August 5, 2010

Marking a significant victory for private property rights, the New Jersey Supreme Court has ruled that owners of beachfront property must be compensated for the taking of their property by a municipality nearly 50 years ago. (See Klumpp v. Borough of Avalon) The property, owned by Edward and Nancy Klumpp, was physically taken by Avalon Borough for the construction of protective dunes after the nor'easter of 1962. It has been the subject of contentious litigation since 2004, when the Klumpps were denied permits to build a new home on the property.

While the Supreme Court has ruled for the Klumpps, the case is not over, as it has been sent back to the trial court for a determination of the amount of compensation due to the Klumpps.

The dispute arose from the 1962 nor'easter that decimated the Avalon shore, including the beachfront home of the Klumpps. After the storm, Avalon Borough adopted an ordinance that allowed the Borough to enter private properties in the disaster zone to build protective dunes, without any compensation to homeowners.

Subsequently, Avalon vacated and demolished the street fronting the Klumpps' home and built sand dunes over the property. However, over the course of the next 40+ years, the Borough continued to tax the Klumpps for the property at the average rate of 35 cents per year based on a property value assessment of $100.

When the Klumpps sought to develop the property in 1997, the Borough denied their request and denied that a taking had occurred by way of the 1962 ordinance. The Klumpps then applied to the New Jersey Department of Environmental Protection for a coastal construction permit in 2003, which also was denied because the Klumpps could not demonstrate they had road access to the property.

After Avalon refused to allow road access to the property, the Klumpps sued for a declaration that they were entitled to access their property. In the course of that litigation, the Borough claimed for the first time in 2005 that it owned the property by virtue of inverse condemnation in 1962, and the trial court accepted that argument, even while acknowledging that there had been no "semblance of due process or compliance with statutory requirements."

The trial court also ruled that the Klumpps were time-barred from seeking compensation based upon an inverse condemnation claim because the six-year statute of limitations for inverse condemnation expired decades ago. Remarkably, the Appellate Division upheld the trial court's ruling, dismissing the Klumpps' legal ownership of the property as "indicia of plaintiffs' bare legal title...and nothing more."

The Supreme Court has now reversed the lower courts, finding that it would be unfair to apply the six-year statute of limitations to bar the Klumpps' claim of inverse condemnation because Avalon, over a course of 43 years, took the position that the Klumpps owned the property. It recognized that "[a]fter finally conceding, in 2005, that a taking occurred forty-three years earlier, the Borough now attempts to hide behind the six-year statute of limitations to claim that [the Klumpps] have no right to an inverse condemnation claim."

Even though the Supreme Court's ruling favors the Klumpps, the compensation due to them could be less than satisfactory. The case has been sent back to the trial court for a determination of the fair market value of the property in 1965, when Avalon finished construction of the dunes. Representatives of Avalon claim that the value of the property as of 1965 could be as low as $2,000, although that amount will be surely disputed by experts for the Klumpps when the trial court hears the matter.

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Hill Wallack LLP's Land Use Team

Hill Wallack LLP has one of the premier land use practices in New Jersey. Our Land Use Team provides comprehensive solutions to issues arising in every area of law affecting the land development permitting process at the local, county, state and federal levels.

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For more information, contact one of the attorneys who work in this area: Thomas F. Carroll, III, Esq., Donald R. Daines, Esq., Kenneth E. Meiser, Esq., Stephen M. Eisdorfer, Esq., Henry T. Chou, Esq. or Michael J. Lipari, Esq.

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