedural safeguards provided in the Environmental Protection Act would permit the IDOT to circumvent the procedures established by the Legislature and the Environmental Protection Agency for recovering environment remediation costs. _ _ _ Upon receiving information that an alleged violation of the act (Environmental Protection Act) and its regulations has occurred, the agency may investigate and file a complaint against the offender with the Board (Pollution Control Board). _ _ _ The Board has the authority to hear such complaints. At such a hearing, the complainant bears the burden of proving that a violation of the Act or its regulations has occurred or may occur and the respondent has caused the violation, _ _ _ a respondent may file third party actions against other parties who may be responsible for environmental contamination _ _ _.

” _ _ _ Due process also requires that orderly proceedings must advance according to established rules which do not violate fundamental rights. Under the Act, IDOT is legally entitled to commence an enforcement action to recover environmental remediation costs yet nothing in the record indicates that IDOT has commenced an enforcement action. Consequently, permitting IDOT to admit evidence of remediation costs in an eminent domain proceeding would effectively allow IDOT to recover these costs without adhering to the procedures established to provide that remedy. We cannot allow IDOT to achieve such a result.

“As stated previously, property owners against whom remediation costs are sought have a right to require proof of the existence of a violation. They also have a right to bring third-party actions against prior owners of the property and require such other parties to pay remediation costs if the proper tribunal finds them to be responsible. The Eminent Domain Act by itself neither allows for third party actions nor addresses potential liability under the Environmental Protection Act. The only established procedures for addressing violations of the Environmental Protection Act and providing remedies for such violations are found in the act itself and the case law giving construction to the Act. For the reasons given, we conclude that the admission of remediation costs at an eminent domain proceeding violates the rights of property owners to have their potential liability properly adjudicated in a proceeding under the act with the attendant procedural safeguards.” (emphasis in original).

We suggest that this decision is substantially applicable here in New York. We believe, for the reasons given by the Illinois Court, that in view of the limited jurisdiction of New York Courts that to, in effect, recover the costs of remediation by deducting them from the value of the property in a condemnation proceeding violates the due process rights of a condemnee.

Reprinted with permission from the October 26, 1994 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

The Probability of Change

While property in a condemnation proceeding is valued s of a specific date, reflecting its status and condition at that time, it does not mean that situation is frozen. As we said in In the Matter of County of Suffolk v. Firester, 37 NY2d 649, 376 NYS2d 458 (1975); “It is axiomatic that, in determining fair market value, the condemnees are entitled to have the appraisal based on the highest and best available use of the property, irrespective of whether they are so using it (Keator v. State of New York, 23 NY2d 937, 339, 296 NYS2d 767, 769, 244 NE2d 248, 249; St. Agnes Cemetery v. State of New York, 3 NY2d 37, 41, 163 NYS2d 655, 658-659, 143 NE2d 377, 379-380; Hazard Lewis Farms v. State of New York, 1 AD2d 923, 924 149 NYS2d 658, 661; Sparkill Reality Corp. v. State of New York, 254 App. Div. 78, 82 4 NYS2d 679, 682, aff’d . 279 N.Y. 656, 18 NE2d.

However, as was stated in West Senece Central High School District v. the State of New York,

It is well settled that (a) use which is no more than a speculative or hypothetical arrangement in the mind of the claimant may not be accepted as the basis for an award (Matter of City of New York (Shorefront High School-Rudnick), 25 NY2d 146, 149, 303 NYS2d 47, 50 250 NE2d 333, 334). There must be a reasonable probability that the asserted highest and best use could or would have been made within the reasonably near future (Matter of City of New York (Wilson), 21 AD 2d 652, 653, 249 NYS2d 811, aff’d, 16 NY2d 814, 263 NYS2d 9, 210 NE2d 361) Matter of City of New York, (Broadway Cary Corp.), 34 NY2d, 535, 536, 354 NYS2d 100, 101, 309 NE2d 870, 871).

Probability of Change

But the probability of a change in use as the predicate of a valuation of the property is not the only consideration. Anything that the real estate market would consider and pay a premium for should be taken into account in valuing the property. That is not to say that the fact that there might be such a change means that the value is what it would be if that change were an accomplished fact, but rather what additional price the market would pay over and above its present condition for the fact of the probability of a change. As was said in Marks v. State of New York, 152 AD2d 930, 544 NYS2d 395 (4th Dept., 1989);

It is well settled that property is to be valued as it exists on the date of taking and that an increment is to be added to reflect the potential use (Matter of County of Suffolk (Firester), 37 NY2d 649; Lierre v. State of New York, 39 AD2d 980, 333 NYS2d 266; Hewitt v. State of New York, 18 AD2d 1128, 239 NYS2d 522).

Highest and best use is not the only concept where this probability of a change is recognized as a value-adding concept. Use is governed by zoning restrictions. Thus the first cousin to the concept is that while a property’s use may be restricted by applicable zoning, if there is a reasonable probability, by reference to extrinsic circumstances, that the zoning restrictions might be relaxed or changed, whether by a zone change or variance, or even by court action, that circumstance must be considered as affecting value. (Masten v. State of New York, 11 AD2d 370, 206 NYS2d 672, aff’d. 9 NY2d 796, 215 NYS2d 508, l75 NE2d 166; Matter of Town of Islip (Hamlet of Sayville), 49 NY2d 354, 426 NYS2d 220 (1980); Harwood v. State of New York, 112 AD2d 741, 492 NYS2d 236 (4th Dept., 1985); Dittimer v. State of New York ___ AD2d ___, 590, NYS2d 275 (2d Dept. 1992). The valuation in such circumstances is not what the value would be if the zoning were changed, but what the market would pay as an increment to value as currently zoned for the probability of securing such a change, taking into an account the time, cost and risks of securing such a change (City of New York v. Nelkin, 51 NY2d 921, 434 NYS2d 98 (1980); Knight v. State of New York, 36 AD2d 574, 317 NYS2d 800 (4th Dept., 1971).

Value-Affecting Fact

But highest and best use and zoning are not the only areas where the probability of a change in an existing status is to be considered in valuating the property. The examples are so many that one can synthesize the cases by saying that if there was a reasonable probability of securing a change it became a value-affecting fact, whether positively or negatively. We give some examples.

In Matter of the City of New York (149th Avenue), New York Law Journal, Oct. 20, 1971, p. 17 cols. 6 and 7 (Tessler, J., Sup. Ct. Queens Co.) the Court found that there was a reasonable probability of the adjacent upland owner securing title to the lands in the bed of a former creek, which no longer existed, since the proof was that the City had been granting such deeds.

In In re City of New York (J.H.S. 47, Friedman), 40 AD2d 597, 335 NYS2d 945 (1st Dept., 1972) a developer, in the midst of an assemblage to build a nursing home, was stopped short of his full assemblage by the condemnation proceeding. The court valued the property on the basis of a reasonable probability that he would have completed his assemblage.

In Schwartz v. State of New York, 72 AD2d 490, 426 NYS2d 100 (3rd Dept., 1980) the court valued the property on the basis of a reasonable probability that there would be a waiver of a restrictive covenant affecting the use of the property.

In Campbell v. State of New York, 39 AD2d 615, 331 NYS2d 75, aff’d. 32 NY2d 952 the court valued the property, long used pursuant to a revocable license, on the basis of the reasonable probability of the continuation of the non revocation of that license (see also Rochester Poster Advertising Co. v. State of New York, 11 NY2d 1036; Queensboro Farm Products Inc. v. State of New York, 5 NY2d 977, 184 NYS2d 844, aff’g., 5 AD 2d 967, 171 NYS2d 646; Breezemont Park Inc. v. State of New York, 39 AD2d 793, 332 NYS2d 202.

In Zasppavigna v. State of New York, ___ AD2d ___, 588 NYS2d 585 (2d Dept., 1992) the court held that, having received preliminary approval for this subdivision plan, it was reasonably probable that the owner would receive final approval and the land would be used as a residential subdivision. In Petit v. Central School District, No. 1, 355 NYS2d 947 (Sup. Ct., Suffolk Co, Lazar, J.) the court held it was proper to value the land based in its joinder with other property, with the value based on the probability, not as an accomplished fact.

In Walker v. State of New York, 33 NY2d 450, 354 NYS2d 626 (1974) the court found the property should be valued based on the reasonable probability that the property owner could have purchased a right of way across a former railroad right of way.

In Bero v. State of New York, 33 AD2d 88, 305 NYS2d 309 (3d Dept., 1969) it was held that value of the property could be proved based upon the reasonable probability of securing a permit to mine gravel from the banks of an adjoining river.

In Erie Lackawanna Railway Co. v. State of New York, 38 AD2d 463, 330 NYS2d 700 (4th Dept., 1972), the court held that, although a railroad held title under the Railway Act of 1850 under which it received only a permanent easement for railway purposes during the continuance of its corporate existence and on abandonment the title reverted back to the original owners, the possibility of the abandonment was so remote and speculative that the possibility of the reverter had no value and the entire award went to the railroad.

Thus it is clear that if you can prove the reasonable probability of any change in a property’s status within a reasonable time and if the market will recognize a value in that change, it is a factor to be considered in valuing the property.

Reprinted with permission from the April 22, 1993 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

Fact Versus Theory

While the theory of valuation in condemnation and tax certiorari proceedings relates to what is fair and reasonable and what is the market, with no single transaction bespeaking the market, the fact of the matter is that an actual transaction relating to the subject property and otherwise unexplained is evidence of the first rank as to what that transaction stands for. As the cases make clear, the fact of a transaction does not make it conclusive, but shifts the burden of proof to the side contending differently. We see it applied in situation after situation.

Thus, it has been held that the cost of construction of a building “well suited to its site is some evidence of value, at least as to the tax years after construction ” (Joseph E. Seagram & Sons, Ltd. v. Tax Commission, 14 N.Y.2d 314, 251 N.Y.S.2d 460 (1964); Dune Alpin Farm Corp. v. Assessor of Town of East Hampton, 25 A.D.2d 672, 509 N.Y.S.2d 861 (2d Dept., 1987) and cased cited therein. So, also, the recent cost of an alteration is deemed strong evidence of added value for a changed use (In re Madison Houses, 17 A.D.2d 317, 234 N.Y.S.2d 799 (1st Dept., 1962); In re P.S. 79, Manhattan, 19 A.D.2d 239, 241 N.Y.S.2d 575 (1st Dept., 1963). Costs expended for a variety of planning and carrying costs in a building in the course of development is strong evidence of the value added to the land (In re P.S. No. 223, City of N.Y. (Nelkin), 71 A.D.2d 1021, 420 N.Y.S.2d 501, afff’d. 51 N.Y.2d 921, 434 N.Y.S.2d 981 (1980). In the same vein, actual recent leases of the subject premises are strong evidence of rental value (Matter of the City of N.Y. Clinton Urban Renewal (Franklin Record center, Inc.), 59 N.Y. 2d 57, 463 N.Y.S.2d 168 (1983); Rosbroc Associates v. Assesssor, et. al. of the City of New Rochelle N.Y.L.J., 11/3/76, Sup. Ct. Westch. Co., Slifkin J; Hicks Realty Assoc. v. State of N.Y., 34 A.D.2d 866, 310 N.Y.S.2d 825 (2d Dept. 1970), A history of no vacancies in the property is sufficient to disallow a vacancy allowance in the capitalization process (City of Niagara Falls v. Zak, 40 A.D.2d 755, 337 N.Y.S.2d 548 (4th Dept., 1972); Wolnstein v. State of N.Y. 33 A.D.2d 990, 307 N.Y.S.2d 402 (4th Dept., 1970); actual gallonage sold in a gas station is strong evidence on which to compute its rental value (Kozecke v. State of N.Y., 34 A.D.2d 599, 308 N.Y.S.2d 488 (1970); the existing use is presumed as its highest and best use (Rochester Urban Renewal Agency v. Lee, 83 A.D.2d 770, 443 N.Y.S.2d 479 (4th Dept., 1981); Matter of the City of N.Y. (Broadway Carey Corp.), 34 N.Y.2d 535, 536, 354 N.Y.S.2d 100, 101 (1974); the work done towards creating a use is strong evidence of that which is to be created is its highest and best use (Matter of the City of New York (Jomar Real Estate Corp.), 61 N.Y.2d 843, 473 N.Y.S.2d 963 (1984).

Then we come to the proposition, applied in varying forms, that evidence of an arms length sale “if unexplained, was evidence of the highest rank to determine the true value of the property at that time “Matter of Woolworth Co. v. Tax Commission of the City of New York, 20 N.Y.2d 561, 565. In 309 Veeder Avenue Inc. v. State of N.Y., 26 A.D.2d 749, 272 N.Y.S.2d 177 (3rd Dept., 1966) the court held as to a valuation fixed on the capitalization of income method it was error to rely solely upon that method, in that consideration should have been given to the price paid for the property three years before. In Matter of the City of New York (Nassau Expressway-Peter Grimm et. al., 98 A.D.2d 166, 421 N.Y.S.2d 105 (2d Dept., 1983) the court averaged the prices paid in assembling a large site over a number of years to find a value, in disregard of adjacent recent sales. In Matter of the City of New York (Atlantic Improvement Corp.), 28 N.Y.2d 465, 372 N.Y.S.2d 708 the court reversed the lower court’s award when measuring it against the price paid for the property rejecting the proferred comparable sales as being too dissimilar. In Matter of City of N.Y., (N. Central Brooklyn H.S. (Chestnut Properties Co.), 39 A.D.2d 73, 332 N.Y.S.2d 19, aff’d. 34 N.Y.2d 800, 359 N.Y.S.2d 40 (1974) the court used as the test of value the most recent sale to the owner plus the monies spent by the owner in development enhancement in preparing it for its contemplated use. In Amsterdam Urban Renewal Agency v. Barnett, 63 A.D.2d 755, 404 N.Y.S.2d 892 (3rd Dept., 1978) where the property was purchased for $25,000.00 and in a commissioner trial an award was made of $86,000.00, the award was reversed solely on the basis that the disparity between the two “shocked the conscience of the court.” In Hardele Realty Corp. v. State of N.Y., 125 A.D.2d 543, 509 N.Y.S.2d 621 (3rd Dept., 1986) the court increased a $45,000.00 award to $60,000.00 where the property had been purchased in two parts, six and eight years before, for $110,000.00, with evidence of deterioration of the property, since the trial court did not give sufficient weight to the purchase price. There are many other variations on the theme.

We understand where the courts are coming from on this subject but, at least as to rental value and fair market value, it causes us an intellectual problem. We know that it is the norm that if one takes a look at more than the single transaction we will get a range of prices and rentals. Why, because it is the subject property, should a single transaction assume a preeminent and thus exaggerated position as against a demonstrated market, particularly, when we know that not all buyers and sellers and lessors and lessees are equal, whether in knowledge or bargaining position? Different people hold different views as to the value of property. They make different offers and accept different prices. The reason to look at a broader segment of the market than a single transaction is to minimize the impact of those factors.

We are drawn, in this context, to the statement of Judge Steuer in his decision in re Lincoln Square Slum Clearance Project, 15 A.D.2d 153 222 N.Y.S.2d 786, 794 (1st Dept., 1961), aff’d. 16 N.Y.2d 497, 260 N.Y.S.2d 439 (1965):

“Reliance is put upon sales of comparable property or even the same property. These sales, though genuine, are by themselves far from conclusive as guides to value. In fact, in several instances where properties were shown to be comparable, the sales of these properties realized different amounts and the average used varied widely from the consideration of each individual sale. In any event, sales are made in accord with the theoretical standard of a willing buyer and a willing seller. Buyers are naturally prone to seeking bargains – opportunities to buy at a price that would give an unusually high return – and sellers to await the purchaser whom necessity compels to acquire property at somewhat more than it would otherwise realize. The concept of a fluid market, such as that existing in regard to corporate securities where one sale can indicate the value at the time, is just not true with respect to real estate.

“As regards the sale of the instant property, differences in time must first be considered. If the sale is the purchase by the present owners and is very close in time to the taking in condemnation, a total disregard of the sale as evidenced by a gross difference between the estimate and the sale price may well lead to the conclusion of a dishonest estimate of value (Matter of City of N.Y. (Valley Stream, etc.), 15 App. Div. 422, 137 N.Y.S. 329). And utter disregard of such a sale is error (Matter of City of N.Y. (Marshall) 8 A.D.2d 365, 187 N.Y.S.2d 606). But a failure to make such a sale the absolute standard of value is not the equivalent of disregard.”

To which we add that the usual nature of the proof regarding comparable sales make them virtually useless as criterion of value in income producing property in any event. The reason is that what is being sold is almost always different than what is being valued in a condemnation proceeding. The sale of an income producing property is not the sale of an entire fee but only of the fee owner’s interest subject to other outstanding interests in the property including that of any lessee. A condemnation proceeding values all of the interests in the property, including that of the tenant(s) and leaves it to the parties to apportion those interests between them. Thus, the reason for the condemnation clause. To the degree that the tenant has a lease at less than market rent, with a period of time yet to go on the lease, the tenant owns a valuable interest in the property, his leasehold. The sale of the property is exclusive of that interest, it remaining with the tenant. However, the value paid in condemnation must include the interest in the property of the tenants. Thus, for a sale to have any relevancy, the facts of that leasing must be known, including any difference between the rent reserved in the lease versus rental value as well as the length of the remaining term. The greater the number of tenants, the less likely that sale has any relevance. These raise subsidiary issues requiring virtually separate trials as to each comparable sale, beyond the capabilities of proof in a condemnation or tax certiorari trial. In such a milieu, the relevance of such sales is questionable.

In a similar vein to Judge Steuer’s statement is the statement of Judge Benza in Goldmark 35 Associates v. State of N.Y. (Claim No. 78376, Court of Claims, decision dated July 6, 1992); “While actual rent may be the best indicator of value, it is merely a factor to be considered in determining income value, and another figure may be adopted if the actual rent is shown to be too low (Mostiff v. State of N.Y., 32 A.D.2d 729, aff’d. 26 N.Y.2d 692; Kommit v. State of N.Y., 50 A.D.2d 945, Matter of the City of New York (First Elephant Estates – La Hermosa Church), 17 A.D.2d 317”.

Since value is fixed as of a date certain, title vesting date, and leases are rarely made on that date, merely to state the rental in effect equates to fair rental value ignores not only the realities of the market place as to the bargaining position and knowledgeability of the parties but the differences in the market between when the lease was negotiated and the valuation date. In multi tenanted buildings, we find many leases at different rentals per square foot.even when made at the same time. Why then should the lease of a single tenanted building be accorded any stronger position. The description by Judge Steuer as how to sales come about equally applies to leases.

But despite the theory, when a court wants an easy handle, it reverts to the recent sale or lease of the subject property as prime evidence of value, putting the burden on he who would oppose it to explain it away. While it is easier, the better considered opinions do not give such a conclusive effect to these sales and leases.

Reprinted with permission from the October 22, 1992 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

Property in the Course of Development

From time to time a property is in the course of development finds itself the subject of a proposed condemnation proceeding. It may be in the beginning of the process, where planning is merely taking place or at various stages, up to where construction is very near completion. It inevitably raises the question of what the developer should then do, go forward with the project or stop all activity until the condemnation actually takes place?

It is not an easy decision. Often the decision is complicated by the fact that various levels of governmental approval are required, from variances or rezoning to securing approval of building plans, and the question arises whether the decision of the governmental body involved will be influenced by the pending condemnation, a more than likely proposition, and what the developer should do about it. What cannot be lost sight of is that in valuing the property in the condemnation proceeding the award would probably be negatively affected if an application for a variance or zone change were turned down and it could not be proved it was because a condemnation was pending. Then there are questions relating to losing a favorable market if he waited and the project did not go forward and to losing time-limited financing commitments.

We start with the basic proposition that despite a property being designated for a proposed condemnation proceeding, as long as the owner continues in title, he has an absolute legal right to continue to use and develop his property. In fact, we find a decision that holds that just because a condemnation proceeding is proposed is no basis for a tenant being relieved of the obligation under a lease to substantially renovate a building (2814 Food Corp. v. Hub Bar Building Corp., 35 AD2d 277, 315 NYS2d 969 [1st Dept., 1970]). Further, history tells us that, short of actual condemnation, there is no certainty that a project will go forward. The proposed Lower Manhattan Expressway and Westway are glaring examples in a long list of projects that reached various stages of approval and then were dropped. We have a client who did not build on a part of his lot on which the State Department of Transportation told him they were planning to construct a highway. When the highway was built, the lines had been changed and it was never taken, with his having lost gainful use of that part of the property, without compensation.

Stopping the Developer

We also find, on the other side of the process, that, at least with some condemnors, the temptation to stop the developer from going forward with his project by extralegal means has been too great to resist. It happens far more often than most realize. Thus, it has happened that where an application for a variance or rezoning or even a building permit was pending, an unpublicized letter or conversation between agencies or bodies has led to either the governmental body involved just sitting on the application without action or unjustifiably denying it. In the latter instance, the developer at least has a chance, by an Article 78 proceeding, in doing something about it, while with the former, unless there are statutory or regulatory time limits by which the government body must act, he is helpless.

Sometimes a paper trail has been left when it occurs, but most times it has not. When there is such a trail we find the courts act in terms of forcing permits and variances, disregarding inappropriate zoning and in providing compensation in the ultimate condemnation award for the resulting loss (See In re Public School No. 223, City of New York (Nelkin), 71 AD2d 1021, 420 NYS2d 501, aff’d. 51 NY2d 921, 434 NYS2d 981 (1980); In re City of New York (Jomar Real Estate Corporation) 71 AD2d 1020, 420, NYS2d 501 aff’d 51 NYS2d 921; In re Fifth Avenue Coach Lines Inc., 18 NY2d 212, 273 NYS2d 52 (1966); Keystone Assoc. v. Moerdler, 19 NY2d 78; Bowne v. Town of Hamptonburgh, 76 AD2d 848, 428, NYS2d 526 (2d Dept., 1980); Corrado v. Wolf, 37 Misc2d 89, 235 NYS2d 336 (Meyer J. Sup. Ct. Nassau Co., 1962); Winpol v. Town of Hempstead, 59 Misc2d 768, 300 NYS2d 197 (Sup. Ct. Nassau Co., Meyer, J.); In re Public Place, Borough of Manhattan, 54 Misc. 69, aff’d and remanded 24 AD2d 243, 265 NYS2d 150, on remand __ Misc2d __ , 281 NYS2d 414 rev’d on other grounds 31 AD2d 530; Chase v. City of Glen Cove, 246 NYS2d 975 (Sup. Ct. Nassau Co., Meyer J. 1964); Matter of City of New York (John F. Kennedy H.S.), New York Law Journal, July 24, 1967, p.10 col.3 (Sup. Ct. Bronx Co., Brust, J.); Zogby v. State of New York, 53 Misc2d. 740, 279 NYS2d 665 (Ct of Cl., Lengyel, J., 1967): Oakwood Island Yacht Club v. City of New Rochelle, 59 Misc2d 355, 298 NYS2d 807, aff’d __ AD2d __, 320 NYS2d 505 (2d Dept., 1969); Conway v. Kerr, 51 AD2d 758, 380 NYS2d 44 (2d Dept., 1976); Mt. Morris Assoc. v. McMorran, 35 AD2d. 843, 318 NYS2d 120 (2d Dept., 1970).

Paying Lip Service

Suppose the developer wishes to go forward with his construction in the face of a planned condemnation, the other side of the above coin. While we find the courts paying lip service to his right to do so, unless the developer has the most compelling reason for continuing with the development their decisions, in the valuation of the property in the condemnation proceeding, say something different in the result. We believe this is the real explanation for the decisions in Matter of City of New York (Atlantic Improvement Corp.), 28 NY2d 465, 322 NYS2d 708 and Matter of City of New York (G & C Amusements), 55 NY2d 353, 449 NYS2d 671 (1982), reversing 82 AD2d 829, 439 NYS2d 677.

In the latter case, the amusement rides and ancillary property in dispute, for which compensation were sought as “trade fixtures,” were held non-compensable “personalty” by the trial court because, when he installed them, the owner “gambled” that the property would not be condemned, he having installed them on land leased from the City, allegedly in the face of a planned project. They were then deemed compensable trade fixtures in the Appellate Division, which reversed the trial court. Then they were held to be part of the real estate, pursuant to a very strictly construed lease clause, and thus not compensable to the tenant, in the Court of Appeals.

On oral argument in the Court of Appeals, a year or so later, in the Jomar case, supra, a case where a building permit was revoked as to the tenant in the middle of construction of indoor tennis courts because of a newly planned condemnation proceeding (restored after a nine-month delay), with the balance of the development put on hold because of the project, the other side of the G & C Amusements coin, the then Chief Judge tacitly acknowledged the reason for its lease construction in G & C.

It is by reason of these latter decisions and others like them that we generally advise clients that if they are not so well along in their development that they have no realistic chance to halt the process they should put their project on “hold” until they know whether the condemnation is going forward. There is a down side to doing so, however. Usually, there has been a substantial amount of money already invested in planning, engineering and architect’s fees, while interest on mortgages as well as taxes, insurance and other costs continue to accumulate while the property remains unproductive.

There may be time-limited mortgage commitments that will expire either before the property is condemned or before one can be sure the project has been abandoned. Then there is the condemnor that will attempt to attribute the stoppage of the proposed development to causes other than the planned condemnation. Sometimes the development is so well along that it cannot realistically be halted. Sometimes the developer believes that because his project is so well along and beneficial he can persuade the potential condemnor to abandon the taking, usually more a hope than a reality. Sometimes he believes he can complete the development before a condemnation can be started.

Favorable Treatment

The upside in halting the work is that the courts appear to treat those who do so more favorable than those who do not. The dissenting opinion in the Appellate Division describing what the trial court included in its award in In re Public School No. 223 (Nelkin)supra, gives an indication of what that reaction is:

The total award — included $68,022 for real estate taxes for the period Jan. 1, 1962, to March 9, 1971, $137,712 for mortgage interest for the same period, $71,071 in architect’s fees, $29,000 in legal fees, and approximately $10,000 in other fees expended in claimant’s attempt to obtain financing for the projected development of the site.

The underlying facts of the case were that to develop the project the developer was seeking not only a Federal Housing Administration mortgage commitment, but a zoning change to increase density and a real estate tax exemption, which involved three different agencies. After years of effort, an agreement was reached to secure all of them. Before it could be implemented, condemnation of the property was proposed and a letter sent to the FHA by a City agency asking that it withhold the FHA mortgage commitment because of the pending condemnation proceeding. It was complied with.

Nothing happened for more than two years, despite the developer’s efforts, until the property was condemned. Fortunately, the letter was discovered in the FHA files and put before the court. While the dissent did not mention this, it appears that the result in fully compensating the developer for his out-of-pocket costs was attributed to it. But, we know of other instances where it is clear something similar happened but there was no smoking gun.

In Matter of City of New York (New Detention Facility) (China Plaza Inc.), __ AD2d __ (1989) the Appellate Division affirmed an award that included the costs of development of a project that had been halted upon the announcement of a planned condemnation of the property before it had reached the actual construction stage but after a package of complete planning and financing had been completed. While the trial court never spelled out the exact amount allowed for any particular item, it indicated it added to the award $3.2 million for “development costs.”

The question then is what the legal justification is for granting the costs expended in development, besides the moral and equitable one. The basis alleged has been that the project, in its then state of development, is saleable as a package with a buyer securing the advantage of not having to repeat what has already been accomplished, with its attendant costs, i.e., it is a project in the course of development (see Arlen of Naunet v. State of New York, 26 NY2d 465, 322 NYS2d 708; Matter of City of New York (Chestnut Properties Co.), 39 AD2d 573, 332 NYS2d 19 (2d Dept.); Matter of City of New York (New Detention Facility) (China Plaza Inc.), supra; Matter of City of New York (P.S. 223) (Nelkin), supra.

Added Value

While there is always an issue of “reasonableness,” the actual cost of the work is the best evidence of the value that the work added to the property. The courts have held that the cost of construction of a building, “well suited to its site is some evidence of value, at least as to the tax years soon after construction” (Joseph E. Seagram & Sons Ltd. V. Tax Commission, 14 NY2d 314, 251 NYS2d 460 (1st Dept., 1964); Dune Alpine Farm Corp. v. Assessor of Town of East Hampton, 125 AD2d 672, 509 NYS2d 861 (2d Dept., 1987) and cases cited therein.) This view is consistent with other aspects of real property valuation law and recognizes that while the quest is market value, which may or may not be coincident with the actual cost of construction, it is similar to using an actual recent lease of the subject premises as strong evidence of rental value (Matter of the City of New York (Clinton Urban Renewal-Franklin Record Center Inc.), 59 NY2d 57, 463 NYS2d 168 (1983); Matter of the City of New York (Maxwell), 15 AD2d 153, 162, 222 NYS2d 786; c.f.Ettlinger v. Weil, 1184 N.Y. 179, 183; Mater of the City of New York (Marshall), 16 AD2d 570, 229 NYS2d 947 (1962)); a recent sale of the subject property as strong evidence of its market value, (Matter of Woolworth Co. v. Tax Commission, 20 NYC 561, 565; Matter of City of New York (Maxwell), supra); Matter of the City of New York (Marshall), supra; recent cost of alteration as strong evidence of added value for a changed use (In re Madison Houses, 17 AD2d 317, 234 NYS2d 789; In re P.S. 79, Manhattan, 19 AD2d 239, 241, NYS2d 575); and actual use as evidence of highest and best use (Matter of City of New York (Jomar Real Estate Corp.), 61 NY2d 843, 473 NYS2d 963 [1984]). In each instance the actuality, and otherwise unexplained, is evidence of the first rank. As the cases make clear, existence does not make it conclusive but shifts the burden of proof to the side contending differently.

While this is an over simplification of a larger subject, it is clear from a synthesis of case law that there is a basic presumption in law of the reasonableness of an actual transaction. While it is specifically stated and recognized that no single transaction bespeaks and entire market, and the fact of actuality as to the subject property does not preclude other evidence inconsistent with that fact to prove the market to be otherwise, the fact itself, unless otherwise explained, is evidence of the first rank in determining market value of the subject property. This being so, if the cost of a building recently completed is evidence of the first rank, then the cost of development of a building in the process of development is also evidence of the first rank of the value.

Since actual cost is evidence of the first rank as to value, what then is included as part of the cost. As was stated in Matter of City of New York (Harlem-East Harlem Neighborhood Development Area-Salvation Army Inc.), 43 NY2d 512, 516, 402 NYS2d 804, 805 (1978):

Implementation of the summation method requires the inclusion not only of payments for material, equipment, labor and other obvious physical ingredients which go directly into construction, but also of those charges which may be termed indirect or less direct, such as architect’s fees, contractor’s profits, interest and taxes on land during the period of construction, cost of procuring necessary licenses and the miscellany of other essential overhead or incidental expenses. For a fair and realistic appraisal of reproduction costs must embrace in its reckoning all expenditure that reasonable and necessarily are to be expected in the re-creation of a structure so idiosyncratic as to leave no alternative method by which to measure fair compensation. (Cases cited)

Financing costs are such an expenditure (citation). — Thus, whether an owner uses its own or borrowed funds, the calculation of true cost would, wither way, require inclusion of costs of financing.

See also D’Amico v. State of New York, 37 AD2d 681, 323 NYS2d 224 (4th Dept., 1971); Richards “Of Course” Inc. V. State of New York, 36 AD2d 572, 317 NYS2d 827 (4th Dept., 1971); Lapides v. State of New York, 37 AD2d 755, 323 NYS2d 179 (4th Dept., 1979); Ryan v. State of New York, 39 AD2d 830, 333 NYS2d 158 (4th Dept., 1972); Rustcon Developers v. State of New York, 33 Ad2d 582, 3304 NYS2d 287 (3d Dept. 1969); Salamone & Company v. State of New York, 40 AD2d 916, 337 NYS2d 846 (3d Dept., 1972); Specialty Foods Corp. v. State of New York, 46 AD2d 989, 362 NYS2d 266 (3d Dept., 1974); In re City of New York (North Central Brooklyn High School-Chestnut Properties Co.), 39 AD2d 573, 332 NYS2d 19 (2d Dept., 1972), aff’d, 34 NY2d 800, 359 NYS2d 40); (See also Internal Revenue Code, §189, which provides that interest and taxes for purposes of acquiring, constructing and carrying real property during the construction period is not deductible as an expense but must be capitalized).

In Banner Milling Co. v. State of New York, 240 N.Y., 533 the court, while referring to “fair value of architect’s and engineer’s fees upon the construction and equipment of said plant, insurance premiums and interest on investment during construction period, railway franchises, legal expenses, sundry items correcting errors in construction expenses incurred in operating the mill at a loss up to a time when machinery is synchronized and coordinated so as to produce a satisfactory result” stated, at page 545, that while claimant was not entitled as a matter of law to recover for those expenses they were entitled to have them considered. As the court said (P. 546):

Each case necessarily involves different facts and must be considered by itself. Only a few general rules apply on the question of valuation in condemnation proceedings, and even these may yield to exceptional circumstances.

The rule in condemnation proceedings is “just compensation.” Fair market value is only a means of getting to it. But exceptional facts require exceptional handling.

Before we leave this subject, we mention one other aspect of this problem that the courts are yet to address and that the appraisal texts have just begun to recognize. That is compensation for earned “entrepreneurial profit.” It is a subject that is inherent in the compensation to be awarded for property in the course of development. Developers build for profit. That being so, the project, when completed, should be worth more than merely the land value plus the actual costs of construction, both hard and soft costs and builder’s overhead and profit. That difference is the entrepreneurial profit. As was stated in Levin v. State of New York, 13 NY2d 87, 242 193 (1963):

— Nor would one expect the prospective purchaser to pay for the vacant land in suit an amount equal to the worth of the conjectured net rental income, deducting of course, construction and other costs necessary to complete the building — for, then, he would be paying an amount which would precluded any profit. What the purchaser would pay would undoubtedly be influenced by the extent to which the property had been exploited.

If the project had been completed it would have included within its value that entrepreneurial profit. The question then is why should not a project in the course of development, which is only partially completed, have included as part of its value more than just the land and money expended, but a proportionate part of the entrepreneurial profit that condemnation has deprived him from realizing. For the same reason, one cannot come to a land value by contemplating the value upon completion and only deduct the costs of development without deducting for “entrepreneurial profit,” (the so called “residual” approach to land value), one should not merely be limited to land value plus development costs where there is a property in the process of development without including an amount for that part of the entrepreneurial profit earned to that stage of the development.

Reprinted with permission from the March 18, 1992 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

Eminent Domain Procedure Law 701 — Continued

In August 1987, the Eminent Domain Procedure Law (EDPL), §701, was amended to provide that when an award in a condemnation proceeding was “substantially” in excess of the condemnor’s proof on the trial, the trial court, in its discretion, if required to afford a claimant “just compensation,” could award a claimant an additional allowance of his litigation expenses, including attorneys’, engineering and appraisers’ fees.

The statute had a rocky start. The first lower court decision held that the statute did not apply to then pending cases. It was, however, followed by a number of Court of Claims and other cases holding differently. (L.I. Pines Barrens Water Corp v. State of New York., 144 Misc2d 665, 669, 544 NYS2d 939 (Ct. of Claims, Silverman, J., 1989); Spear v. State of N.Y., (Ct of Claims, Claim No. 73272, Margolis, J., 1989); In re Transit Authority (Gun Hill Bus Garage), 142 Misc2d 629, 538 NYS2d 161 (Sup. Ct., Bx. Co., Shapiro J., 1989); Frisbro Enterprises Ltd. v. State of N.Y., 145 Misc2d 397, 546 NYS2d 789 (Ct of Claims, Silverman, J.); Town of Esopus v. Gordon, 143 Misc2d 193, 539 NYS2d 841 (Sup. Ct. Ulster Co., Connor, J., 1989), aff’d __ AD2d __ 557 NYS2d 732 (3d Dept., Sept. 1990.) This disparity was subsequently clarified by the Appellate Division, Second Department, which held the statute to be remedial in nature and gave retroactive effect to cases that were not finally determined as of the date of its enactment (Matter of N.Y.C. Trans. Auth. (Superior Reed & Rattan Furniture Co.), 160 AD2d 705, 553 NYS2d 785 (2d Dept., 1990); Matter of the City of New York (Long Island Sound Realty) 160 AD2d 696, 553 NYS2d 789 (2d Dept., 1990).

In Excess of Condemnor’s Proof

Over that hurdle, the courts began to address the question of at what point was the award substantially in excess of the condemnor’s proof to qualify for an additional allowance. The courts early appreciated that the drafters of the statute made an incorrect assumption that the initial offer to the condemnee mandated by EDPL would necessarily be the amount of the condemnor’s proof at the trial. The amount of that offer, when turned down, was then made as an advance payment. What soon became apparent is that, quite often, the condemnor would make an offer based on an existing appraisal that was considerably lower than the amount of its appraisal made later and subsequently submitted at the trial.

Thus we find in Frisbro, supra, that the initial offer was $19,000 but that the appraisal submitted on the trial was $30,000 with an award of $56,390. The court in granting an additional allowance made the comparison, not to the proof on the trial, but to the initial offer, citing Long Island Pine Barrens Water Corp., supra, and the lower Court decision in Done Holding Co. v. State of N.Y., (Ct. of Claims, Claim No. 68231, filed Aug. 18, 1989), aff’d. 144 AD2d 528, 565 NYS2d 178 (2d Sept. 1991). In Done, supra, the initial offer was $53,200, the State’s proof at the trial was $204,000 with an award of $344,000 and an increase by the Appellate Division to $377,000. In Long Island Pine Barrens, supra, the initial offer was $1,350 the trail appraisal was $27,000 and the award was $29,650. In both cases the comparison was to the initial offer, and an additional allowance was granted. In Karas v. State of N.Y., __ AD2d __, 565, NYS2d 185 (2d Dept., 1991) the court did not even mention the amount of the trial appraisal but just compared the award of $257,000 directly to the pre-litigation offer of $182,500. At this point, it is a given that the award will be compared to the initial offer that brought the claimant into court.

The reasoning for this approach was made quite clear in the decision of Judge Silverman in Long Island Pine Barrens, supra, where the court stated that “clearly the intent of the statute was to correct inequities relative to the initial offer.” The court made specific reference for this statement not only to the bill jacket, but to the Report of the Law Revision Commission (McKinney’s Session Laws — 7/87 No. 4, Page A-455), which drafted the original bill. As the court stated: “The purpose of the amendment would be defeated were we to use amounts for comparison which were not available until after the condemnee has retained an attorney and an expert and filed his own appraisal. We must base our determination on the amount that was offered at a time when the litigation expenses could be saved.” The reasoning and approach was adopted by the Appellate Division.

Of course, all of this is based on another assumption, that the policy of EDPL is being followed by the condemnor and that an initial offer is made that a condemnee could accept in order to spare himself the expense of litigation. But what happens when no such offer is made? We have a recent decision just on that point where the court stated: “Here the condemnor failed to make any initial offer to the claimant. In comparing the initial offer of $0.00 to the final award of $252,000, there is no question that the statutory requisite has been satisfied (Cf. Done Holding Co. v State of N.Y. , supra; Karas v. State of N.Y., supra; Long Island Pine Barrens Water Corp. v. State of N.Y. 144 Misc2d 665).”

Parenthetically, the court notes that the same result would be reached even if the court were to consider the condemnor’s $81,500 advance payment as the “Condemnor’s proof.” (Matter of City of NY (Alley Pond Park Addition (Second Taking), Index No. 9879/81 Sup. Ct. Queens Co., Kassoff, J. decision dated Feb. 25, 1991). Earlier in his decision the court had noted that while title vested in the condemnor on Aug. 5, 1981, it was not until June 2, 1982, that claimant was notified that an advance payment would be made, after he had retained counsel and hired an appraiser. This decision appears to be a logical extension of the earlier cases. Condemnors, however, in response to this decision are arguing that if no pre-vesting offer was made and an advance payment is made, say a year later, the offer should not be treated as “0” but rather as the later advance payment — that the same result would have been reached if the comparison had only been made to the advance payment.

Reasonable Reimbursement

The last question answered in the cases concerns what the courts have found as reasonable amounts for reimbursement. Here we find some common elements and some points of difference. First, the courts have been almost unanimous in finding, as did the court in Alley Pond Park, “With respect to the contingent fee agreement, the Court notes that such an agreement is an accepted practice in the field . . . .” This appears to be generally accepted and except for one very early upstate case none of the courts are looking at time sheets. In Lee-Hi Fuel Corp. v. State of NY; (Ct of Claims, Claim No. 69267, Orlando, J., decision filed Aug. 13, 1990) the court approved a fee of one-third more than the initial offer/advance payment as reasonable. In Long Island Pine Barrens, supra, the court there also approved one-third more than the initial offer as a “reasonable contingent fee agreement.” In Pomerantz and Bedrick v. State of NY (Ct. of Claims Nos. 69712, 69713, decision filed Nov. 9, 1989, Blinder, J.) the court found reasonable a fee of 40 percent in excess of the State’s offer. Also approved have been fees at 6 percent of the total recovery as to real estate and as similar fee structures based on total awards depending on the type and size of the case. Fixture cases would no doubt command higher percentages. The fact of the matter is that in this age of consumerism, of lawyer solicitation and advertising, the problem of unreasonable fees is not that they are too high, but that they are not compensatory.

Reluctance to Award

However, a few courts have also expressed a reluctance to award the full amount requested, not only for experts’ fees but, in some cases, attorneys’ fees where the fees and expenses were tied to unsuccessful attempts to recover items of damage that were disallowed or for unsuccessful appeals (See Frisbro Enterprises Ltd., supra, Matter of City of NY (Douglaston Little Neck Branch Library) (Sup. Ct. Qns. Co., Kassoff, March 7, 1991); Matter of NY City Transit Authority/Gun Hill Bus Depot) (Bronx Co. Index No. 1236/83, March 15, 1991, Shapiro, J.). Some of the decisions seem to be more in the spirit of a punishment for making such a claim than an attempt to reimburse claimants for expenses to restore them to the just compensation awarded by the court that is the clear intent of the statute. The attorneys’ fees in such cases were contingent on success (such fees are almost universally contingent). Since they were not successful in those claims, no part of the fee sought to be reimbursed was for the work involved in the unsuccessful effort. To refuse to reimburse the claimant for the fee paid for the successful part of his claim does not follow the reasons for enactment of the statute as enunciated by the Law Revision Commission.

The reason for the statute is that a condemnee cannot be made whole when the award he receives is just compensation if he must deduct from that just compensation the expenses of litigation. By definition he must receive less than just compensation. The statute solely related to that and, as long as the award was substantially in excess of the initial offer that brought him into court, this enactment has nothing to do with what and how much he thereafter claimed. If the expenses he seeks reimbursement for have a logical connection to the recovery, then we fail to perceive what purpose is served, in line with the statutory intent, in providing for a punishment in making a claim exorbitant or not. This statue was not intended as a punishment for condemnors, nor should it be reversed to be a punishment for condemnees. Its purpose is to make a condemnee whole, nor more, no less.

Reprinted with permission from the May 15, 1991 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.