WILL THE NJ RULE AFFECT EMINENT DOMAINNATIONALLY?

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Jim Ettelson is a partner in the corporate andreal estate practice of Thorp, Reed & Armstrong. He is based inPhiladelphia.

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The bulk (57%) of respondents to last week's Feedback Polldon't like the scent in the wind since New Jersey's recent rulinglimiting eminent domain. As Eric Peterson reported,the Court drew the line at takings because a parcel was"underutilized." While the majority is convinced that, as thequestion was posed, the industry will pay in the long run, 43%believe it's an isolated incident. Commentator Ettelson doesn't buyinto that theory. He says there's going to be dialog on a nationalbasis--and the ruling could help both sides of the issue. Here'swhy:

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"I don't know what impact the ruling will have nationally, butit's another piece of the discussion that will go on--on both sidesof the issue.

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"Blight is like obscenity. No one's really sure what it is butthey know it when they see it. And everyone has a different view ofit. So nobody has fully rejected the blight argument yet. We knowit's obvious that a local municipality or government cannot takeproperty just because they want to turn it over to a private entityto develop it. There are a number of things that have to happen anddifferent states treat it different.

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"In terms of affect, what happened in New Jersey might inspireothers who are opponents to say, 'If they could do it, we canchallenge it on the same basis.' And it might inspire people on theother side to say, 'Let's avoid what happened in Jersey and let'snot use these nebulous terms.'

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"Politically, some strange bedfellows have been created sinceKelo, with both sides of the aisle coming together in their mutualopposition to it, which transcended their mutual opposition to eachother. But they came together for different reasons, and everyonewas seeing what they wanted to see in it. The question is what dothe cities really see in it and what are the areas that truly needrevitalization. What are they going to do? This most recent wrinkleto me is just another way of saying we're still trying to figureout how to define blight. In New Jersey, the court made a point ofsaying you can't take property just because it's not fullyproductive. That you need to make sure it negatively affectssurrounding property.

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"This becomes a major problem for legislatures because frankly,we have all of this public tax money. If we stop such projects alltogether how do we benefit these cities with all this money we justtook out of people's pockets? Right now, maybe it's OK to put theseprojects on hold, but after a while, if deterioration continues, ifrevitalization slows down or a port doesn't get developed or aninner city doesn't get improved, people will start to ask what weneed [these legislators] for.

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"If you look at the New Jersey decision from 50,000 sf, you'dsee a port area being developed; you'd see one thing. Down on theground, you'd see a piece of property--the last piece in thisassemblage--and if the only reason you needed that piece was foraccess, it would look like an overtaking. It could be said that,had they done it differently and they referred to it as somethingmore definitive than not fully productive, or had they emphasizedthe importance of the access an reduced their taking to whateverthe necessary access was, the issue would never have come up.

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"The real question here is if there is public process and ifpeople have the right to object in a legislative process and canyou somehow definitively clarify, at least in your ownmunicipality, what it is that people can expect from this statute.If you can't, we're talking about fodder for newspapers foryears."

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John Salustri

John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of GlobeSt.com, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.