Second Department Reduces Wetlands Takings Award

Baycrest Manor, Inc. (“Claimant”) owned two contiguous unimproved lots near the eastern shore of Staten Island. Claimant acquired title in the 1970s, and the majority of the property was later designated as wetlands. In 2006, New York City (“City”) acquired the property as part of a multi-phase stormwater management project. Claimant then commenced a proceeding seeking compensation for the taking. After a nonjury trial, the court awarded Claimant the principal sum of $382,190.25, plus interest, as just compensation.  The City appealed the award.

On appeal, the City argued that Claimant’s compensation should be limited to the $57,000 market value of the property under the wetlands regulations.  The City claimed that no knowledgeable buyer would purchase the property above its regulated value based on a potential takings challenge to the wetlands regulations, as the purchaser takes the property subject to said wetland regulations.  However, the Court rejected this contention and held that a subsequent buyer would not be precluded from bringing a regulatory taking claim. Accordingly, the Court held that the reasonable probability incremental increase rule still could be applied in valuing regulated wetlands properties taken in condemnation.

The City next argued that the lower court erred in finding Claimant established a reasonable probability that the imposition of the wetlands regulations on the property would constitute a regulatory taking. However, the City’s own appraisal showed the wetlands regulations reduced the value of the property by 88%. This diminution in value, together with the effective prohibition on development, established a reasonable probability that the imposition of the wetlands regulations would be found to constitute a regulatory taking.

Finally, the City argued that the lower court should not have used the increment proposed by Claimant’s appraiser, who the record shows chose said increment based solely on instructions from Claimant’s attorneys and a prior case. The Court agreed and found that the lower court should have applied the increment formula proposed by the City’s appraiser, which was based on market data.  Accordingly, the Court held that Claimant should have been awarded the principal sum of $156,987.84, an affirmed the decree as modified to reflect the reduced amount of compensation.

The case was Matter of New Creek Bluebelt, Phase 3, 156 A.D.3d 163 (2d Dep’t 2017).

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