New Jersey Supreme Court Decides 62-64 Main Street, L.L.C. v. City of Hackensack, Clarifies Definition of “Blight” in Context of Redevelopment

On March 23, 2015, in 62-64 Main Street, L.L.C. v. City of Hackensack, the New Jersey Supreme Court determined that property does not need to have a negative effect on surrounding properties in order to be deemed “blighted.” Prior to the Court’s decision in this case, it was unclear whether a negative effect on surrounding properties was a prerequisite to a finding of blight, or simply one way to establish it. Because the New Jersey constitution allows municipalities to exercise their powers of eminent domain to redevelop blighted property, the Court’s decision could encourage more municipalities to move forward with the condemnation of property for private redevelopment.

In 62-64 Main Street, plaintiffs owned five lots in the City of Hackensack consisting of two dilapidated buildings and several poorly maintained parking lots. In accordance with New Jersey’s Local Redevelopment and Housing Law (LRHL), the City designated a two-block area that included plaintiffs’ property as “in need of redevelopment.” In doing so, the City made findings of fact that the lots met the statutory definition of blight, but did not specifically find a negative effect on surrounding properties.

Plaintiffs challenged the City’s determination, arguing that Gallenthin Realty Development, Inc. v. Borough of Paulsboro, a 2007 Supreme Court decision, established a constitutional prerequisite to any blight determination, namely that the subject property must have a negative effect on surrounding properties. The trial court disagreed, holding that substantial evidence supported the City’s findings of blight. The Appellate Division reversed, finding Gallenthin did indeed establish a heightened constitutional standard requiring such a finding under all subsections of the LRHL, thus precluding compelled condemnation and redevelopment without a negative effect on neighboring properties.

In a 3-2 decision, the Supreme Court reversed the Appellate Division, holding that property does not necessarily need to have a negative effect on surrounding properties in order to be deemed blighted. Thus, a municipality need not find the negative effect criterion exists in order to declare an area blighted and in need of redevelopment when proceeding under subsections (a), (b) and (d) of section 5 of the LRHL. Writing for the majority, Justice Albin found that Gallenthin did not create a new overarching constitutional standard, but was instead limited to correcting the constitutional infirmity previously contained in subsection 5(e) of the LRHL, which was subsequently revised by a recent statutory amendment. Justice Albin noted that the Blighted Areas Clause of the New Jersey Constitution (Article VIII, Section III, Paragraph 1) was enacted primarily to ensure that certain redevelopment laws would not be held unconstitutional, and that the definitions of blight in those laws were nearly identical to the current definition of “in need of redevelopment” contained in section 5 of the LRHL. Ultimately, Justice Albin opined that the Court “would not have concentrated . . .on a single defective timber [in Gallenthin] – if the whole statutory scheme was rotten.”

Writing in dissent, Chief Justice Rabner argued vigorously that prior to any blight designation, the New Jersey constitution requires substantiated proof of the existence of deterioration or stagnation and a negative effect on surrounding properties. The majority disagreed, finding that the dissent’s interpretation of Gallenthin would have “dire implications and perhaps lead to a state of chaos for ongoing redevelopment projects.”

Perhaps in part to placate the concerns of the dissent, a portion of Justice Albin’s opinion focused on the importance of providing specific facts to support each of the criteria being relied on to designate property as blighted and in need of redevelopment. Therefore, while arguably 62-64 Main Street provides a clearer avenue for municipalities seeking to condemn property for private redevelopment, the case should not be considered as a retreat from the policy embodied in Gallenthin, and it would be prudent for municipalities to carefully establish specific facts that satisfy at least one, and optimally all, of the criteria set forth in section 5 of the LRHL when designating property for redevelopment.