In Gallenthin Realty Development, Inc. v. Borough of Paulsboro, the New Jersey Supreme Court held that the New Jersey Constitution’s authorization of redevelopment of “blighted areas” could not be applied in circumstances where the sole basis for redevelopment is that the property is “not fully productive.”  Thus, the Court invalidated the Borough of Paulsboro’s overbroad interpretation of the New Jersey Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-5(e), concluding that this provision of the LRHL applies only to property that has become stagnant because of issues of title, diversity of ownership, or other similar conditions.

The Court held that, under Paulsboro’s interpretation, any property that is operated in a less than optimal manner is arguably “blighted,” and if such a broad definition were adopted, most property in the State would be eligible for redevelopment.  The Court noted that this holding does not preclude the Borough from a future inquiry as to whether the subject property is “in need of redevelopment” based upon any other legitimate grounds.

Furthermore, the Court noted that municipal redevelopment designations are entitled to deference provided that they are supported by “substantial evidence” in the record.  The Court clarified that the substantial evidence standard is not met if a municipality’s “in need of redevelopment” determination is supported only by the net opinion of an expert: “A municipality must establish a record that contains more than a bland recitation of applicable statutory criteria and a declaration that those criteria are met.”

For a more detailed syopsis of the Court’s decision, please see the linked Real Estate Law Bulletin, authored by Philip J. Morin III.