Goldstein Rikon Rikon & Levi, P.C.

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Payment for Abandonment

Anyone familiar with condemnation proceedings is familiar with EDPL §701 which provides for additional allowances. Not many are familiar with §702 with the innocuous title of “Incidental Expenses.” Run Shepards and you find a total of four cases, one dealing with §702(A)(1) providing for reimbursement of “recoding fees, transfer taxes and other similar expenses,” one dealing with §702(c), which provides for reimbursement of expenses incurred in successfully prosecuting a claim for a “de facto” or “inverse” condemnation and the third merely noting the section. Not reported are any decisions dealing with or interpreting §702(B), except one. Yet, this section of the law, as far as condemnors are concerned, is a time bomb waiting to go off.

It states in §401: (A) “The condemnor may commence proceedings under this article to acquire the property necessary for the proposed public project up to three years after conclusion of the later of (1) publication of its determination and findings pursuant to section two hundred four, or (2) the date of the order or completion of the procedure that constitutes the basis of exemption under section two hundred six, or (3) entry of the final order or judgment on judicial review thereof.” (B) “If the condemnor has not commenced the proceedings under this article to acquire the property prior to the expiration of such three year period the project shall be deemed abandoned and thereafter, before commencing proceedings under this article the condemnor must again comply with the provisions of article two; . . .”

It states in §701: (B) “In the event the procedure to acquire such property is abandoned by the condemnor, or a court of competent jurisdiction determines that the condemnor was not legally authorized to acquire the property, or a portion of such property, the condemnor shall be obligated to reimburse the condemnee, an amount, separately computed and stated for actual and necessary cost, disbursements and expenses, including reasonable attorney, appraisal and engineering fees, and other damages incurred by such condemnee because of the acquisition procedure.”

History of Condemnation

A little background to the subject is in order. Under the Condemnation Law of the State of New York, since repealed and replaced by EDPL, when the right of eminent domain was exercised, title did not pass to the condemnor until the final judgment was paid. Condemnation proceedings were instituted, a trial to fix value held, decision rendered and even appeal heard and decided without there being a vesting of title. However, under the Condemnation Law, an application could be made to the court to abandon the proceeding prior to the vesting of title.

Even under the City of New York’s Administrative Code it was possible for the Board of Estimate, in adopting a resolution providing for the institution of condemnation proceedings, to provide for the vesting of title at the time of the entry of the final decree fixing the amount of the award. Under such procedure, a proceeding could be abandoned prior to the vesting of title. Various statutes, including Condemnation Law §18, provided that in the event of an abandonment of the proceeding, the owners were entitled to be reimbursed for expenses they incurred in the aborted condemnation proceedings. There was no provision to pay the condemnee for any other damages it may have suffered by reason of the proceeding.

EDPL set up an entirely new procedure in approving projects and added the right of the condemnee to be paid damages, in addition to legal and appraisal expenses in the event of the abandonment of a proceeding. Under EDPL, no longer can there be a trial fixing just compensation prior to the vesting of title. Instead there is a public hearing process followed by “Determinations and Finding” justifying the exercise of the condemnation power. Proceedings begin with petition asking for the vesting of title or, in the case of an appropriation, the filing of the vesting map.

Damages to Condemnee

Because of the damages visited on property owners by the long delay between the announcement of a project and its approval, followed by a taking, EDPL put a limit on how long it would take between approving condemnation and its actual institution by the vesting of title. Under the common law, damages visited on the property because of the delay in the planning process were damnum absque injuria (City of Buffalo v. J.W. Clement Co., NYS2d 345 (1971)). The Eminent Domain Commission, in drafting EDPL for the legislature, set in the new statute an attempt to limit the damage that could be done without limiting the public discussion stage leading to approval of the project. It also provided that if condemnation proceedings are approved, being no longer just in the discussion stage, and if the project takes more than three years to institute, thus being abandoned, the condemnee could be paid the damages he could not get under the common law.

The statute now provides that once a project has gone through those discussions and procedures and “Determinations and Findings” have been made by the appropriate body authorizing the institution of a condemnation proceeding, that the approved proceeding could not hang over the property indefinitely. EDPL §401 provides that once the determinations and findings have been published, the proceeding to condemn or appropriate the property must have commenced within three years or the “project shall be deemed abandoned.” In the event the project is being taken in segments, instead of all at once, the first segment must have been taken within three years, but the balance may be taken within ten years or the project is deemed abandoned. There are certain exceptions not germaine to this discussion.

Some of these provisions have been interpreted by the courts. In Binghamton Urban Renewal Agency v. Manculich, 503 NYS2d 548 (1986), the court denied the right to condemn when proceedings were not instituted within three years of the approval of the project, under exempt substitute procedures for approval in place of EDPL, even though there were, in the interim, three different amendments to the project plan approved by the governing body and a substantial number of properties being purchased in lieu of condemnation in the interim. Since the formal public hearing process had not been followed in approving the amendments, the court ruled the proceedings were deemed abandoned since no condemnation proceeding had been instituted within three years of the original project approval. The court noted that EDPL §401 provides that, once the determinations and findings have been published, the proceedings to condemn or appropriate the property must have commenced within three years or the “project shall be deemed abandoned.” The court noted that the agency was not foreclosed from acquiring the property, but to do so, it had to hold all the hearings and make all the findings required for any new project, the prior project having, in effect, been abandoned.

It is interesting to note the use of two different terms in the statute — “procedure” and “proceedings.” “Procedure refers to the steps taken to approve the taking of the property and “proceedings” refers to the actual condemnation or appropriation itself. In EDPL §702(B), it is the abandonment of the “procedure” which gives rise to the right to reimbursement for fees and damages and it is the three years to commence “proceedings”, after which there is deemed an abandonment.

Recently, an action was brought for both reimbursement and damages pursuant to EDPL §702(B) in Buffalo Airport Center Associates v. Niagara Frontier Transportation Authority (Eric County Supreme Court, Index No. 1995-1706). The basis of the action was an abandonment of the project by reason of the failure to commence proceedings within three years after publication of the determination and findings. Allegations were made in the complaint of very extensive damages caused by wholesale abandonment of the 2,500,000 square foot industrial/warehouse building by the tenants after approval of the project, to the point where the building is now a vacant shell. Partial summary judgment was granted on the issue of liability, despite a number of defenses, including one that there was no actual intent to abandon the project and that at an unspecified time in the future it would go forward. The decision was unanimously affirmed by the Appellate Division, Fourth Department, based on the decision below in 649 NYS2d 858 (1996). Since we have been counsel to plaintiff’s attorneys in this case, we will not comment further except to note that the trial on the issue of damages has not yet been head and, of course, the issue of liability along with other issues is still subject to a possible review in the Court of Appeals when the damage phase has been finished.

Interestingly, no one has sought to challenge UDC on its 42nd Street project on similar grounds. In 1984, the findings and determinations for that project were published and thereafter reviewed on appeal. Later, it was determined to take it in sections. The first of the takings took place in April 1990, the application to condemn being made just within the three-year deadline more than six months previous. Now, more than 10 years later, there is a section of the project, as originally contemplated, that still has not bee taken. Isn’t there something wrong about keeping a threat of condemnation over property for 13 years, with no end in sight?

Reprinted with permission from the August 27, 1997 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.