In an unanimous decision, the New Jersey Supreme Court has sided with the Borough of Harvey Cedars in its case against ocean-front property homeowners Harvey and Phyllis Karan.
The decision will likely decrease the amount of compensation awarded to homeowners for use of their land for beach replenishment projects in the future, to the relief of shore municipalities considering the use of eminent domain against homeowners who are reluctant to allow dune construction on their property. If the court had sided with the Karans, many proponents of dune construction worried that projects would become prohibitively expensive.
At the center of the case was whether the protection offered by a 22-foot dune, built by the Army Corps of Engineers along much of Long Beach Island, should be taken into consideration when determining the amount of compensation paid to the Karans for the use of their land. The dune occupies approximately a third of their property and blocks some of their views of the water.
The court held that the protective value of the dune should be considered.
“Because the Borough was prohibited from presenting evidence of such benefits, and the trial court erroneously charged the jury as to the calculation method for just compensation, a new trial is required,” wrote Justice Barry Albin.
Initially, Harvey Cedars offered the Karans $300 to sign an easement allowing for the use of their land. The couple countered that they deserved $500,000, for the lost use of the land and decreases in property value that resulted from lost water views. A jury eventually awarded them $375,000, a decision that the borough appealed because the jury was not permitted to consider the protective value of the dune.
In oral arguments in front of the state’s Supreme Court in May, both sides agreed the dune offered the Karan’s protection from Superstorm Sandy and other storms. But they differed on whether that benefit was greater than or equal to the protection the dune offered the rest of the borough and island.
“[The protection] differs in kind and degree from other property owners in the borough, on Long Beach Island, and throughout the state,” said Lawrence H. Shapiro, lead counsel for the Borough of Harvey Cedars.
Therefore, it should be considered in compensation calculations, he said.
The Karans' attorney didn't see it that way. “It’s clear that… the intent and purpose of the dune was not simply that the ocean-front property owners would receive some storm damage reduction benefits, but that the entire town, indeed the entire Long Beach Island which was covered under the project would receive the storm damage reduction benefits,” said Peter H. Wegener, who represented the Karans.
Since everyone in the area derives the benefits the same from the dunes, it should not be taken into consideration in compensation calculations, according to Wegener.
But the court disagreed.
It held that benefits “that increase the property’s value at the time of the taking should be considered in determining just compensation regardless of whether those benefits are enjoyed to a lesser or greater degree by others in the community.”
The case has been closely watched among local municipalities and homeowners alike after Superstorm Sandy added fresh urgency to dune construction projects along the shore.
Toms River Mayor Tom Kelaher said the decision would be "very helpful" in resolving conflicts around dune construction. The town has approximately 70 percent of the required easements from property owners on the barrier island.
"We have some places were we would be ready to do condemnation on some areas because we’re very anxious to get the dunes finished,” said Mayor Kelaher. “The reason we held up on that is because of the manner in which the Harvey Cedars case turned out, where for one piece of property the jury awarded $375,000. We could not afford to even run that risk with the properties we have along the ocean-front on the barrier island.”
Kelaher said pending a closer inspection of the ruling and a town council meeting, he would now be ready to proceed use eminent domain to secure the use of land for dune construction.
Long Beach Township Mayor Joe Mancini was similarly relieved.
"The property owners who have been holding out because they thought it was the new lottery now realize that it’s not," he said. "So I think the responsible person will now sign their easements and get them in."
Of the 480 ocean-front homes in the township, 52 easements remain unsigned.
For those homeowners who still don't want to sign an easement, "we’ll be going through the eminent domain process, but there won’t be these huge awards, if any award exists period," Mancini said.
"It certainly lessens compensation because the issue of damages is pretty much wiped out as a result of the court allowing the municipality to argue outsetting benefits," agreed William Ward, the managing partner of Carlin & Ward who represents three ocean-front property owners in neighboring Long Beach Township.
However, Ward believes condemnation would still be a favorable outcome for homeowners because they would likely still receive some compensation, as well as more information about the dunes and the terms of the arrangement.
Moreover, Ward worries that the decision, which he called "a big shift in the law" will have wide-ranging implications.
If a jury decides the homeowners' positive benefits from a construction project outweigh its negative costs, would the property owner owe the municipality money? That issue wasn't addressed by the court, according to Ward.
Additionally, Ward says the decision will apply to projects outside beach replenishment. If the state wanted to take pieces of private property for highway construction, Ward worries they can now argue that the highway will broadly benefit the property owner and therefore they would be entitled to lesser compensation.
EDITOR'S NOTE: The original amount offered to homeowners was misstated due to an editing error.