Mr. Mangini discusses how the introduction of green building principles and the heightened interest in energy efficiency and cost savings has begun to influence the negotiation and operation of commercial leases and the build-out of tenant improvements. The article presents a summary and analysis of the issues that landlords and tenants should be aware of and what they need to build into their due diligence when dealing with a high-performance building.

You can read the full article online here. (PDF)

The construction of energy efficient buildings, the practice of conserving natural resources and recycling and the development and use of alternative fuels have all become prevalent concerns in our culture.  Not surprisingly, these concepts have thoroughly permeated the contemporary legal landscape providing both benefits and burdens to individuals and businesses alike.  The purpose of this article is to provide a summary of a few of the laws and incentives that impact the building and real estate industry.

Water Reuse Program
In light of the increasing demand placed on water supplies and the desire to reduce the impact of drought conditions, interest has grown in water reclamation and reuse, which entails the conversion of wastewater into reclaimed water through the application of specialized treatment for beneficial uses, such as landscape and agricultural irrigation, fire protection, dust control and street cleaning.
 

• The term “reclaimed water for beneficial reuse" (RWBR) is defined in the New Jersey Administrative Code to mean “[w]ater that meets restricted access or public access reuse requirements specified in a NJPDES permit that authorizes that water to be directly reused for non-potable applications in place of potable water, diverted surface water, or diverted groundwater.” N.J.A.C. 7:14A-1.2. 
• Under current State policy, as manifested through the New Jersey Department of Environmental Protection’s technical manual entitled “Reclaimed Water for Beneficial Reuse," dated January 2005 (“Guidelines”), the preparation of a water reuse feasibility study may be required for New Jersey Pollutant Discharge Elimination System (NJPDES) permits involving all wastewater treatment and disposal facilities with a design flow of at least 100,000 gallons per day and for water supply allocation permits involving the use of water for non-potable and consumptive uses. See also N.J.A.C. 7:19-2.2(g) (requiring applicant for water supply allocation permit to consider lower quality water for non-potable purposes).  Indeed, in issuing water allocation permits the DEP may require users to consent to the use of reclaimed water should such lower quality water become available, potentially creating a host of additional issues and challenges for builders.
• Any person, who actually produces or is seeking to produce RWBR is required under current State regulations to utilize the Guidelines and to obtain a NJPDES permit. N.J.A.C. 7:14A-2.15.
• A building project that makes use of recycled wastewater for landscape irrigation or sewage conveyance (i.e. toilet flushing) may earn water efficiency credits that can be applied towards certification under the Leadership in Energy and Environmental Design Green Building Rating System for New Construction (LEED-NC) formulated by the United States Green Building Council.

You can view a copy of the executive order here. Municipalities are constitutionally required to exercise their zoning discretion to allow for reasonable opportunities for affordable housing. Under the Fair Housing Act, COAH was created for the purpose of creating and enforcing those obligations. Unfortunately, most on all sides of the debate over affordable housing have agreed that COAH has fallen far short of it's obligations and created at least as many problems as it has opportunities. Indeed, State Senator Raymond Lesniak has introduced legislation seeking to abolish COAH and create totally new mechanisms for creation of affordable housing. Where and how this issue will end remains to be seen, but certainly the Governor and Legislature are shaking up the "house" as relates to affordable housing.

The time period for validity of Approvals is now further extended by the PEA Amendment until at least December 31, 2012 before the time begins to run on the validity of an Approval.   Subsequent to December 31, 2012, permits and approvals have a phased expiration whereby any unexpired portion of the term of the Approval further extends the Approval, limited to up to six (6) months from December 31, 2012, i.e., no later than June 30, 2013. In addition to the foregoing, a developer may exercise any unexercised extension applicable to such Approval. For example, if a developer were issued a permit on November 30, 2010 that was valid for two (2) years with the right to an additional one (1) year extension, the PEA Amendment would stop the clock on the expiration of this permit that would otherwise expire on November 30, 2012 and extend the expiration of the permit from November 30, 2012 to June 30, 2013. Should the developer be timely granted the one (1) year extension applicable under this scenario, the June 30, 2013 expiration would thereby be extended until June 30, 2014.

The Amendment is applicable to most municipal, county, regional and state development permits and approvals, but sets forth specific exceptions and limitations.  Property owners and developers with permits and approvals that are effective on or after January 1, 2007 should seek legal advice to determine the effect the PEA and the PEA Amendment may have on their development rights.

The articles discuss the recent plan to renovate the ailing Hamilton Square Shopping Center and enlarge its ShopRite supermarket from 53,000 square feet to 85,789 square feet. The shopping center, located at the corner of Route 33 and Yardville-Hamilton Square Road, currently has a vacancy rate of 30 percent or more.

The plans were introduced last week to the township zoning board and a decision will be made after the board meets for a final vote on the proposal on January 26, 2010 at the Hamilton Township Municipal Building. Mr. Forshner who represents Levin Properties, which owns the site, states, "We need to make sure that the locations along Route 33 are up-to-date, well-tended and rehabilitated. You don't want to end up with a blight situation along Route 33."

In order to be eligible for the Pay for Performance Program, (1) an applicant must be a customer of a regulated electric utility and/or gas utility in New Jersey, including Atlantic City Electric, Jersey Central Power & Light, Rockland Electric Company, New Jersey Natural Gas, Elizabethtown Gas, PSE&G and South Jersey Gas, and (2) the project for which an application is made must consist of one or more commercial, industrial, institutional or multi-family residential structures having over 200 kW average annual peak demand electrical usage (if the buildings are preexisting) or having at least 50,000 square feet or more of planned conditioned space (if the project calls for new construction).  Individual buildings, as well as multiple buildings in complexes owned by a single person or entity, may qualify for benefits under the program provided that they meet the above criteria.  Condominium associations may also be eligible to receive incentives for energy-efficient measures relating to common elements under this program.

In addition to the provision of loans for energy audits and qualified energy efficiency services, the Green Jobs-Green New York Program requires the Authority to award grants for certain purposes and to promote employment and training services.  In the way of funding, the New York State Legislature has appropriated $112,000,000 to finance the aforesaid loan program and the Authority’s other activities.  The Authority is not expected to begin implementing the Green Jobs-Green New York Program until the spring of 2010.

First, strangely missing from the new statutory definition of inherently beneficial use is any mention of religious institutions, affordable housing or certain other uses that have been long recognized as being inherently beneficial.  Although the list of uses contained in the definition is expressly stated not to be exhaustive, the omission of uses traditionally viewed as being inherently beneficial is troubling and could open the door to a reexamination of their value and purpose by municipal agencies and the courts.  Additionally, it is unclear whether the term “wind, solar or photovoltaic energy facility or structure” refers only to stand-alone facilities or to facilities that are accessory to (and situated on the same site as) other uses or structures, as well.  It also remains to be seen whether a wind, solar or photovoltaic energy facility that is connected to the grid and supplies excess energy to off-site users qualifies as inherently beneficial.

In order for lease negotiations to produce the right opportunities, a business owner must develop a full understanding of its own purposes in entering into the lease, the landlord’s actual or likely positions on “big picture” issues relating to the proposed deal and, in addition, the nature and extent of the proposed uses and operations within the leased space.  This is a prerequisite to negotiations.  Of course, a business owner should also be prepared to come to the table with an open mind and a willingness to compromise and consider creative alternatives.  In such instance, the business owner may succeed in cultivating a (or improving an already positive) relationship with the building owner, as well as furthering and protecting commercial interests.  For example, a tenant with a new business may be willing to expose itself to greater liability in the event of a default by signing a personal guarantee, for example, in exchange for some up-front assistance from the landlord, such as rent concessions during the first year of the term or contributions toward the cost of fitting out the interior of the premises.  In these financial challenging and legally tumultuous times, business owners should give special consideration to safeguarding your rights in the event of insolvency or bankruptcy and in the event condemnation or destruction of the premises.  Having the ability to assign freely your interests in a lease, especially to a newly formed or reorganized business entity and sublet or otherwise transfer those interests are also of paramount importance.   In any event, by being flexible and creative, the business owner stands to create an agreeable lease arrangement and, by the same token, the financial stability that this creates will also advance the long-term interests of the landlord. This is especially true in multi-tenant environments where the stability of one business owner contributes to the stability of another and creates a commercially attractive neighborhood. 
   

It is undeniable that the economic downturn has had a considerable effect on tenancy rates in Central New Jersey and elsewhere.  If you are a business owner who has managed to survive the recession, and you are looking for leaseable space, you should take advantage of the opportunities available in the current “tenant’s market.”   No matter the size of your business, as a tenant today, you don’t necessarily have to accept a lease as proposed by a landlord or sit on an existing lease that is ripe for renegotiation.  Similarly, landlords can take affirmative steps to hold onto existing tenants and attract new ones by providing incentives and by being flexible, in the negotiating process. 
   

Whatever your interests or purposes may be, business owners should take their leases seriously, especially now, given the real potential for securing favorable new deals and restructuring existing ones.  Business owners who fail to do so or who enter the fray unprepared and without the proper tools risk losing an opportunity and, quite possibly, jeopardizing their business - a lesson that some small businesses, unfortunately, have already learned.  Indeed, given the complexities inherent in preparing and negotiating a commercial lease (many of which have not been detailed here), business owners would be well advised to seek legal counsel before entering into any such agreement.

 
The seminar will be presented from 8:00 AM – 12:30 PM September 9, 2009 and September 10, 2009. The September 9th event will be held at The Villa in Mountain Lakes, New Jersey, and the September 10th event will be held at the Sheraton in Eatontown, New Jersey.

 

The seminar will provide actionable recommendations to cut energy costs immediately, while providing the insight to prepare for upcoming regulations and impending laws and current initiatives, like New Jersey’s Energy Master Plan. The material shared at the event will benefit New Jersey-based building owners, business owners, CFOs, energy managers and facilities managers - anyone who makes decisions about energy for buildings of 20K square feet or more.
Topics to be discussed include:

• Quick and no-cost building upgrades to reduce energy consumption
• Reducing peak demand
• Emerging technologies and incentive opportunities
• State Renewable Energy Tax Exemption
• Grants and loans for energy efficient projects
• Energy audits
• NJ Smart Start Buildings Pay-for-Performance Programs
• And other related topics.

Mr. Mangini will present the seminar with Joseph Carlamere of New Jersey SmartStart Buildings. Mr. Carlamere is involved in environmental consulting, company TRC’s design and development of the sector initiative of New Jersey’s Clean Energy Program as part of the team developing programmatic strategies that resonate to the following sectors: industrial, institutional, multi-family, higher education and hospitality. He also manages the Local Government Energy Audit Program for the NJOCE and the BPU.
 

Additional information and details on how to register for the events is available online here.
 

Recently, in the matter of Friends of Peapack-Gladstone v. Borough of Peapack-Gladstone Land Use Board, et al., the Appellate Division of the New Jersey Superior Court interpreted this provision of the MLUL and decided, among other things, that the running of the period of approval for 18 golf cottages was tolled when a zoning officer declined to issue a building permit for the construction of the second such cottage, “because of his perception that the project was being advertised in a manner contrary to the Board’s prior approvals.”  In the Court’s view, the zoning officer was “plainly” acting as an agent of the Borough, a political subdivision, in rendering this decision which, according to the Court, “was manifestly an effort on his part . . . to ‘protect the public health and welfare’ in the Borough [and] . . . had the direct and indirect effect of halting the developer’s work on the project, at a time at which the developer was evidently ‘ready, willing and able to proceed’ with the building of the next dwelling.”

The Appellate Division’s decision in Friends of Peapack-Gladstone v. Borough of Peapack-Gladstone Land Use Board, et al. may be viewed on WestLaw at 2009 WL 1643315 (N.J.Super. A.D.) and has been approved for publication.

By this case, the Appellate Division has provided a clear message to all parties involved in the prosecution and disposition of applications for development under the MLUL that a failure on the part of municipal board members to abide by N.J.S.A. 40:55D-10.2 - while not triggering a new hearing - will likely cause the board’s decision to be deliberated and voted on anew.  The Appellate Division’s decision in Schmidhausler v. Planning Board of Borough of Lake Como may be viewed on WestLaw at 2009 WL 1491306 (N.J.Super. A.D.) and has been approved for publication.

The Appellate Division of the Superior Court of New Jersey recently affirmed a trial court’s decision finding that the property owner was without recourse when its tenant was relocated and the New Jersey School Construction Corporation (“NJSCC”) decided not to acquire the property.  R.A.R. Development v. Associates v. New Jersey Schools Constr. Corp., 2008 WL 2663403 (N.J. Super. A.D. 2009).  In this particular case, NJSCC targeted a property for acquisition in order to build a new school.  After making an offer to acquire the property but before filing a condemnation complaint, NJSCC agreed to relocate a commercial tenant located at the property in question.  Since the relocation was going to take more than one year at a cost of approximately $5 million, NJSCC did not want to wait for the condemnation complaint to be filed before starting the relocation process.  When the move was almost complete, NJSCC decided not to acquire the property.  The property owner was extremely upset since it lost a tenant occupying over 100,000 square feet of space.
 

The property owner filed a lawsuit against the NJSCC alleging several causes of action, including tortuous interference with contractual and economic advantage, estoppel and inverse condemnation.  In terms of the tortuous interference claims, the court found that the NJSCC acted in good faith and pursuant to its statutory rights since New Jersey law permits the relocation of tenants prior to acquiring property by eminent domain (subject to certain requirements).  In terms of the estoppel argument, the court found that the property owner did not rely to its detriment on any representations of the NJSCC concerning the relocation of its tenants.  Finally, the court dismissed the inverse condemnation claim finding that the lease was at the end of its term (1 month remaining at the time the tenant completed its move) and the tenant had paid all rent due through the term of the lease.  In rejecting the property owner’s agreement that it was entitled to compensation for the taking of its renewal option, the court held that a “landlord’s expectation that the tenant will exercise the right of renewal does not confer on the landlord a recognized property interest subject to just compensation for its taking.”
 

The property owner in this case was harmed, but without recourse.  When negotiating with a condemning authority, one must keep in mind that New jersey law allows a condemning authority to change its mind at various stages of the process with little regard for the property owner’s rights.

Mr. Mangini states, "Green building is defined in a number of ways, depending on the context. The Environmental Protection Agency defines it as “creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life cycle, from siting to design, construction, operation, maintenance, renovation, and deconstruction.”

You can read the full roundtable discussion online here. (PDF)

1) Amend the bill to require a firm 20% set-aside for affordable housing (COAH or Mt. Laurel Housing) as opposed to the 20% being a cap on the amount of affordable housing; and
 

2) Granting municipal boards discretion to decline a conversion if they are not satisfied that the conversion will not cause substantial detriment to the public good and will not substantially impair the intent and purpose of the zone plan and zone ordinance. 
 

The bill now requires the legislature to amend the bill in accordance with the foregoing requirements.  A copy of the Governor's Conditional Veto is available online here.