Posted by: Patricia Salkin | November 15, 2017

NY Appellate Court Reduces Takings Award on Appeal

Claimant, Baycrest Manor, Inc., owned two contiguous unimproved lots, totaling more than 7,000 square feet, near the east shore of Staten Island. The claimant acquired title in the early 1970s and, the majority of the property was subsequently designated as wetlands. In 2006, the City acquired the property from the claimant as part of a multi-phase project to manage stormwater along the New Creek Bluebelt. The claimant then commenced this proceeding seeking compensation for the taking. Following the nonjury trial, the court awarded the claimant the principal sum of $382,190.25, plus interest, as just compensation for the taking.

On appeal, the City argued that the claimant should not have been awarded any increment above the $57,000 market value of the property as restricted by wetlands regulations, since no knowledgeable buyer would be willing to purchase the subject property at a price above its regulated value in the hope of successfully challenging the wetlands regulations as a taking. The City also argued that wetlands regulations were background principles of State law that inhere in the title of a post-enactment purchaser. The court rejected this contention, finding that a subsequent buyer of the property would not be precluded from bringing a successful regulatory takings claim. Therefore, the court declined to follow the City’s argument that no knowledgeable buyer would be willing to pay a premium for the probability of a successful judicial determination. Accordingly, the court held that the reasonable probability incremental increase rule still could be applied in valuing regulated wetlands properties taken in condemnation.

The City next argued that the Supreme Court erred in its determination that the claimant established that there was a reasonable probability that the imposition of the wetlands regulations on the property would be found to constitute a regulatory taking. However, based on the City’s valuations, the wetlands regulations reduced the value of the property by 88%. This diminution in value, together with the effective prohibition on development of any part of the property effectuated by the wetlands regulations, established that there was a reasonable probability that the imposition of the wetlands regulations on the property would be found to constitute a regulatory taking.

Finally, the City contended the Supreme Court should not have applied the increment proposed by the claimant’s appraiser, Lally. The record indicated that Lally chose an increment based only on instructions from the claimant’s attorneys and on a prior case. The court found that the Supreme Court should have alternatively applied the increment formula proposed by the City’s appraiser, Sterling, since his proposed increment was based on market data. Accordingly, the court held that the claimant should have been awarded the principal sum of $156,987.84.

Matter of New Creek Bluebelt, Phase 3, 2017 WL 5473963 (NYAD 2 Dept. 11/15/2017)


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