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November 1, 2013

Re:          Appellate Court Decision Regarding Sand Dunes        
Petrozzi v. Ocean City

Dear Mayor,

The League has received a number of inquiries regarding a recent Appellate Division case, Petrozzi v. Ocean City, and its impact on shore towns in light of the Superstorm Sandy rebuilding process. In essence this case stands for the idea that if a municipality agrees to keep the dunes below a certain height in order to obtain easements, if it is unable to lower them due to the Department of Environmental Protection (DEP) refusing to issue a permit, it will have to pay damages to the property owners it negotiated the easements with.  We would like to take this opportunity to explain the precedential nature of the case and its possible impact.

This case centers on the contractual agreements made by a municipality with property owners before a dune building project. In the early 1990’s Ocean City had entered into a number of perpetual easements with shorefront property owners to build dunes. The homeowners granted these easements after the City agreed to limit the height of the dunes. While the easements were being procured, legislation was passed that required DEP approval of dune projects. Over time the dune height increased. Because the DEP denied the city’s permit application, Ocean City was unable to lower the dunes. The homeowners sued the City for the loss of their view.

The city argued that it should be excused from the agreement because it was unable to perform its promise, lowering the dunes, because of the DEP’s refusal to grant permission. The Appellate Division agreed with that argument regarding the property owners it had taken leases from before the legislation giving the DEP authority over dune projects was passed. After the law was passed the City was presumed to have notice that it might not be able to fulfill its promise to keep the dunes below a certain height. To those property owners it is obligated, the court reasoned, to pay for the decreased value. Keep in mind however, that that value will be offset by the benefit garnered to the property owners by creating the dunes pursuant to Karan v. Harvey Cedars.

Currently many municipalities, as well as the State, are in negotiations to acquire easements for dune projects. This recent decision should be a reminder that municipalities should not, in order to get easements more easily, promise to keep dunes below a certain height. The municipalities might not be able to follow through with that promise, without DEP approval, and would be liable to homeowners for their lost view.

If there are any question regarding this case please contact the League’s staff attorney, Ed Purcell, at (609) 695-3481 x 137 or .


Very truly yours,

William G. Dressel, Jr.
Executive Director





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