Appraising Contaminated Properties
After The Suydam Decision

In December 2002, the New Jersey Appellate Division in Housing Authority of the City of New Brunswick v. Suydam Investors, L.L.C. overturned the approach long followed by appraisers when valuing contaminated land to be acquired by government for public purposes. Instead of valuing contaminated property as uncontaminated, the government can now value it as contaminated. This will have a profound impact on Redvelopment Projects, Infrastructure improvements (Water, Sewers, Roads), etc.

This impact is not yet fully understood, but is something we at Maraziti, Falcon & Healey have been discussing and considering. For example:

• How Will Appraisers Integrate Clean up Costs in Appraising Value?
   
• What Different Role Will Environmental Consultants Play?
    
• How May the Timing and Cost Issues for Public Bodies Be Evaluated?

On March 20, 2003, the firm put on a seminar at the Short Hills Hilton that addressed these issues. It used to be that the government had to value contaminated property as if "clean," then bring a cleanup cost recovery action along with the condemnation action and ask the court to withhold the cleanup costs from the appraisal value. Then a court came along and said the cost recovery action could not be brought along with the condemnation action, which meant that the government had to pay inflated clean value for contaminated property only to watch as the property owner withdrew the money from court, as was his right, and left town, long before the government could file and win a subsequent cost recovery action. Now, with the Suydam decision, the government can appraise the property as "dirty" as part of the condemnation proceedings. 

Our seminar touched on how the appraisal exercise will now require considerable input from the environmental consulting community and how this will likely increase the complexity of condemnation, unless competent counsel can guide the government through the process. By the end of the seminar, it became clear that this new case might simply spur all sides to negotiate more reasonably at the front end of the condemnation process so all parties could avoid the difficulties associated with litigating these new complexities. One suggestion was to have the government put its considerable powers for Brownfields redevelopment on the table in order to resolve the condemnation, cleanup and future liability issues in a way that would be satisfying to all parties. One thing was certain from the seminar, Maraziti, Falcon & Healey was crafting cutting-edge solutions to this difficult problem in full view of satisfied seminar attendees.