NY Court of Appeals Upholds Compensation for Partial Collection

This post was written by Ashlee Vega- Slattery, University of Touro Jacob D. Fuchsberg Law Center

The question at 20 Rewe Street, LTD v New York State is whether landlords were adequately compensated by the State for taking part of their property in Brooklyn. The property, which is located in a manufacturing/industrial zone and covers 39,900 square feet, is largely unrepaired; it consists only of a concrete wall and a chain link fence, and is used for storage and parking. In January 2012, the New York State Department of Transportation seized 27,041 square feet of the north side of the property, leaving 12,859 square feet to the landlord. The land owner then submits a claim seeking compensation as fair compensation for the partial taking.

The landowner and the State each hire an appraisal company, and each company achieves a different score, using a different valuation approach. The Prosecution Court believed that the state appraiser’s approach to appraisal was more persuasive than that of the landlord appraiser. The court also rejected the time, zoning and size adjustments made by the plaintiff’s appraiser, because they were not supported by evidence. The plaintiffs’ suit against the State-owned comparable sale property also did not particularly appeal to the courts. The court decided for damages of $3,310,500.00; the award is based on the pre-collection value of the property, $4,389,000.00, together with an upward modification to account for errors in the appraiser access adjustment. The land owner appealed to the Appeals Division.

The Fifth Amendment Withdrawal Clause provides that “private property may not be taken in the public interest, without just compensation.” Regarding partial withdrawals, the loss is measured as the difference between the total value before withdrawal and the residual value after withdrawal. Damages may be direct, indirect, or consequential. Division of Appeals, citing Lerner Pavlick Realty v. The State of New York (a case previously decided, in which it argued that awards to landlords seeking consequential damages as a result of taking the costs and temporary facilitation of building a highway were adequate, but subject to reimbursement for any increase), maintained that consequential damages , “measured by the difference between the before and after values, minus the land value and adjusted repairs.” Decisions must also be within the reach of expert testimony or supported by other evidence and explained by the court. The court of appeals further noted that the court’s explanation of the award supported by evidence is “reserved to respect and will not be disturbed at the level of appeal.”

The Appellate Division is of the opinion that the Court of Prosecution’s decision to side with the State assessor is supported by records and is adequately explained. Additionally, they noted that judging the suitability of comparable sales was within the discretion of the Court of Claims alone, and the sales selected were similar enough to serve as a guide to the property’s market value. The State appraiser’s explanation of the basis for selecting the comparator property and the relevant adjustments made for the valuation is adequate and credible. In addition, the Lawsuit Court’s denial of certain adjustments made by the plaintiff’s appraiser is supported by evidence. Accordingly, the Appellate Division is of the opinion that the court has accepted the pre-appropriation value of the property offered by the State appraiser, with the upward adjustment being adequately explained.

Although the landlord argued that the Court of Appeal based its determination of the amount of consequential damages to the remaining property on its finding of the highest and best use, it was in effect applying a percentage deduction to the residual value of the parcels per square foot of land. floor area ratio, using the 20% higher figure offered by the State in recognition of the interests of the State. The landlord did not dispute the percentage reduction method applied by the court, and because the landlord submitted a lower deduction rate, he failed to fulfill his burden of establishing entitlement to a higher severance pay. Accordingly, the Division of Appeals found that the Court of Appeals’ decision to award $3,310,500 as fair compensation for the taking was appropriate and should not be disturbed.

20 Rewe Street, LTD v New York State, 2022 WL 4230493 (NYAD 2 Dept. 14/9/2022)

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