William Minnich and his nephew, Bill Minnich, own Minic Custom Woodwork in East Harlem, a business that’s been in their family for more than 70 years. Their custom-made furniture and cabinetry is known throughout the nation, and their work appears in many museums, including the Metropolitan Museum of Art. The Empire State Development Corporation, however, plans to condemn their building and transfer it to a private developer for a Home Depot parking lot.
Bill Brody, like his father, owns a lumberyard and hardware store. He also buys buildings and renovates them. Four years ago, he purchased several adjacent buildings in Port Chester, New York, only a few minutes from his home. The four joined buildings were in total disrepair, but Brody believed that Main Street held promise. Over the next few years, Bill spent countless hours and thousands of dollars completely renovating and restoring the buildings. Just as he finished, the Village of Port Chester announced it would be condemning his buildings and handing the land over to a private developer to turn into part of a Stop ’n Shop and its parking lot.
Pastor Fred Jenkins formed St. Luke’s Pentecostal Church in the Town of North Hempstead back in 1979. The church is currently leasing basement space; it has been renting for years as it saved to buy a permanent home. In 1997, St. Luke’s finally purchased a piece of property, with a partially constructed church already built. The Church spent the next two years seeking the Town’s permission to complete the construction. And then, shortly after the Church finally obtained a court judgment allowing it to build, the Town moved to condemn the property. St. Luke’s already has spent hundreds of thousands of dollars purchasing the property, preparing for construction, and fighting the Town. The Town plans to pay a mere $80,000 as "just compensation" for the property, $50,000 less than the Church actually paid to purchase it.
Unfortunately, the Minnichs, Brody, and St. Luke’s are just the latest example of a frightening trend. Private property owners in New York and nationwide find their property rights under attack from unethical marriages of convenience between developers, local governments and state agencies. The result is an erosion of the fundamental constitutional right to private property. And the legal landscape is stacked against the landholders.
On October 4, 2000, the Institute for Justice joined the Minnichs, Brody, and St. Luke’s in fighting the condemnation of their properties, two of which are for the benefit of other private parties. The Institute for Justice is asking the U.S. Court for the Southern District of New York to bar four government agencies from seizing of the Minnichs’ and Brody’s buildings and the impending demolition of St. Luke’s and to hold that New York’s condemnation procedure violates the U.S. Constitution.
Eminent Domain: How It Works, How It Is Abused
"Eminent domain" is the power of government to take away a person’s private property. In the United States, this power is limited in several important ways. The New York and United States constitutions both state that private property shall not "be taken for public use without just compensation." This constitutional provision imposes two limits on the taking of private property: First, that the use must be public, and second, that just compensation must be paid. If private property could be taken for any use at all or strictly for private use, the term "public" would not have been included.
Originally, "public use" was understood by everyone—courts, local governments, and the general citizenry—to have its ordinary meaning, and eminent domain was intended only for projects that would be owned by and open to the public. Eminent domain was a power that allowed the government to condemn property in order to construct public works, like roads and water systems, and to erect public buildings, such as post offices. Courts further explained that government was limited to taking only that property "necessary" for the public use. It could not simply grab additional land to increase its holdings.
Gradually, though, government has come to ignore all of these limits. Now, local governments will take property and give it to a private party for their economic profit, hardly a public use. After a private business or developer identifies the parcels of land it wants to acquire and city agencies approve a "redevelopment project," the city attempts to confiscate these private properties and transfer them to the developer. At the same time, governments give less and less consideration to the necessity of taking property for whatever project is planned. They also ignore the personal loss to the individuals being evicted.
Courts, instead of acting as a check on these abuses of government power, have abdicated their role and often simply defer to whatever claims of "public purpose" a legislature or administrative agency makes, no matter how preposterous. With a strong economic incentive and no judicial check on the use of eminent domain, for local government and state agencies, all the benefits weigh in favor of using government power to condemn private property and evict the rightful owners.
The erosion of the doctrine of eminent domain has led to predictably appalling results. In 1981, Detroit destroyed Poletown, the last racially integrated neighborhood in the city, and gave the property to General Motors to build a plant. The closely knit, historic community could not be replaced, and the plant did not live up to its promise of bringing economic prosperity to the city. Likewise, when the city of Oakland decided that it didn’t want the Raiders football team to move to Los Angeles, it tried to exercise eminent domain, take ownership of the team and force them to stay.And in 1984, the U.S. Supreme Court allowed Hawaii to engage in a wholesale transfer of the land from owners to renters.
Condemnations for private parties are occurring throughout the United States, with new condemnations happening all the time. For example, in Pittsburgh, the Mayor is threatening to use eminent domain to take more than 60 buildings and 125 local businesses in a historic downtown area to give the property to developer who will build a mall with a Gap and a Tiffany’s. Boston is using eminent domain to build a new ballpark for the Red Sox. In Richfield, Minnesota, a car dealership is being threatened to make way for a new headquarters for the Best Buy electronics chain. And outside of Cincinnati, the city of Norwood wants to condemn a number of small businesses so that a nearby Walgreens can move its current store to a new corner one block away.
How Government Makes a Profit From Condemning Your Property
Although it does not directly prevent condemnation of property, the requirement that the owner receive "just compensation" has always, until recently, served as a restraint upon the use of eminent domain. Government would have to balance the cost of property acquisition and the cost of the eminent domain process itself against other possible uses of taxpayer dollars. When government condemns private property for the use of private developers, however, those financial constraints are removed.
In private condemnations, the typical agreement between the government and the developer is that the developer will pay all costs of acquisition, including legal fees. This is a good financial deal for the developer, of course. "Just compensation" invariably is less than what the developer would have to pay on the open market. And the owner can be forced to move, so there’s no problem with owners who refuse. The government also gets a good deal. It doesn’t have to pay for anything. The developer pays for the property, the attorneys fees, and any studies that are necessary to get approval for the project.
In addition to the removal of the financial disincentives that prevented much of the excessive use of eminent domain, there are often direct incentives for condemnation. Designating an area and project for redevelopment makes a municipality eligible for additional funding from the state and often the federal government.
Another increasingly common incentive is Tax Increment Financing (TIF). When a locality approves a redevelopment project, it gets a certain amount of the property taxes generated in the area, instead of those dollars going to the state treasury. Thus, the larger the area designated and the more projects approved, the greater the TIF income.
Some governments use even more offensive funding systems. For example, the Southwestern Illinois Development Authority actually charges a six percent commission fee for its services in forcibly acquiring property for private parties. In one case, now before the Illinois Supreme Court, the agency made more than $50,000 off a single condemnation.
Eminent Domain in New York
Both the East Harlem and Port Chester condemnations follow the same general plan. In each case, a developer proposed the project, paid for all aspects of the condemnation, and now hopes to reap financial benefit by having the government take property from its rightful owners. In each case, the municipality pays little or nothing but has obtained or is seeking additional funds from other government bodies.
The process in New York is astonishingly complex, but for all its hearings and supposed opportunities for input, it provides little protection for property owners. First, the municipality declares the area "in need of redevelopment" or, interchangeably, "blighted." This declaration can proceed on the flimsiest of excuses—that buildings have "outmoded design" (a contemporary urban planner might design it differently), "lack of suitable off-street parking,"or even "impairing the 'economic soundness' of nearby buildings and "threatening the source of public revenues"(the government could get more taxes if your home was a shopping mall). Yet the designation affords enormous powers. Once an area has been declared blighted, then that designation automatically cloaks any future condemnations in the area in the mantle of public purpose. Any property in the area becomes up for grabs.
But the government stacks the deck even more in its favor by requiring that only some of the properties in the area be in bad shape, so if a New Yorker has the misfortune to be situated near a property in disrepair, like Mr. Minnich, the government can throw his well-maintained property into the condemnation plan just for good measure. Or to make the site more attractive to a private developer.
Even more conveniently for the government, it does not have to tell owners at the time of the designation that this is the first step toward condemning their property. And redevelopment
designations seem never to expire, so the government can call something in need of redevelopment in 1977, never conduct another study, and condemn it in 2000.
After the blight designation, the municipality creates an environmental impact study, usually paid for by the private developer. A draft of this is circulated, and public comments are received. Then, a final version is produced and approved by the municipality.
The municipality then holds a public hearing to decide that the project is for a public purpose. The government does not send individual notice to the property owners. It simply publishes a notice of the meeting in the newspaper. And that notice does not inform the owners that crucial rights will be decided. If the owner is lucky enough to see the newspaper notice, once he arrives, he is told that he can speak for only a few minutes to beg to keep his property and that no questions may be asked.
After the hearing, the municipality issues "Determination and Findings," an uninformative document that states that the purpose of the project is economic development. Again, this is published in the newspaper and not sent by the government to the individual property owners. Without receiving notice that this very significant of the right to appeal and the necessity of that appeal, property owners almost certainly won’t file a legal protest and thereby will lose all of their legal ability to block the taking of property that is rightfully theirs. And even the fine print in the published notice does not tell owners that they have a right to appeal and that failure to do so will waive their right to object later. Indeed, this is exactly what happened to the Minnichs and Brody. In fact, an owner has a mere 30 days to appeal the Determination and Findings or lose his rights forever.
Even after the Determination and Findings, the project is not complete. The developer (and therefore the government) may decide to change the outlines of the project and to include different properties, but no new hearing will be necessary. And again, no notice is issued to the owner whose property has now been added to the list for condemnation. The developer and local government may still be seeking approval from other agencies for the project, as well as funding. It may still take years before any particular property owner receives any notice that his property is being condemned.
Thus, from the first proposal to designate an area for redevelopment to the point the government issues a petition for condemnation, there will have been hearings, meetings, plans, more hearings, more meetings, and changes of plans. An owner interested in the fate of his property could attend some, or even all of these events. But even if he read every notice and attended every hearing and every meeting, he would never know that there was one hearing, one notice, and one 30-day window, somewhere in the middle, that was absolutely critical to preserving his rights.
Before the owner receives the petition for condemnation, he cannot be sure his property is really being condemned and probably has learned only recently what will be replacing his home or business. Nevertheless, under New York law, it is much too late to complain. If he did not have a specialized condemnation lawyer at the time of the public hearing, he would never know that he had to appeal from the Determinations and Findings. And in fact, many if not most owners miss this deadline without ever knowing it existed. The system is perfectly designed to trip up those without legal expertise and deprive them of the ability to assert their constitutional rights.
State Agency prefers Home Depot furniture to custom-made in Harlem
In 1927, shortly after Valentine Minnich immigrated to the United States from Germany, he started a cabinetmaking business, like his father’s. He began training his two sons, William and John, and his daughter, Irmgard, when they were very young. From 1953 to 1955, when William was only 13, the family worked with Frank Lloyd Wright in creating a furniture line. Many of the Minic works appear in museums throughout the country, including the Metropolitan Museum of Art.
After their father died, the two sons took over the business. Eventually, John retired, and now William and his nephew Bill own and run the business, which employs between nine and 19 people, depending on the season. Minic Woodwork specializes in furniture and cabinetry made to order. A single craftsman works on a piece, from start to finish.
The Minnichs purchased their current building in 1981 and then devoted more than $250,000 and a full year and a half to completely renovating the interior to suit their needs, adding fire resistant walls, three-layer wood floors, cement reinforcement under each machine, and other permanent fixtures.
The area around Minic Custom Woodwork contains hundreds of local businesses and employs approximately 3,000 people. It is a bustling area, combining residential, retail and manufacturing. The only empty parcels and decaying buildings are the ones that were owned for years by the government before recently transferring the property (at a bargain-basement price) to the private developer.
Several years ago, the Empire State Development Corporation, a state agency, announced that it was considering a project in the area. It held many hearings, issued draft reports, and finally announced it would be condemning a number of businesses,including Mr. Minnich’s, to transfer the property to Tiago Holdings, a subsidiary of one of the largest developers in New York. At the time of the public hearing in June 1998, the Development Corporation still had not received approval from another agency for the project, so all discussion was couched as very tentative. The approval did not come for several months after the hearing. The Minnichs attended the hearing, at which they were allowed to speak for three minutes and could ask no questions. Afterwards, they submitted written testimony as well. The agency issued Determination and Findings in September 1999, which they published in the newspaper. No copy was sent to the Minnichs, and even the finest print of the newspaper publication did not inform readers of their right to appeal.
When the final approvals came through, the Minnichs and other neighbors filed a lawsuit challenging the project. The court ruled that they had missed their deadline to appeal the Determination and Findings, which were issued even before the agency had approval for the project, and had waived all their rights.
The nominal basis for the condemnation of the property is the removal of blight, but the area is no more blighted than any other part of upper Manhattan. By unlucky accident for the Minnichs, it is an area that a private developer wants, and so it is slated to go. The Minnichs’ 70-year-old business will be replaced by parking for the Home Depot. Although the Development Corporation has assured him that it will find a place to relocate, it has not been able to find anywhere that has zoning and proper building approvals for the woodworking business. Without those approvals, the new location would be useless. Unless the Minnichs are able to stop the condemnation of their property, their business will be destroyed.
No Merit Badge for Good Citizenship in Port Chester
Port Chester also has decided that redevelopment will put the city on the road to riches. Any homes or small businesses that happen to be in the way will be taken and demolished.
Bill Brody purchased his property in 1996 and spent two full years renovating and restoring buildings before even beginning to rent them. In addition to supervising the construction, Brody personally did much of the work, including plastering, painting, and installing floors and tiles. The renovation work continued throughout 1999 and 2000, and the building has updated electric wiring and plumbing, a renovated sprinkler and alarm system, new windows, a new roof and lobby, and has been remortared and waterproofed. It took countless hours and an enormous amount of money.
The Village dragged its feet all the way, granting approvals and building permits slowly. It did everything it could to halt Brody’s progress short of actually forbidding him to renovate the building and rent space. Just getting permission to construct the interior of the laundromat took over six months, even though there were no code problems and no need for any kind of variance. Eventually, however, Brody got full approval for all construction.
Brody has almost finished the makeover for his five-floor, 56,000 square feet combined buildings. Ten small businesses rent space from him, including the Village’s cleanest and least expensive laundromat, an electrical installation company, a dance studio, two artists’ studios, a small antique shop, a high-end carpet distributor, a recording studio, and two warehouse spaces. For Brody, these properties are his investment in the future to support his wife, Carolyn, and their three small children, Elizabeth, 8, Kathryn, 3, and Diana, 1. He worked hard to improve the space, rent as much space as possible, and be a helpful building owner and manager to his tenants.
Over the last 15 years, Port Chester had gradually become more Hispanic. The area near the waterfront contained manufacturing and other small businesses that employed the newer population, as well as residences and retail to serve them. The area had become a productive mix of residential, retail, industrial, and harbor uses. The retail services were broad-ranging, from antique stores and luxury furnishings to Peruvian restaurants to a community micro lender.
The Village, however, had other plans for these properties. It was a thriving community, but it didn’t quite look like the cookie cutter bedroom suburbs nearby. So when a local developer suggested it would all look better as a mall, the Village was only too happy to agree. The marina, with its boat rentals, fresh lobsters, and bait and tackle shop would become parking for the complex. Bill Brody’s building would become part of a Stop ‘n Shop and its parking lot. Other local businesses would turn into a Costco and a multiplex movie theatre. The Village also agreed to use its power of eminent domain to take anything the owners couldn’t be threatened into selling "voluntarily." The Village pays for almost nothing. The developer has total control over the project, which would be perfectly fine if it wasn’t using the power of government to seize other peoples’ property against their will.
Residents and owners were unpleasantly surprised to learn that the Village was confiscating their property, not for a road or a school, but for the benefit and ownership of another private party. Owners and residents alike felt helpless before the seemingly inexorable progress of the project. At public hearings, people were told they could speak for four minutes-but there would be no debate and no one could ask questions. The exact outlines of the project were in flux. Rumors flew as to which buildings would be in or out. After the public hearing, the Village issued Determination and Findings, which it published in the newspaper. No notice was sent to Brody, and the published notice did not explain that there was a right to appeal, or that failing to appeal within 30 days would waive all future rights to object.
Brody never received an offer to purchase his building. Instead he saw a petition for the condemnation of his buildings and land. But when he tried to raise his constitutional defenses—that the taking was not for a public purpose, that his property was not blighted, for example—he was told that he had waived these defenses by failing to appeal from the Village’s earlier Determination and Findings. To add insult to injury, as the Village was moving to take his property, it also sent him a $40,000 bill for sidewalk improvements to help out the new private owners.
No more churches in North Hempstead
St. Luke’s has been a North Hempstead institution since 1979. It prides itself on the sense of community among its congregation. When members are having difficulty with rent, mortgages, food, or heat for the winter, church members band together to help.
There are less than 150 members, but they are a strong community. The congregation saved for years in a building fund to finally purchase their own property. Another congregation had been in the process of constructing a church building when its funding ran out. They agreed to sell the mostly completed building and the land to St. Luke’s. All that remained were a few items for completion.
Before purchasing, St. Luke’s did a title search to make sure there was no encumbrance on the land. There wasn’t. Then, St. Luke’s obtained a letter from the building department explaining exactly what it needed to do to obtain a building permit to finish construction. It then satisfied each and every item on the list. Obtaining new architectural plans was particularly expensive, but the Church was happy to do anything to get the project moving swiftly so that the services could move out of the basement space and into a real church. The building department still refused to issue a permit, saying that St. Luke’s had not met the building code’s parking requirements. St. Luke’s applied to the Town’s Board of Zoning Appeals for a variance from the parking requirement, something the Board had already granted to the prior church owner, but the Board refused. During all this time, no one at the Town suggested that the property was going to be condemned, so perhaps St. Luke’s shouldn’t spend hundreds of thousands of dollars trying to complete its building project.
St. Luke’s was forced to initiate a separate proceeding against the Zoning Board and finally achieved a judgment in January of 2000 that it was entitled to a variance and, consequently, to begin construction.
Less than two months later, the Town sought to condemn the property. St. Luke’s objected to the condemnation, arguing that the property was only in a dilapidated condition because the Town had steadfastly refused to allow St. Luke’s to complete construction. Also, the Urban Renewal Area Plan on which the Town based its condemnation contained a statement that the Plan would not be amended or changed without the consent of affected property owners. St. Luke’s had not consented to the Plan amendment that slated the St. Luke’s property for condemnation.
The Town responded that there had been a hearing in June of 1994 on the amendment slating the church for condemnation. St. Luke’s had not objected to or appealed from this amendment. True, the Town argued, St. Luke’s didn’t purchase the property until three years later, but it had still waived its rights, or the prior owner had waived the rights. Amazingly, the state court agreed, and, in April 2000, the condemnation moved forward. Now, the congregation lives in fear that its building will be demolished before it has time to secure a court ruling.
The Town’s motivation is difficult to fathom. What is clear is that the city is bent on eliminating what it calls blight (a "blight" it perpetuated by refusing to let St. Luke’s open) and has the support of some influential community members. Summing up North Hempstead’s "problem," John V. Brown, president of the local business association, "The symbol of poverty is an abundance of drinking establishments and churches, and we’re fast approaching an excess amount of churches." A member of the Zoning Board of the Town agreed.
These projects are only three of several such instances currently in progress in New York, which seems to be on a condemnation spree. There is an ongoing plan to condemn a neighborhood in New Rochelle for an Ikea. More than 34 homes, 29 businesses and two churches will be destroyed. New York City also recently announced its plan to condemn a block in the Times Square area for a new building for the New York Times.
Litigation Strategy: Challenging New York’s Procedural Sleight of Hand
The Institute for Justice is committed to a program of litigation that will help restore judicial protection of private property rights—the basic right of every American to responsibly use and enjoy their property. On October 4, 2000, the Institute for Justice filed a lawsuit in the U.S. District Court for the Southern District of New York challenging New York’s unconstitutional eminent domain procedures and asking for an injunction to prevent the seizure of the Minnich, Brody, and St. Luke’s properties. The defendants are Charles Gargano, the head of the Empire State Development Corporation, which wants to condemn the Minnichs’ business; the Village of Port Chester, which is seeking to take Brody’s buildings; and the Town of North Hempstead and the Town of North Hempstead Community Development Agency, which have condemned St. Luke’s.
As the Supreme Court recently stated, "Individual freedom finds tangible expression in property rights." The choices people make regarding their homes or business are among the most personal and important decisions they will ever make. When government exercises eminent domain, it can take someone’s home or livelihood, exacting enormous personal costs. The Institute is especially concerned with the way that government actions affect those who have relatively limited economic means to defend themselves against such outrages. In 1998, the Institute successfully defended Vera Coking, an elderly widow, against the attempts by a New Jersey state agency to condemn her house of more than 35 years for Donald Trump’s casino across the street.
The U.S. Supreme Court also has begun to notice some of the abuses of local governments. In a series of cases, the Court declared that the actions of local governments constituted takings. In each of the cases, the local government argued that it had not "taken" the property and so did not owe compensation. Before these cases, courts strayed from the text and read the Constitution in a way that maximized government power. The Court has not considered a major eminent domain case since its infamous decision in Hawaii Housing Authority v. Midkiff, in which it approved a large-scale transfer of land by Hawaii from property owners to property lessors. However, "Midkiff embodies the lavish deference to governmental regulation of property rights from which the Court has retreated" in the last ten years.
The Institute for Justice is committed to restoring substance to the constitutional requirement that property can only be taken for public use, not for the benefit of private parties. Yet property owners in New York can’t even challenge the constitutionality of the confiscation of their property because New York has erected procedural hurdles designed to trip up owners without condemnation law expertise and deprive them of the ability to exercise their constitutional rights. The attempts to take these East Harlem, Port Chester, and North Hempstead properties violate the Constitution and must be stopped.
New York is virtually unique in requiring property owners to defend their rights before they even know when and if their property will be condemned—or lose them forever. Requiring owners to appeal from Determination and Findings made by the condemner after a public hearingmakes no sense at all. The government can change the properties included in the plan, can wait years before actually condemning, or could never receive approval from other government agencies. Yet if the owner doesn’t appeal, he loses all rights to make those arguments later. The system couldn’t be better designed to prevent owners from asserting their rights. Not surprisingly, most states use a more logical system, allowing property owners to raise their defenses at the time the government moves to take their property. Plans change, and it is at the time that the government tries to take the property that an owner is in a position to fully object. Only a handful of states use New York’s irrational system of requiring owners to bring their constitutional challenges to a condemnation that hasn’t even taken place.
New York’s system violates the fundamental due process rights of New York property owners. First, New York requires only newspaper notice of the public hearing rather than individual notice. Before depriving someone of property, the government must give individual notice, not just by newspaper publication.
Next, although owners are allowed to stand and express their concerns about the process, there is no opportunity to question the condemning government body or the developer who stands to benefit. Should property owners somehow learn of the hearing and appear, they may present evidence, but they may not cross-examine witnesses or ask questions. Four minutes of presentation is hardly a meaningful hearing. But due process requires that when a person is deprived of his property, the hearing the government provides must be "adversarial"--with an opportunity for questioning and for each side to present arguments.
Finally, whatever notice and information is given to owners, they are never told of the significance of the initial hearing or that important rights will be determined. The later newspaper notice does not mention their right to appeal or, most significantly, that it will be their only opportunity to challenge the taking of their property. Yet due process requires notification of the effects of these hearings and of the right to appeal from the government’s decision. All of these failures violate due process, and our lawsuit challenges the New York statute that authorizes this shell game with the rights of New York property owners.
The constitutions of both New York and the United States were designed to prevent property being taken to benefit other private parties. But New York’s eminent domain procedure laws trick owners out of their opportunity to assert their rights. The procedures are designed so that New Yorkers lose the right to defend their homes and businesses long before the government tries to take them. New York’s sleight of hand with cherished property rights violates the due process guarantees of the U.S. Constitution. This lawsuit seeks to strike down New York’s unfair and deceptive procedures and prevent the condemnations being threatened under these unconstitutional procedures.