Second Department Finds Highest And Best Use Of Condemned, Adjoining Parcels Was Light Industrial

Respondents/claimants owned land in the Town of Oyster Bay (“Town”).  On September 5, 2003, the Town condemned a 14.03–acre parcel of land (“Parcel 1”) to expand an abutting public park.  Another 7.51–acre parcel to the east of Parcel 1 (“Parcel 2”), and an 8.7–acre parcel of land to the east of Parcel 2 (“Parcel 3”), also owned by claimants, was not condemned at that time.  In April 2002, one of the claimants, 55 Motor Avenue Company, LLC, entered into a ground lease with Stop & Shop Supermarket Company to build and operate a store on Parcel 3.  In August 2006, claimants filed a claim for just compensation, seeking direct damages for the loss of Parcel 1, and consequential damages for Parcels 2 and 3. The Supreme Court, Nassau County held the three parcels should be valued as one economic unit, and that the highest and best use on the date of the taking “was retail development of the maximum allowable density.” The claimants were awarded a principal sum $20,700,000.  The Town appealed.

On appeal, the Second Department held that claimants failed to demonstrate unity of use between Parcels 1 and 3 on the vesting date.  It found 17 months before the vesting date, 55 Motor Avenue Company, LLC had entered into a ground lease that included a non-integration clause, which provided Stop & Shop could “erect a fence” around Parcel 3 “as may be reasonably necessary to prevent” any “persons occupying or having business with any other land adjacent to or near” Parcel 3 from using any portion of Parcel 3. Accordingly, the lower court erred in finding Parcel 3 should be valued as a single economic unit with Parcels 1 and 2.

The Court also found that claimants failed to establish a reasonable probability that they would be granted a special use permit to develop Parcels 1 and 2 as a large-scale multi-tenant retail development. While claimants proffered the testimony and report of their expert planner, the planner did not review the history of any special use permit applications to the Town Board or reference any largescale retail developments located in the immediate area on the vesting date. Furthermore, the special use permit granted in 2008 for the Stop & Shop to operate on Parcel 3 did not provide sufficient evidence that, as of the vesting date, there was a reasonable probability that the Town Board would have granted a special use permit for big box retail development on Parcels 1 and 2. The court therefore reversed and remitted the matter to determine the fair market value of Parcel 1 and whether Parcel 2 sustained consequential damages when the highest and best use for both parcels was  light industrial development.

The case was Matter of the Town of Oyster Bay, 156 A.D. 3d 704 (2d Dep’t 2017).

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