The NJ Appellate Division recently decided a case involving an important and recurring issue – valuing a property for a use that requires land development approvals.  In New Jersey Transit Corp. v. Franco, Docket No. A-3802-12T4, the Appellate Division reversed the trial court due to “prejudicial error” in permitting the condemnees’ experts to value the property with an apartment complex as its highest and best use without establishing the reasonable probability of obtaining certain land development approvals.

The Appellate Division explained that the “crucial issue on appeal is whether the creation of a cul-de-sac . . . would have required and received approval by” the municipality. The condemnees’ experts assumed the municipality would not need to approve a use variance access or that the street could be dedicated to the municipality without need for a use variance.  New Jersey Transit contended that the experts’ opinions failed to analyze whether there was a reasonable probability of obtaining the variance or dedication.  Condemnee’s testified at trial over New Jersey Transit’s objections, which resulted in a jury award of $8.1 million.

The Appellate Division held that the condemnees were required to and failed to show a “reasonable probability” the municipality would either grant a use variance for the cul-de-sac or accept the dedication of the cul-de-sac as a public street. The Appellate Division expressed no opinion on whether the condemnees could, in fact, show such a reasonable probability and remanded the case for a new trial.