In our last posted blog, we criticized the Second Department’s decision in the above case for confusing what is necessary to prove a reasonable probability of rezoning and the ability to develop land pursuant to a special permit.

But there is another problem with the Appellate Division’s decision.  It held that although three parcels were physically contiguous and had unity of ownership, parcel 3 could not be considered as having unity of use because the claimant had entered into a ground lease for parcel 3 seventeen months before the vesting date, therefor, the lower court erred in determining that parcel 3 should be valued as one economic unit with parcels 1 and 2. In support of this proposition, the Court cited two extremely weak authorities which were fifty years old.  More to the point, the Court ignored its own precedents and those of the Court of Appeals.

In Wilmot v State of New York, 32 NY2d 164 (1973), the Court of Appeals held that the sale of a parcel did not preclude the parcel being considered in the assay of damages.  It stated, “… the prospective sale to Lenrich Associates was in time and substance so clearly referable to appropriation as to be incidental to and inseparable from it.

The Second Department, recently held in 90 Front St. Assoc. LLC v State of New York, 79 AD3d 708 (2010) that the sale of a parcel a year before title vesting did not preclude calculation of direct damages calculated on the basis of the highest and best use of the entire tract of land owned by the claimants.  The Second Department also upheld unity of use and valuation of the condemned properties as a single economic unit in Matter of Village of Port Chester (Bologna), 95 AD3d 895 (2012).  In Bologna, the condemned properties were contiguous and a variety of individuals and entities held title to them.

The fundamental error was the failure of the Appellate Court to consider that in condemnation, the property must be valued as if it is free and clear of all encumbrances, liens, leases or mortgages.  The condemned property must be valued on its highest and best use regardless of whether the property is being put to such use at the time.  Thus, in the 730 Equity Corp. v New York State Urban Dev., 142 AD3d 1087 (2d Dept 2016) cited by the Court in the 55 Motor Avenue decision, the same Court held that an existing lease on the property did not prohibit a finding of a different highest and best use than contemplated in the lease.

Posted in Highest and Best Use, Unity of Ownership, Valuation Free and Clear
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