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Y9 �r 0 Page 102 Land Use Law Report June 1.8, 2003 Takings Futility Argument Fails In Regulatory Taking The New Jersey Superior Court Appellate Di- vision has ruled a landowner's regulatory taking claim was not ripe for adjudication, because the landowner failed to exhaust its administrative remedies (United Savings Bank v. New Jersey De- partment of Environmental Protection, :,,No. A- 5125- 01T2, June 4, 2003). Between 1987 and 1991, United Savings Bank (USB) loaned money to a developer, Terra -Tech Development Corp., that planned to develop a resi- dential subdivision on 61.4 acres of '. land in Gibbsboro Township. Terra -Tech defaulted on its mortgage in 1991, and USB foreclosed. Title to the property eventually passed to USB in 1995. By that time, Terra -Tech had final municipal approval for the first section of the development. Part of the property contained wetlands, initially under the jurisdiction of the U.S. Army Corps of Engineers. In 1994, however, jurisdiction over the wetlands passed to the state Department of Environmental Protection (DEP).When USB inquired of DEP about its situation following transfer of wetlands regulatory jurisdiction, DEP replied that USB would have to get permits to further develop the property. Endangered Species Endangers Project Sometime between 1986 and 1996, Hellonias Bullatta, or "swamp pink," a plant on the state and federal endangered species lists, was found on the property. In 1996, DEP's director of land use regulation replied to an expression of interest in the property from the Nature Conservancy. In part, the letter from Richard Kropp said the development of the property could not proceed "due to the extent of disturbance a housing project would have on the wetlands, which cover the majority of the site." A copy of that letter was sent to USB. Later that year, USB filed an application to build on four lots in Section 1 of the property and later filed an amended application covering 12 acres in Section 2. DEP initially rejected the application for Sec- tion 1 on the ground it did not adequately document how impacts on wetlands would be minimized. It refused to proceed with the Section 2 application until USB paid an $11,400 application fee. Eventu- ally, DEP issued permits for two houses in Section 1. USB did not proceed with its Section 2 applica- tion. Instead, it sought a declaratory ruling from USB that "there is no set of circumstances upon which the department would issue an individual wetland permit" covering 35 houses in Section 2. DEP did not respond. USB filed an inverse condemnation action against DEP in 2001. The trial court granted DEP's motion for summary judgment, ruling USB had failed to exhaust its administrative remedies. It might be factually more accurate to say USB failed to initiate the formal administrative process, the appeals court remarked. USB claimed it was not required to file an actual permit application or pay the application fee because the result was a fore- gone conclusion. Therefore, it argued, the futility doctrine allowed it to cut short the demonstrated process and proceed directly to court. The appeals court disagreed. Owner Must Follow Administrative Process Whatever the scope of the futility doctrine may be, the court said, it does not come into play before the applicant even files a request for administrative relief, at least if the agency has some discretion to grant the relief. Preliminary statements from ad- ministrative officers, even if they appear conclu- sive, remain preliminary. The landowner must give the administrative body an opportunity to exercise its discretion. In this case, the court continued, USB never told DEP precisely what it planned for Section 2. While full -scale development might not have been possible, a smaller project might have been feasible by using upland areas and limited filling of wet- lands. The court noted that in Section 1, USB had shown a measure of flexibility, suggesting a similar approach might have applied to Section 2. Requir- ing a permit does not amount to a taking, it contin- ued. There is no taking until the landowner has pur- sued the available regulatory process to its conclu- sion. Even if a permit is denied, there may be other viable uses for the land. Only when a permit is de- nied and the denial prevents economically viable use of the land has a taking occurred, the court con- cluded. The court's opinion is available fi -oin BPI's DocuDial service, No. 39 -4830, 4 p. I DocuDial Service W Copies of documents flagged by a phone in LULR may be pur- chased through DoeuDial, a service of Business Publishers, Inc. 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