New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

Under N.J.S.A. 40:55D-21, if a developer is “barred or prevented, directly or indirectly,” from moving forward with an approval obtained pursuant to the Municipal Land Use Law (MLUL) “during the period of approval” on account of the institution of “a legal action” or the issuance of “a directive or order” by, among other government actors, a “political subdivision” for the purpose of “protect[ing] the public health or welfare” at a time when “the developer is otherwise ready, able and willing to proceed[,]” then - in such instance - the period of approval shall be suspended for so long as “said legal action is pending or such directive or order is in effect.”

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.

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Recently, in the matter of Schmidhausler v. Planning Board of Borough of Lake Como, the Appellate Division of the New Jersey Superior Court addressed, among other issues, what the remedy for an aggrieved party should be when a municipal board renders a decision on an application for development under the Municipal Land Use Law that is tainted by the failure of one of its members to read or listen to the testimony presented on the matter during a prior meeting in violation of N.J.S.A. 40:55D-10.2.  In this case, the planning board voted to approve an application for a subdivision with variance relief by a narrow one-vote margin.  The plaintiffs argued that the remedy in such instance should be the striking of the disobedient board member’s vote.  The Appellate Division, however, was not persuaded by plaintiffs’ suggestion, especially here, where such action “would result in a tie vote and . . . an automatic denial of the application.”  Instead, the Court opted to remand the matter to the planning board for another round of deliberation and a new vote after “those who had not attended one or all of the hearings in this matter review the transcript of any meeting or meetings that they may have missed[ and] certify they have done so[.]” According to the Court, this course of action was preferable to “denying the application outright or putting all of the parties to the cost and expense of an entire new hearing[.]”

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.

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Although municipal boards are not bound by the strict rules of evidence during the conduct of proceedings, their findings and determinations must be based upon substantial credible evidence created in the record. This applies when a municipal board acts in a quasi-judicial capacity during the review of applications for development under the Municipal Land Use Law, N.J.S.A. 40:55D-1, et seq. (“MLUL”), and when a municipal board (specifically, a planning board) acts in a quasi-legislative capacity during a preliminary investigation into whether certain properties are in need of redevelopment pursuant to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1, et seq. (“LRHL”).

In order to meet the substantial evidence standard an adequate record must exist. This requires a verbatim recording of the proceedings. The MLUL expressly requires that “[t]he municipal agency shall provide for the verbatim recording of the proceedings by either stenographer, mechanical or electronic means.” N.J.S.A. 40:55D-10f. Although there is no comparable provision in the LRHL, the Appellate Division in Concerned Citizens v. Mayor implied that the minimum procedures required for hearings on applications set forth in the MLUL applies equally to the conduct of proceedings by municipal agencies under the LRHL. 370 N.J.Super. 429, 463 certif. denied 182 N.J . 139 (2004). The application of the MLUL in this regard is reasonable in light of the importance a written record plays in memorializing issues, concerns and policy considerations that were relevant when the municipal board made its determination. A written record of proceedings also provides the judiciary with a basis for evaluating the validity of a determination when it is challenged on appeal.

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On March 31, 2009, Governor Jon Corzine signed into law new legislation known as the Residential Development Solar Energy Systems Act. (P.L. 2009, c.33) codified at N.J.S.A. 52:27D-141.1, et seq.. The Act requires developers of residential developments containing 25 or more single-family dwelling units to disclose in advertising and offer to install solar energy systems. The act requires the Department of Community Affairs (DCA) in consultation with the Board of Public Utilities to adopt regulations respecting the technical sufficiency of solar energy systems to be installed pursuant the act and prescribes certain minimum standards.  For example, a solar energy system installed under the act shall have components that are new and shall have a manufacturer’s warranty of not less than 10 years.

Although the Residential Development Solar Energy Systems Act became effective immediately, in actuality, it shall apply only to dwelling units that have received a construction permit on or after the 90th day following the DCA’s promulgation of the aforesaid technical sufficiency regulations for solar energy systems.

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Under the Local Redevelopment and Housing Law (LRHL), a redevelopment entity is allowed to enter into a contract with a private redeveloper. The redevelopment entity is allowed broad discretion in selecting a private redeveloper and currently no specific statutory guidelines for the designation of a redeveloper exist. However, a redevelopment entity must still act rationally in choosing a redeveloper for a given redevelopment project. For example, a redevelopment entity must be sure that the redeveloper it selects is competent having both the technical expertise and the financial wherewithal to carry out the redevelopment project with which it is being entrusted. The Appellate Division of the New Jersey Superior Court made clear in Vineland Const. Co. Inc. v. Township of Pennsauken, 395 N.J. Super. 230, 255 (App. Div 2007) that mere “political connections” are insufficient to justify the designation of a particular person or company as a redeveloper. The public good is not served by such an appointment. Ibid. at 257-258.

 

A redevelopment entity must also take care not to enter into a redeveloper agreement in anticipation of the project area that is the subject of such agreement being made the subject of a redevelopment plan. On the contrary, in Monroe Properties, LLC, et al. v. The City of Hoboken, et al., an unreported decision decided after the Vineland Const. case, the Appellate Division squarely rejected an attempt on the part of a municipality to select a private redeveloper prior to designating the study area as an area in need of redevelopment. The Court made clear that a municipality or other redevelopment entity has no inherent authority to enter into a memorandum of understanding for redevelopment but, rather, must abide by the statutory procedure set forth in the LRHL. Once a municipality has determined that a particular geographic area within its jurisdiction is in need of redevelopment or in need of rehabilitation and has adopted a redevelopment plan for such area, then it or a separate redevelopment entity designated by the municipal governing body may exercise redevelopment functions, which include, among other things, entering into contracts with redevelopers “for the planning, replanning, construction, or undertaking of any project or redevelopment work.” N.J.S.A. 40A:12A-8f.

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In order for the evidence adduced during municipal board hearings to be relied upon in making factual findings it must in every instance be given under oath. Indeed, even in settings where the rules of evidence are relaxed the Appellate Division of the New Jersey Superior Court has recognized “the importance of administering the oath before a witness may testify.” Penbara v. Straczynski, 347 N.J.Super. 155, 158 n.1 (App. Div. 2002). Sworn testimony is expressly required under the Municipal Land Use Law. N.J.S.A . 40:55D-10d. Although there is no comparable provision in the Local Redevelopment and Housing Law, at least one trial court in an unreported decision has held that the purpose for requiring competent evidence in municipal board hearings under the MLUL applies equally to proceedings conducted by planning boards under the LRHL. See Cramer Hill Residents ASO v. COO Primas and the Camden Redevelopment Agency (Docket No. CAM-L-008135-05), decided January 23, 2006. In addition to purely statutory considerations, a municipal agency’s reliance upon unsworn testimony in making a redevelopment determination, which implicates the rights of property owners within the study area and the public at large, may violate due process.

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A person whose property has been condemned and who is involved in litigation with the condemning authority over the validity of the taking will lose the right to continue the appeal if they withdraw all or any portion of the funds on deposit with the court pursuant to the Eminent Domain Act of 1971, N.J.S.A. 20:3-1, et. seq.; N.J.S.A. 20:3-23. Indeed, last year in Township of Piscataway v. South Washington Avenue, LLC, the Appellate Division of the New Jersey Superior Court specifically ruled that “a condemnee could not accept or withdraw deposited funds and thereafter appeal the condemnation on any ground other than the amount of compensation due." 400 N.J.Super. 358, 369.


According to the Court in South Washington Avenue, this holding “fully accords” with existing case precedent relating to appeals from judgments by litigants, who have voluntarily accepted the benefits of such judgments. In those instances, under the common law, a litigant would be prohibited from attacking such a judgment on appeal. Ibid. at 369. The Appellate Division also viewed its ruling as being consistent with the Eminent Domain Act’s provision relating to the withdrawal of funds. Although the Eminent Domain Act provides that the withdrawal of money from court shall not “affect or prejudice the rights of . . . the condemnee in the determination of compensation[,]” N.J.S.A. 20:3-27, the statute does not afford similar protection to the rights of the condemnee in the determination of a taking’s validity and such omission “implicitly bars a condemnee who makes a withdrawal of the deposit from asserting any rights other than those relating to the amount of compensation.” 400 N.J. Super. at 368.

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Unlike a redevelopment area designation, which must be based upon substantial credible evidence in the record, there is nothing in the Local Redevelopment and Housing Law (LRHL) that requires the contents of a redevelopment plan to be based upon substantial evidence. On the contrary, as recognized by the Appellate Division of the New Jersey Superior Court in Bryant v. City of Atlantic City, the LRHL “[r]equires only that the plan include an ‘outline’ for the development of the project area indicating [among other things] (1) its relationship to certain local objectives [and] (2) the proposed land uses and building requirements in the project area[.]” 309 N.J.Super. 596, 617-618 (1998). This general rule, however, as it applies to redevelopment plan amendments was questioned recently in an unreported case entitled St. Paul’s Missionary Baptist Church v. City of Vineland, et al., decided by the Appellate Division on July 15, 2008.

In St. Paul’s Missionary Baptist Church, a municipal governing body, after receiving a proposal from the designated redeveloper, amended a redevelopment plan to provide for the operation of a homeless shelter as a permitted use within the zone. Although the city followed the procedures outlined in N.J.S.A. 40A:12A-7 required for amending a redevelopment plan which, as already stated, do not require specific findings based upon substantial evidence, the Court was nevertheless convinced that the substantial evidence test must be applied to a redevelopment plan amendment where, as here, “it calls for such a significant change in the permitted use in the area.” Indeed, the Appellate Division could not find “any reason, of public policy or otherwise, for a distinction between the level of proof required to create a redevelopment zone, and that which should be required for a significant change in use within that zone . . .” and in light of the city’s failure to furnish such evidence to support it inclusion of homeless shelters in the redevelopment plan the Court found the ordinance amending the redevelopment plan to be “arbitrary, capricious and unreasonable.”

Also underlying the decision in St. Paul’s Missionary Baptist Church was the Court’s discomfort with city’s decision to modify the permitted uses within the redevelopment zone in response to the designated redeveloper’s proposal. Although homeless shelters were identified in the city’s master plan as being needed facilities, the master plan “did not designate a [specific] geographic area . . . where such shelters should be located[]” and, as such, “without further justification,” the Court was of the opinion that the city’s action in amending the redevelopment plan was “analogous to ‘spot zoning,’ the impermissible re-zoning of a lot or parcel of land for the benefit of an owner for a use incompatible with surrounding uses, and which does not further the comprehensive zoning plan.”

Although St. Paul’s Missionary Baptist Church is not precedential, it raises doubts about how New Jersey courts will evaluate the validity of substantial amendments to redevelopment plans that change major land use requirements applicable to a zone, such as the permitted uses, especially when such modifications are made in response to a redeveloper’s proposal.

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When negotiating the terms of a redevelopment agreement with a redevelopment entity it is crucial to pay close attention to the wording of the redevelopment entity’s remedies upon default, especially if the redevelopment project is going to involve mortgage financing. Indeed, in such instance, a redeveloper should try to avoid including a provision in the redevelopment agreement that subjects its interest in whatever property it might acquire within the redevelopment project area to forfeiture upon default. However, if the redevelopment entity insists upon having such a remedy, then it should be made subject to the redeveloper’s right of redemption under any mortgage. Otherwise, a redeveloper runs the risk of losing title to property previously conveyed to it by the redevelopment entity upon default under the redevelopment agreement (whether or not the redeveloper is in default under the mortgage at the time the redevelopment entity seeks reversion of title). This situation was recently addressed by the Appellate Division of the New Jersey Superior Court in Mercer County Improvement Authority v. Trenton Studios, Inc. in an unpublished case decided on August 21, 2008.

 

In Trenton Studios , a redevelopment entity initiated foreclosure proceedings and sought reversion of title, among other relief, after the redeveloper had defaulted under a mortgage held by the redevelopment entity and the redevelopment agreement. The redeveloper claimed, among other things, that enforcement of the redevelopment agreement’s forfeiture remedy impermissibly interfered with the redeveloper’s equitable right of redemption. In evaluating this issue, the Appellate Division agreed with the redeveloper’s position “that a remedy which flows from the [m]ortgage due to a default under the [m]ortgage cannot clog the equity of redemption.” However, the Court rejected the redeveloper’s assertion that the redevelopment entity was limited the those remedies, such as foreclosure, that flow from the mortgage. In this regard, the Court observed that since the redevelopment agreement “does not incorporate the default events” contained in the mortgage and has “separate and independent conditions, obligations and events of default[,]” it is a “distinct instrument[]” that is neither subject to nor intertwined with the mortgage. “Therefore, while reconveyance of title and possession is not a viable remedy under the [m]ortgage because it would clog the equity of redemption, it does not prevent plaintiff from seeking that remedy under the terms of the [r]edevelopment [a]greement.”

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Under the Local Redevelopment and Housing Law a municipality may declare private property to be blighted if “[t]he generality of buildings are substandard . . . dilapidated, or obsolescent . . . or are so lacking in light, air, or space,” and such conditions are “[c]onducive to unwholesome living or working conditions.” This is the first of eight enumerated criteria set forth in the statute, which is sometimes referred to as the “a” criteria (because it is codified at N.J.S.A. 40A:12A-5a).

 

In order to prove that property within a redevelopment study area meets the “a” criteria it is essential for municipal officials to do their homework and actually document findings of fact that support both prongs of the “a” criteria test. In 2005, the Appellate Division of the New Jersey Superior Court in case entitled ERTEC v. City of Perth Amboy, which is reported at 381 N.J.Super. 268, identified the types of data that need to be collected and analyzed in evaluating whether property satisfies the first prong of the “a” criteria - that is whether “[t]he generality of buildings are substandard . . . dilapidated, or obsolescent . . . or are so lacking in light, air, or space[.]” Among these data items are (i) land use and topographic information, (ii) environmental conditions (iii) building and fire code violations, (iv) exterior and interior building conditions and (v) building permit data. As for the second prong of the “a” criteria, that being the linkage between substandard, dilapidated, obsolescent or overcrowded conditions and “unwholesome living or working conditions,” the Court suggested in ERTEC that municipal officials undertaking a redevelopment study look at such things as “occupancy rates” within the study area. Indeed, if a “dilapidated” area, which may be “lacking in light, air, or space” is, nevertheless, a functional commercial, residential or mixed use neighborhood, it may not be declared in need of redevelopment under the “a” criteria.

 

More recently, on August 7, 2008, in an unreported decision entitled City of Long Branch v. Anzalone, the Appellate Division, among other things, examined the methodology of obtaining and evaluating evidence to support a redevelopment designation using the “a” criteria and the quality of such evidence. In that case, municipal officials conducted a “windshield” survey of exterior conditions of properties being considered for redevelopment using six assessment criteria derived from city and state building codes that included “broken windows; ‘deteriorating’ paint; exterior columns that were falling or rotten; masonry veneer that was cracked or chipped; structural parts like walls, roofs, stairs, porches, balconies, and siding that showed ‘evidence of deterioration’; and ‘evidence of apparent defects’ in gutters, leaders, drains, window frames and doors.” According to the city’s data evaluation methodology, a building that satisfied one or two of these criteria would be categorized as “fair” and a building that satisfied three or more of these criteria would be considered in poor condition. The Court in Anzalone found the city’s system to be wholly deficient criticizing the city’s procurement of data through a windshield survey and its examination of property characteristics that “might well be deemed more cosmetic than substantial.” The Court was also concerned about the lack any “expert opinion setting forth standards by which blighted structures should be gauged.”

 

In light of the foregoing, there is little doubt that the task of delineating a redevelopment zone using the “a” criterial is a formidable one that requires a clear methodology for obtaining and evaluating relevant data that establishes the required linkage between certain deleterious property characteristics and unwholesome living and working conditions.

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