A583

An Act concerning diminution in the fair market value of real property due to State action pursuant to certain laws, amending and supplementing P.L.1968, c.410 (C.52:14B-1 et seq.), and supplementing Title 20 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) Sections 1 through 7 of this act shall be known, and may be cited, as the "New Jersey Property Rights Protection Act."

2. (New section) The Legislature finds and declares that:

a. The right to own real property is essential to the existence of a free and strong democratic society, and reasonable and limited regulatory controls on the development of real property are essential to ensure the protection of unwarranted and inappropriate development by one landowner that would unfairly impinge on the rights of other landowners or jeopardize the health or safety of New Jersey's citizens.

b. Actions taken by the Department of Environmental Protection, the Pinelands Commission, and other State bureaucracies to regulate the development of real property have often been excessive and unreasonable and have significantly and unfairly diminished the value of real property owned by individuals, thereby eroding substantial lifetime investments, individual freedom, and economic independence; and the Highlands Water Protection and Planning Council has been empowered to stringently regulate land use in much of the Highlands Region.

c. The United States Supreme Court and the New Jersey Supreme Court have both held that, unless the value of real property is reduced to virtually nothing by the action or actions of the State, there is no governmental obligation to compensate the property owner for that lost value.

d. The New Jersey Supreme Court has even gone so far as to hold that restricting a property owner in the pinelands area to developing his or her land at a rate of one residential unit per 40 acres does not necessarily constitute a taking and, therefore, does not require payment of any compensation to the affected property owner even though significant lifetime investments may have been virtually destroyed.

e. The costs associated with seeking compensatory relief through judicial intervention is prohibitively expensive, time-consuming, and unpredictable, given the unclear, contradictory vague rulings of the courts as to the meaning and application of the "takings" clauses of the United States Constitution and the New Jersey Constitution.

f. The open and democratic legislative process is the appropriate forum to debate and establish the level of regulation that may be forced upon property owners by the State without the State being required to pay compensation.

g. It is therefore appropriate for the State to compensate any property owner whose property is diminished in value by 20% or more as a result of an action or actions taken by the State, and to require the Attorney General to establish standards for the adoption of regulations in order to ensure that the State does not adopt regulations that constitute a regulatory taking of private property as established by the courts.

3. (New section) As used in sections 1 through 7 of this act:

"Environmental law" means R.S.12:5-1 et seq.; "The Wetlands Act of 1970," P.L.1970, c.272 (C.13:9A-1 et seq.); the "Freshwater Wetlands Protection Act," P.L.1987, c.156 (C.13:9B-1 et seq.); the "Hackensack Meadowlands Reclamation and Development Act," P.L.1968, c.404 (C.13:17-1 et seq.); the "Pinelands Protection Act," P.L.1979, c.111 (C.13:18A-1 et seq.); the "Coastal Area Facility Review Act," P.L.1973, c.185 (C.13:19-1 et seq.); the “Highlands Water Protection and Planning Act,” P.L.2004, c.120 (C.13:20-1 et seq.); and the "Flood Hazard Area Control Act," P.L.1962, c.19 (C.58:16A-50 et seq.); or any amendment or supplement to any of those laws.

"Fair market value" means the most probable price at which real property would be sold, in a competitive and open market under all conditions requisite to a fair sale, between a willing buyer and a willing seller, neither of whom is under any compulsion to buy or sell and both having reasonable knowledge of relevant facts, at the time the State action occurs.

"Property" or "real property" means privately owned land, or any right, easement, or other interest therein, and all structures located thereon.

"State action" means enactment of an environmental law, adoption of a rule or regulation pursuant to an environmental law, an administrative application or interpretation by a State agency of such a rule or regulation, or an action of a State agency to grant, deny, modify, suspend, or revoke a license, permit, certificate, approval, registration, or other form of permission required by an environmental law.

"State agency" means the Department of Environmental Protection, the Highlands Water Protection and Planning Council, the New Jersey Meadowlands Commission, or the Pinelands Commission.

"Tax lot" means a single entry on the property tax list of a municipality.

4. (New section) a. The State shall compensate the owner of real property whose use of all or any portion of that property has been limited by State action, occurring during the time of ownership, that diminishes the fair market value of the entire property by 20 percent or more. The amount of the compensation shall equal the diminution in fair market value that resulted from the State action. If the diminution in the fair market value of the property is greater than 50%, at the option of the owner the State shall purchase the entire property, or the affected portion thereof as designated by the owner, for its fair market value. For purposes of calculating the percentage diminution in fair market value pursuant to this subsection, at the option of the property owner, the property at issue may be considered as one parcel regardless of the number of contiguous tax lots comprising that parcel, or each such component tax lot may be considered to be a separate parcel from all of the other contiguous tax lots owned by that person.

b. Real property with respect to which compensation has been paid under this act shall not thereafter be used contrary to the limitation imposed by the State action, even if that action is later rescinded or otherwise vitiated. If, however, that action is later rescinded or otherwise vitiated, and the property owner refunds the amount of the compensation paid, adjusted for inflation, to the General Fund of the State of New Jersey, the property may be used contrary to the limitation imposed by the State action. An inflation adjustment required pursuant to this subsection shall be an amount equal to the percentage increase in the consumer price index for all urban consumers in the New York and Philadelphia areas as reported by the United States Department of Labor, from the date of payment of compensation by the State to the property owner to the date of payment of the refund of the amount of compensation by the property owner to the State.

c. (1) A person may apply for compensation pursuant to this act only while the person still owns the parcel of real property that was subject to the State action.

(2) An owner of real property may not apply for compensation pursuant to this act for a State action that occurred prior to ownership.

d. For the purposes of sections 1 through 7 of this act, the use of real property shall be deemed "limited" if a particular legal right to use that property no longer exists because of the State action.

5. (New section) a. An owner of real property seeking compensation under this act shall make a written request for compensation to the State agency whose action resulted in the limitation on the use of the property. If the State action for which compensation is sought is the enactment of an environmental law, the owner of the real property shall make the written request to the State agency with statutory responsibility for administering the environmental law at issue.

b. The State agency may bargain with the property owner to establish the amount of compensation. If the State agency and the owner agree to the amount of compensation, the State Treasurer shall promptly pay it to the property owner from funds from the annual appropriation to the State agency.

c. If, within 180 days after the written request is made by the property owner, the State agency and the property owner do not reach an agreement as to the right to and amount of compensation, the property owner may choose to submit two appraisals conducted by two different real estate appraisers, who are licensed by the State Real Estate Appraiser Board pursuant to P.L.1991, c.68 (C.45:14F-1 et seq.), showing the percentage and absolute diminution in fair market value of the property attributable to the State action, and the average of the two appraisals of the absolute diminution in fair market value attributable to the State action, and an amount equal to the property owner's cost in obtaining the two appraisals, shall be paid promptly by the State Treasurer to the property owner.

d. (1) Any payment made pursuant to this section to a property owner shall, notwithstanding the provisions of any other law, be made by the State Treasurer from such funds as may be made available therefor pursuant to an annual appropriation by the Legislature to the applicable State agencies.

(2) If insufficient funds exist for the payment of compensation, the head of the State agency shall enter into a memorandum of understanding with the property owner that shall provide that the State action leading to the diminution in fair market value of the real property shall not be applied, implemented, or enforced, as the case may be, with respect to that property, notwithstanding any law, rule, or regulation to the contrary.

6. (New section) Whenever a State agency takes an action pursuant to an environmental law that results in limiting the use of real property, the State agency shall give appropriate notice to the affected property owners explaining their rights under this act and the procedures for obtaining any compensation that may be due to them under this act. With respect to the proposal or adoption of any rule or regulation pursuant to an environmental law that may limit the use of real property, at a minimum such notice shall be published in the New Jersey Register at the time the rule or regulation is proposed or adopted, as the case may be. Notice shall also be included in every application form for a license, permit, certificate, approval, registration, or other form of permission required by an environmental law.

7. (New section) a. Nothing in this act shall be construed to limit any right of compensation that exists under the New Jersey Constitution, any other State law, the United States Constitution, or any federal law.

b. Payment of compensation under this act, other than when the property is purchased by the State at the option of the property owner, shall not confer any rights on the State other than the limitation on use resulting from the State action.

8. (New section) The Attorney General shall establish guidelines that shall be used by State agencies in their evaluation of rules prior to their adoption, amendment, or repeal to assess the potential of a rule to constitute a taking of real property. The guidelines shall be based upon the most current law as articulated by the United States Supreme Court and the New Jersey Supreme Court. The Attorney General shall review and, if necessary, update the guidelines on an annual basis.

As used in this section, "State agency" means each of the principal departments in the executive branch of the State government, and all boards, divisions, commissions, agencies, councils, authorities, offices, or officers with any such department authorized to grant, deny, modify, suspend, or revoke a license, permit, certificate, approval, registration, or other form of permission required by law, other than a license or certificate issued to an individual for the practice of a profession or occupation; and "taking" means the taking of real property for public use that would require compensation pursuant to the United States Constitution or the New Jersey Constitution.

9. Section 4 of P.L.1968, c.410 (C.52:14B-4) is amended to read as follows:

4. (a) Prior to the adoption, amendment, or repeal of any rule, except as may be otherwise provided, the agency shall:

(1) Give at least 30 days' notice of its intended action. The notice shall include a statement of either the terms or substance of the intended action or a description of the subjects and issues involved, and the time when, the place where, and the manner in which interested persons may present their views thereon. The notice shall be mailed to all persons who have made timely requests of the agency for advance notice of its rule-making proceedings and in addition to other public notice required by law shall be published in the New Jersey Register. Notice shall also be distributed to the news media maintaining a press office to cover the State House Complex, and made available electronically through the largest nonproprietary cooperative public computer network. Each agency shall additionally publicize the intended action and shall adopt rules to prescribe the manner in which it will do so, and inform those persons most likely to be affected by or interested in the intended action. Methods that may be employed include publication of the notice in newspapers of general circulation or in trade, industry, governmental or professional publications, distribution of press releases to the news media and posting of notices in appropriate locations. The rules shall prescribe the circumstances under which each additional method shall be employed;

(2) Prepare for public distribution at the time the notice appears in the Register a statement setting forth a summary of the proposed rule, a clear and concise explanation of the purpose and effect of the rule, the specific legal authority under which its adoption is authorized, a description of the expected socio-economic impact of the rule, a regulatory flexibility analysis, or the statement of finding that a regulatory flexibility analysis is not required, as provided in section 4 of P.L.1986, c.169 (C.52:14B-19), a jobs impact statement which shall include an assessment of the number of jobs to be generated or lost if the proposed rule takes effect, [and] an agriculture industry impact statement as provided in section 7 of P.L.1998, c.48 (C.4:1C-10.3) , and an evaluation of the rule for its potential to result in a taking of private property for public use without just compensation, based upon guidelines established therefor by the Attorney General pursuant to section 8 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(3) Afford all interested persons reasonable opportunity to submit data, views, or arguments, orally or in writing. The agency shall consider fully all written and oral submissions respecting the proposed rule. If within 30 days of the publication of the proposed rule sufficient public interest is demonstrated in an extension of the time for submissions, the agency shall provide an additional 30 day period for the receipt of submissions by interested parties. The agency shall not adopt the proposed rule until after the end of that 30 day extension.

The agency shall conduct a public hearing on the proposed rule at the request of a committee of the Legislature, or a governmental agency or subdivision, or if sufficient public interest is shown, provided such request is made to the agency within 30 days following publication of the proposed rule in the Register. The agency shall provide at least 15 days' notice of such hearing, which shall be conducted in accordance with the provisions of subsection (g) of this section.

The head of each agency shall adopt as part of its rules of practice adopted pursuant to section 3 of P.L.1968, c.410 (C.52:14B-3) definite standards of what constitutes sufficient public interest for conducting a public hearing and for granting an extension pursuant to this paragraph.

(4) Prepare for public distribution a report listing all parties offering written or oral submissions concerning the rule, summarizing the content of the submissions and providing the agency's response to the data, views and arguments contained in the submissions.

(b) A rule prescribing the organization of an agency may be adopted at any time without prior notice or hearing. Such rules shall be effective upon filing in accordance with section 5 of this act or upon any later date specified by the agency.

(c) If an agency finds that an imminent peril to the public health, safety, or welfare requires adoption of a rule upon fewer than 30 days' notice and states in writing its reasons for that finding, and the Governor concurs in writing that an imminent peril exists, it may proceed without prior notice or hearing, or upon any abbreviated notice and hearing that it finds practicable, to adopt the rule. The rule shall be effective for a period of not more than 60 days unless each house of the Legislature passes a resolution concurring in its extension for a period of not more than 60 additional days. The rule shall not be effective for more than 120 days unless repromulgated in accordance with normal rule-making procedures.

(d) No rule hereafter adopted is valid unless adopted in substantial compliance with this act. A proceeding to contest any rule on the ground of noncompliance with the procedural requirements of this act shall be commenced within one year from the effective date of the rule.

(e) An agency may file a notice of intent with respect to a proposed rule-making proceeding with the Office of Administrative Law, for publication in the New Jersey Register at any time prior to the formal notice of action required in subsection (a) of this section. The notice shall be for the purpose of eliciting the views of interested parties on an action prior to the filing of a formal rule proposal. An agency may use informal conferences and consultations as means of obtaining the viewpoints and advice of interested persons with respect to contemplated rule-making. An agency may also appoint committees of experts or interested persons or representatives of the general public to advise it with respect to any contemplated rule-making.

(f) An interested person may petition an agency to adopt a new rule, or amend or repeal any existing rule. Each agency shall prescribe by rule the form for the petition and the procedure for the submission, consideration and disposition of the petition. The petition shall state clearly and concisely:

(1) The substance or nature of the rule-making which is requested;

(2) The reasons for the request and the petitioner's interest in the request;

(3) References to the authority of the agency to take the requested action.

The petitioner may provide the text of the proposed new rule, amended rule or repealed rule.

Within 60 days following receipt of any such petition, the agency shall either; (i) deny the petition, giving a written statement of its reasons; (ii) grant the petition and initiate a rule-making proceeding within 90 days of granting the petition; or (iii) refer the matter for further deliberations which shall be concluded within 90 days of referring the matter for further deliberations. Upon conclusion of such further deliberations, the agency shall either deny the petition and provide a written statement of its reasons or grant the petition and initiate a rule-making proceeding within 90 days. Upon the receipt of the petition, the agency shall file a notice stating the name of the petitioner and the nature of the request with the Office of Administrative Law for publication in the New Jersey Register. Notice of formal agency action on such petition shall also be filed with the Office of Administrative Law for publication in the Register.

If an agency fails to act in accordance with the time frame set forth in the preceding paragraph, upon written request by the petitioner, the Director of the Office of Administrative Law shall order a public hearing on the rule-making petition and shall provide the agency with a notice of the director's intent to hold the public hearing if the agency does not. If the agency does not provide notice of a hearing within 15 days of the director's notice, the director shall schedule and provide the public with a notice of that hearing at least 15 days prior thereto. If the public hearing is held by the Office of Administrative Law, it shall be conducted by an administrative law judge, a person on assignment from another agency, a person from the Office of Administrative Law assigned pursuant to subsection o. of section 5 of P.L.1978, c.67 (C.52:14F-5), or an independent contractor assigned by the director. The petitioner and the agency shall participate in the public hearing and shall present a summary of their positions on the petition, a summary of the factual information on which their positions on the petition are based and shall respond to questions posed by any interested party. The hearing procedure shall otherwise be consistent with the requirements for the conduct of a public hearing as prescribed in subsection (g) of section 4 of P.L.1968, c.410 (C.52:14B-4), except that the person assigned to conduct the hearing shall make a report summarizing the factual record presented and the arguments for and against proceeding with a rule proposal based upon the petition. This report shall be filed with the agency and delivered or mailed to the petitioner. A copy of the report shall be filed with the Legislature along with the petition for rule-making.

(g) All public hearings shall be conducted by a hearing officer, who may be an official of the agency, a member of its staff, a person on assignment from another agency, a person from the Office of Administrative Law assigned pursuant to subsection o. of section 5 of P.L.1978, c.67 (C.52:14F-5) or an independent contractor. The hearing officer shall have the responsibility to make recommendations to the agency regarding the adoption, amendment or repeal of a rule. These recommendations shall be made public. At the beginning of each hearing, or series of hearings, the agency, if it has made a proposal, shall present a summary of the factual information on which its proposal is based, and shall respond to questions posed by any interested party. Hearings shall be conducted at such times and in locations which shall afford interested parties the opportunity to attend. A verbatim record of each hearing shall be maintained, and copies of the record shall be available to the public at no more than the actual cost, which shall be that of the agency where the petition for rule-making originated.

(cf: P.L.2001, c.5, s.2)

10. This act shall take effect immediately.

STATEMENT

This bill would require the State to compensate any property owner whose use of all or any portion of that person's property has been limited by State action, occurring during the time of ownership, that diminishes the fair market value of the entire property by 20 percent or more. The amount of the compensation would equal the diminution in fair market value that resulted from the State action. If the diminution in the fair market value of the property is greater than 50%, at the option of the owner the State would be required to purchase the entire property, or the affected portion thereof as designated by the owner, for its fair market value. For purposes of calculating the percentage diminution in fair market value pursuant to the bill, at the option of the property owner, the property at issue may be considered as one parcel regardless of the number of contiguous tax lots comprising that parcel, or each such component tax lot may be considered to be a separate parcel from all of the other contiguous tax lots owned by that person.

The bill defines "State action" to mean enactment of an environmental law, adoption of a rule or regulation pursuant to an environmental law, an administrative application or interpretation by a State agency of such a rule or regulation, or an action of a State agency to grant, deny, modify, suspend, or revoke a license, permit, certificate, approval, registration, or other form of permission required by an environmental law; "State agency" to mean the Department of Environmental Protection, the Highlands Water Protection and Planning Council, the New Jersey Meadowlands Commission, or the Pinelands Commission; and "environmental law" to mean the waterfront development law, "The Wetlands Act of 1970," the "Freshwater Wetlands Protection Act," the "Hackensack Meadowlands Reclamation and Development Act," the "Pinelands Protection Act," the "Coastal Area Facility Review Act," the “Highlands Water Protection and Planning Act,” and the "Flood Hazard Area Control Act," or any amendment or supplement to any of those laws.

Real property with respect to which compensation has been paid under the bill could not thereafter be used contrary to the limitation imposed by the State action, even if that action is later rescinded or otherwise vitiated. If, however, that action is later rescinded or otherwise vitiated, and the property owner refunds the amount of the compensation paid, adjusted for inflation, to the State, the property could be used contrary to the limitation imposed by the State action.

Under the bill, a person may apply for compensation pursuant to the bill only while the person still owns the parcel of real property that was subject to the State action. Also, an owner of real property may not apply for compensation pursuant to the bill for a State action that occurred prior to ownership.

The bill would provide that any payment made pursuant to the bill to a property owner would, notwithstanding the provisions of any other law, be made by the State Treasurer from such funds as may be made available therefor pursuant to an annual appropriation by the Legislature to the applicable State agencies. If insufficient funds exist for the payment of compensation, the head of the affected State agency would be required to enter into a memorandum of understanding with the property owner that would provide that the State action leading to the diminution in fair market value of the real property shall not be applied, implemented, or enforced, as the case may be, with respect to that property, notwithstanding any law, rule, or regulation to the contrary.

The bill also sets forth procedures for providing notice of the bill's provisions to affected property owners and procedures for applying to obtain compensation.

This bill would also require that the notice of the adoption, amendment, or repeal of any administrative rule include an evaluation of the rule's potential to constitute a taking of real property in violation of the federal and State constitutional provisions that prohibit the taking of private property for public use without just compensation. The bill would require that the Attorney General establish guidelines for the review of administrative rules that conform to the law as articulated in the most current United States Supreme Court and Supreme Court of New Jersey opinions.

The provisions of this bill put into action a national trend of state governments, as well as the federal government, to be more sensitive to the effect of regulations upon the rights of private property owners.