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Upon Abandonment, Condemnor Must Pay Legal Fees and Expenses

N.J.S.A. 20:3-26(b), part of the Eminent Domain Act of 1971, provides:

If the court renders final judgment that the condemnor cannot acquire the real property by condemnation or, if the condemnation action is abandoned by the condemnor, then the court shall award the owner of any right, or title to, or interest in such real property, such sum as will reimbursed such owner for his reasonable costs, disbursements and expenses actually incurred, including reasonable attorney, appraisal and engineering fees.

  
Despite the clear language in the statute, a case decided in 1999 found an exception to the general rule of reimbursement of legal fees upon abandonment.  In Essex County v. RAR Development, 323 N.J.Super. 505 (Law Div. 1999), the trial court denied a request for allowance of legal fees and expenses in a case where the County filed a condemnation complaint, but abandoned the lawsuit before the commissioners held their hearing.  The Essex County court relied upon a case from 1941 which held that a property owner’s right to receive attorneys was “conditioned” upon the public entity abandoning the condemnation action within 20 days after the filing of the commissioners’ report or jury’s verdict.  Since the case in question did not reach the commissioners’ hearing stage, the court would not allow the property owner to be reimbursed for legal fees and expenses. 

  
On December 24, 2007, the Appellate Division of the Superior Court of New Jersey decided a case which rejected the Essex County decision.  West Orange Township v. 769 Associates, LLC, ___ N.J.Super. ___, 2007 WL 4472101 (N.J.Super.A.D. 2007).   In 769 Associates, the Appellate Division found that the entitlement to reimbursement of legal fees and expenses is triggered upon the filing of the condemnation action.  Once the complaint is filed, any abandoned entitls the property owner to reimbursement of legal fees and expenses.  In rejecting the Essex County decision, the Appellate Division found that the trial court in Essex County erred when it relied upon a decision interpreting a statute which had been repealed.  The Appellate Division continued by declaring:

Here, by contrast, there is simply not textual support in N.J.S.A. 20:3-26(b) for such a limitation. Under our current law, the only condition that must be satisfied to trigger the right of reimbursement is the abandonment of a condemnation action by the public entity.  The point in time in which this occurs is not a relevant consideration in determining whether reimbursement is warranted.

The Appellate Division also held that legal fees and expenses incurred prior to the filing of the complaint (ie. pre-litigation negotiations) cannot be recovered by the property owner.
   

769 Associates is an important case for two reasons.  First, is it seems to over-rule Essex County, although there is an argument that Appellate Division’s discussion of the Essex County case is dicta and not binding on lower courts.  Second, as set forth in the blog posting discussing the Township of Pemberton v. Berardi decision, a township can file a condemnation action and wait for more than nine months before filing the declaration of taking and committing to taking the property.  This strategy, known as the “free look” process, can cost a property owner a substantial amount of money defending an action that may ultimately be abandoned.  The 769 Associates makes it clear that the case is not totally free and, once abandoned, the property is entitled to recover reasonable attorneys fees and expenses.

Full post as published by New Jersey Law Blog on January 14, 2008 (boomark / email).