Partial Taking in the Dunes of New Jersey: The Harvey Cedars Case
This past July, the New Jersey Supreme Court handed down Borough of Harvey Cedars v. Karan, 70 A.3d 524 (2013). In one sense this is a technical case about the rules of just compensation for a partial taking. The New Jersey Supreme Court clarified the distinction between “special benefits,” which can be offset against the compensation owed for a partial taking, and “general benefits,” which cannot. Where a dune restoration project would provide protection to a home in immediate proximity to the shore, if the value of that protection can be determined, it should be deducted from the compensation owed, even though the dune provides flood protection of the same kind—but in significantly less degree–to rows of houses further back from the ocean. The New Jersey Supreme Court determined that an evidentiary ruling excluding evidence of the benefit was erroneous as a matter of law, and remanded for a new trial. All five Justices participating in the opinion agreed.
The case is of more general interest because the public project involved concerned construction of a dune barrier on private property along New Jersey’s barrier islands. It’s a disaster law and climate change case. Dune projects have been underway here for some time–this one began in 2008–with the United States Corps of Engineers doing the heavy lifting, state and municipalities cooperating and chipping in a smallish part of the cost. All of Long Beach Island is part of a big old beach and dune project. And dune projects have gained special salience after Superstorm Sandy.
In the Borough of Harvey Cedars, on Long Beach Island, dune construction required the cooperation of all 82 beachfront property owners. Sixteen of them declined, forcing the municipality to begin condemnation proceedings for a strip of each recalcitrant property owner’s land. In this particular case, the Karans refuse to grant a dune easement over about a quarter of their property; the easement included a dune 22 feet high, replacing one 16 feet high. A right of public access came along with the new dune as well. So the Karans wound up with a view of other folks’ beach recreation activities on the higher dune, not the water view they had previously enjoyed. Evidence supporting the argument that the Karans’ $1.9 million home would benefit from the flood protection afforded by the dune to the tune of several hundred thousand dollars was excluded from a jury by the trial court, on the theory that the entire community also benefitted, and that therefore the flood protection was a “general benefit” which could not legally be offset against the compensation owed the Karans. The Karan’s expert had testified that they should receive $500,000 from Harvey Cedars. The Harvey Cedars expert (from the Corps of Engineers) testified that the proper amount of compensation was $300. But he couldn’t point to evidence of benefit from flood protection because it had been excluded. The jury returned a compensation award of $375,000, principally for loss of view. You can do the math and see what this does to the possibility of any dune project. Holdouts galore. No project.
There are interesting general reflections to be made on the Harvey Cedars case in terms of how we should treat private property that provides environmental services to neighbors. Why should a beachfront owner be able to deny a preexisting natural service provided by her/his land to neighbors? Why isn’t this like, for example, lateral support? And then there’s the minority rule about dangerous conditions on land that occur naturally. In California, the property owner has a duty of reasonable care to address naturally-arising risks. The duty stems from ownership alone. Sprecher v. Adamson Cos., 636 P.2d 1121 (Cal. 1981). That case involved an uphill property sliding towards the downhill neighbor. Perhaps not that different from a dune eroding and needing to be maintained or replaced.
Another question – why should a view be protected, whenever its value shows up as part of fair market value? Surely there’s no absolute right of a property owner to freeze views in all circumstances to protect property value. There’s probably a difference between an attempt to prevent activity by others that affects a little piece of a view, and having bought a parcel of property expressly because of the view, and then trying to stop an activity part of which is right up next to the property and blocks the whole view. But it’s worth thinking about. We are facing another controversy here in New Jersey over the proposed construction of an office tower that would mar the view of the Palisades. The developer obtained a variance from previous height restrictions that kept buildings below the edge of this beautiful cliff formation, hence invisible to those not down at the base of the cliff. There’s a call for a multijurisdictional zoning district like our Pinelands, Highlands, and Meadowlands districts. In some settings, at least, a view is a common resource and it requires collective regulation, not management based on absolute private rights.
And then there’s the role of risk perception in Harvey Cedars. The property owner, Mr. Karan, testified that he had owned the property since 1973, and without the dunes. He had never once seen water on the property. (Lucky him – Harvey Cedars experienced massive destruction from a storm and flood in 1962, prompting the adoption of revised building codes; according to some residents this disaster was the beginning of the movement for national flood insurance, though Hurricane Betsy in 1965 is usually viewed as the immediate motivation for the 1968 NFIP.) At the oral argument before the state supreme court, the Karans’ attorney protested that if the case were remanded he would get a post-Sandy jury, which wouldn’t be fair. One Justice slyly observed, “Well, Mr. Wegener, at this point in time they are all post-Sandy juries.”
Rather than go back to trial, a few weeks ago the Karans settled, for $1. The ostensible reason was that they were tired of litigation. But they would have faced a jury assessing just compensation on the basis of evidence that the dune protected their expensive house from flood to a very significant extent, more or less wiping out any compensation due to the diminution in the view and the physical invasion. Moreover, it would be a post-Sandy jury.
Meanwhile, Governor Christie has gotten into the act. Up and down the Jersey Shore, there are about 1000 holdouts in the overall project to restore beaches and rebuild dunes. Christie has issued an executive order taking over the eminent domain process for dune easements from the shore municipalities. The just compensation awards are now to be funded from post-Sandy recovery funds. At the reduced compensation levels established by the Harvey Cedars court’s clarification of how compensation for partial takings works, it’s probably affordable.