Court invalidated Kearny's condemnation of two rental leases in a Passaic Avenue industrial park owned by Del Toch Inc.
Street view of James Farm Market on Passaic Avenue in Kearny. TRENTON — Commercial leaseholders used to be out of luck if they wanted to negotiate with developers when their landlord’s property was being taken through eminent domain.
But a state Supreme Court decision today gave them more clout, saying developers have to talk with them when their interests are at stake.
In a sharply divided decision, the state’s highest court invalidated the city of Kearny’s condemnation of the lease of James Farm Market Corp. and James Wholesale Warehouse, which rented space in a Passaic Avenue industrial park owned by Del Toch Inc.
As part of its redevelopment plan, the city selected Del Toch’s sister company, DVL Kearny Holdings, as the redeveloper in 2007.
DVL offered James $250,000 to relocate, despite estimating the cost at about $50,000. James rejected the offer and demanded $3 million, prompting the city to condemn the lease through eminent domain — the taking of private property for redevelopment.
In its 4-3 decision, the high court threw out the condemnation, saying there should have been negotiations between the two companies. Eminent domain laws require ‘‘just compensation’’ for property taken.
DVL did not explain why it offered James five times the estimated relocation costs, the court said.
The dissenting opinion by Justices Jaynee LaVecchia and Roberto Rivera-Soto and Judge Edwin Stern, said the majority gave James a better lease with Del Toch than it had originally negotiated. They warned the goal of protecting commercial leaseholders’ financial interests may fail because they no longer know where they stand.
‘‘The majority’s decision may well bring instability and uncertainty to a great many existing commercial leases in this state,’’ LaVecchia wrote for the minority.
Paul Fernicola, a Red Bank attorney who has handled numerous eminent domain cases, said the decision reflects a recent tendency of courts to rule against redevelopers.
He also said the ruling means James has to right to negotiate with the developer, but the city can take another tack that could leave the company with no negotiating voice. He said Kearny still has the option to condemn the entire property — instead of only James’ lease. In that circumstance, eminent domain laws do not allow for negotiations with tenants.
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