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520 E. 81st St. Assocs. v. State

Citation: 33 ELR 20109
No. No. 134, (N.Y., 11/14/2002)

The court holds that the proper method of determining just compensation for the state's temporary regulatory taking of 39 apartments requires not only the sale value of the property, but also interest on the sale value. In 1985, the owner of the 39 apartments planned to convert the apartments to condominiums after terminating a hospital's lease of the apartments due to noncompliance with the state rent control two-year residency and landlord sublease approval requirements. Before termination, a state law was enacted exempting hospitals from the rent control residency and approval requirements. In 1995, the hospital exemption was invalidated as a law with no legitimate state interest that was intended only to benefit the hospital leasing the apartments. The apartment owner subsequently sought and received a judgment that a taking had occurred. In determining compensation, the lower court determined that the best use value of the apartments would be sale as condominiums, and the compensation would be the difference between the value of the sale of the apartments as condominiums in 1985 as opposed to their sale value in 1995. The lower court, however, would not award interest on the difference in sale value. The court first holds that just compensation requires the apartment owner to be awarded interest on the 1985 sale proceeds. Both the state and federal constitutions require that owners receive just compensation when private property is taken for public use. Just compensation puts the property owner in the same relative position it would have enjoyed had the taking not occurred. Moreover, it is assumed that the person who receives the monetary value of the property as of the date of the taking has a beneficial use for those funds, and interest is a measure of the rate of the return on the property owner's money had there been no delay in payment.

Counsel for Appellant
Gary M. Rosenberg
Rosenberg & Estis
733 Third Ave., 14th Fl., New York NY 10017
(212) 867-6000

Counsel for Respondent
Patrick Barnett-Mulligan
Attorney General’s Office
120 Broadway, 25th Fl., New York NY 10271
(212) 416-8050