Yesterday, the Superior Court of New Jersey, Appellate Division, handed down a decision that should provide some solace to property owners of condemned property who often find themselves in the position of paying for remediation of a property which they no longer own and for which they’ve never received payment.

Under New Jersey eminent domain law, when a contaminated property is condemned, the property is valued as if remediated and the funds are then placed in escrow to be used for the remediation; only if any funds remain after the remediation is completed is the owner able to collect the balance as its compensation for the taking. Ostensibly, this rule was implemented to protect landowners from the double loss of having their properties valued “as is” but still having responsibility for remediation as a prior owner. However, often the result is that the landowner becomes responsible to pay for remediation that, in the absence of the condemnation action, might not have otherwise been conducted. It goes without saying, then, that the need for, as well as the nature and scope of remediation, looms large in many New Jersey condemnation actions.

In Borough of Paulsboro v. Essex Chemical Corp., No. A-5248-10T4 (NJ App. July 16, 2012), Paulsboro condemned certain land that contained a landfill that had been closed with the approval of the NJDEP, leaving a significant mound. Paulsboro, however, wanted the landfill to be completely removed and the ground leveled, remediation that would cost an estimated $60 million. Paulsboro sought to preclude Essex from withdrawing monies from the escrow account set up for the condemnation on the basis that those amounts were needed for the intended remediation. The Appellate Division determined that Essex was entitled to the money because the property had been valued as it existed – that is, with the closed landfill on it and, more importantly, because Essex “was not subject to any additional liability for remediation” because Paulsboro’s desire to have the mound leveled was just that, a desire, and not required under any environmental statute.

While the facts of this case may be somewhat unique, the clarification of New Jersey law on the valuation and remediation aspects of eminent domain should have greater application, providing some clarity as to the nature of the remediation for which a condemnee may be responsible, particularly where a remediation has been completed on the property in question with DEP approval.

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