In Greenridge Estates, a developer filed an application for preliminary major subdivision approval with the local planning board and, two days later, the municipal governing body adopted an ordinance requiring certain disclosures by applicants for land use approvals. For example, the said ordinance provided that an applicant must “[d]isclose all political donations made by the applicant, and any professionals of the applicant, within the past two (2) years, and any business relationship of the applicant or any of the applicant’s professionals with a board member, and list all consultants, facilitators or other professionals used in connection with the pending application.” All such disclosures “shall be a required checklist item for any land development application requiring a variance, waiver or exception,” and any “knowing failure” on the part of an applicant to comply with this mandate “shall be punishable by a two thousand dollar[-f]ine and/or remanding of the application to the board for reconsideration.”

When the planning board had deemed the developer’s application incomplete for failing to make the aforesaid disclosures, the developer filed suit against the municipality. In evaluating the merits of the developer’s challenge, the trial court described the controversy as impinging upon the developer’s constitutionally protected right to freedom of association and right to privacy and invalidated the Monroe Township ordinance on both grounds. The trial court based this ruling principally on the lack of a rational connection between the disclosures required by the subject ordinance and the stated purpose of the ordinance, that being the elimination of appearances of impropriety, and due to its being both over-inclusive and under-inclusive. In this regard, the trial court opined that “[t]here cannot be an appearance of favorable treatment due to political contributions since none of the members of the Zoning Board of Adjustment are elected, and only two of the nine Planning Board members may be elected officials.” In addition, “the Ordinance cannot be upheld because it is overly-broad[,]” since it requires the disclosure of all political contributions irrespective of the amount or the person to whom they were made requiring, hypothetically, “the disclosure of a $10 political contribution made by an applicant to the governor of Hawaii[.]” By the same token, “the Ordinance is under-inclusive[,] . . . because it does not apply to objectors to an application.”

In addition to constitutional infirmities, the trial court struck the “remand remedy” in the ordinance due to the lack of legislative authority in the MLUL to enact such provisions and “without such authority in the MLUL, the governing body cannot confer upon itself or anyone else the authority to remand an application for reconsideration once rights have vested.”

In the face of mounting regulations at every level of government, the Greenridge Estates decision is a breath of fresh air for beleaguered landowners and developers in Monroe Township. Although not precedential, the Greenridge Estates decision is well-reasoned and could serve as a springboard for positive rulings in other cases and the eventual elimination of local disclosure laws in the land use application process.

On April 30, 2008, the Appellate Division in Cotswold v. Renaud, et al. evaluated whether an historic fountain, although not affixed to the real estate, was protected under a local preservation of historic landmarks ordinance.  In this case, a dispute arose when a property owner sought to remove from the grounds of an historic estate a six-foot high fountain after converting the property into condominiums without first obtaining a certificate of appropriateness from the municipality under the ordinance.  The fountain / statue, which consisted of four figures around an urn and weighed over 1,000 pounds, was designed by sculptor, Enid Yandell, and had been located at the historic estate since 1925.  The property owner maintained that the fountain was not attached to the land, and, therefore it was not a fixture was not within the historic site designation. After being instructed by the municipality to return the fountain, the property owner instituted a declaratory action for a court order finding the fountain to be outside the ambit of the municipality’s regulatory authority under the ordinance.  The municipality brought a counterclaim requesting the return of the fountain and the imposition of penalties.  The trial court ruled that the fountain was a part of the historic estate and ordered the property owner to return it until and unless the property owner is able to obtain a certificate of appropriates for its removal and relocation.  The trial court denied the municipality’s request for penalties.

On appeal, the property owner reiterated its position that the fountain is not properly governed by the local preservation of historic landmarks ordinance and also raised, for the first time, the contention that the subject ordinance is unconstitutional, as applied, because it effects a taking of the fountain.  The Appellate Division affirmed the trial court’s ruling in all respects and rejected the property owner’s constitutional argument stating, among other things, that “the Ordinance does nothing more than require that the fountain remain on the property where it has been for more than eighty years unless a Certificate of Appropriateness is obtained.”  Under these circumstances, which neither establish a physical taking nor deprive the property owner of all economic or beneficial use of the fountain, there is no governmental taking.

The facts of Toll Bros, like all cases, are of importance to understanding fully the context of the instant controversy and the breadth of the Supreme Court’s decision.  Briefly, the developer in this case - Toll Brothers, Inc. - acquired a parcel of land in foreclosure with municipal and county approvals and, thereafter, entered into developer’s agreements with Burlington County and Moorestown Township to memorialize its agreement to complete certain off-tract roadway improvements, which the local planning board and the county planning board had required as a condition of the approvals applicable to the Toll Brothers property and a smaller, adjacent parcel owned by another corporate entity.  Over time, Toll Brothers substantially decreased the scope of the original development plan for its property while the approximate cost of the required off-tract improvements had risen from $2,100,000 to $5,000,000.  However, notwithstanding these circumstances, neither the County nor the Township were willing to adjust Toll Brothers’ obligations and, consequently, a multitude of lawsuits were commenced.

The trial court consolidated all of the aforesaid actions and found, among other things, that unlike the conditions of approval contained in a resolution Toll Brothers had no right to seek a modification or reformation of a developer’s agreement based upon a change in circumstances.  In a reported decision, 388 N.J.Super. 103 (2006), the Appellate Division affirmed the trial court with respect to its rulings on the County’s right to enforce its developer’s agreement, but reversed the trial court’s decision regarding the Township’s developer’s agreement.  The reason for the Appellate Division’s distinction in this regard resided in the specific text of each contract.

Under the County’s developer’s agreement, Toll Brothers had to construct all the off-tract improvements when the number of buildings for which it had received permits generated more than 18% of the traffic projected for development under the original plan.  As such, according to the Appellate Division, Toll Brothers’ downsizing was largely irrelevant to the County’s developer’s agreement, because its obligation to build out the improvements was not tied to the completion of development under the original plan but, rather, accrued upon the 18% trigger. 388 N.J.Super. at 129.  Although the Appellate Division acknowledged that the Municipal Land Use Law prohibited the County from requiring Toll Brothers to build the off-tract improvements identified in the developer’s agreement as a condition of approval for Toll Brothers’ downsized development plan, it ruled that such limitations are inapplicable to a voluntary agreement. Ibid. at 123-124.  Contrarily, under the Township’s developer’s agreement, the contractual language required staged improvements that were directly linked to the original development plan and, therefore, could not be enforced once the scope of such plan had been reduced. Ibid. at 130-131.

On appeal, the Supreme Court began its analysis by recognizing that “[u]nder the MLUL, a planning board may only impose off-tract improvements on a developer if they are necessitated by the development.”  As such, “[a] developer cannot be compelled to shoulder more than its pro rata share of the cost of such improvements. . . . [This] is so even if the developer is a willing participant in a separate developer’s agreement.” – A.2d –, 2008 WL 833160 (N.J.) at *1.  To hold otherwise, would be contrary not only to the letter and spirit of the MLUL, but also sound public policy. Ibid. at *14.

Furthermore, even if disproportionate public benefits and improvements could be obtained from developers on a truly voluntary basis, such arrangements would “[p]lainly violate the nexus and proportionality requirements in the MLUL that serve as the Legislature’s check on a municipality’s limited planning power[,]” and thereby would be unenforceable.  A municipality’s exercise of this “limited planning power” must comply with the dictates of the MLUL even if the same is expressed in a contract rather than a resolution of approval.  Indeed, “[a] developer and a municipality cannot do by contract what the statute prohibits.” Ibid. at *15.  On the contrary, “[a] developer’s agreement is an ancillary instrument, tethered to the conditions of approval, and exists solely as a tool for the implementation of the resolution establishing the conditions.  Accordingly, if the resolution . . . changes, the developer’s agreement enjoys no independent status and must be renegotiated.”  As such, “[w]e do not view the ancillary developer’s agreement as a bar to Toll Brothers’ application for modification of the resolution setting the conditions of approval.” Ibid. at *13.

The Court also rejected the County’s alternative arguments, namely, that “[e]ven if Toll Brothers is not barred from advancing a changed circumstances challenge to the conditions of approval,” it is not entitled to relief, because the project was not completely abandoned and “[b]ecause the County relied to its detriment on what it considered the binding developer’s agreement in its later dealings with other developers.”  As to the first alternative point, the Court stated that limiting a developer’s right to seek a modification of a condition of approval only to instances where a project is abandoned “would offend the nexus and proportionality requirements reflected in the MLUL.”  Respecting the County’s detrimental reliance claim, the Court likened this to promissory estoppel and given that “[b]oth Toll Brothers and the County knew or should have known that the conditions of approval were subject to change if the facts in the case changed and that the developer’s agreement was not a stand-alone obligation[,]” the County’s reliance was not reasonable and, therefore, “this argument too must fail.” Ibid. at *15-16.

In light of the Court’s determinations, it reversed the Appellate Division and remanded the matter to the trial court for further proceedings.

The foregoing summary of Toll Bros. v. Board of Chosen Freeholders shows how the Supreme Court in this case was determined not to let local and county government reap a windfall of public benefits at the expense of a single developer, who for one reason or another was unable to complete a particular project as originally approved and, instead, send a firm message that such situations call for flexibility and accommodation.  The common sense approach taken by the Supreme Court will have positive implications for developers and the building industry, especially now, in the current financial climate where flexibility is unquestionably at a premium.

Some time later, the planning board discovered that the completed improvements differed from the approved site plans and demanded that the plaintiffs remedy all such deficiencies.The plaintiffs filed suit challenging the planning board’s decision. In addition to requests for declaratory and injunctive relief, the plaintiffs brought claims for damages under the Tort Claims Act and the Civil Rights Act of 1871. In response the planning board filed a claim against the plaintiffs under the Frivolous Litigation Statute and one of its members, who the plaintiffs were suing personally, brought a counterclaim alleging the plaintiffs’ facilities constituted a nuisance.

The chancery judge found, among other things, that the planning board was not estopped from requiring the plaintiffs to comply with the approved site plan despite the issuance of a certificate of occupancy and, as such, required the plaintiffs to either submit to the planning board an amended site plan application or comply with the site plan, as approved. Additionally, the chancery judge dismissed without prejudice the Tort Claims Act causes of action for failing to comply with the statute and dismissed with prejudice the Civil Rights Act claim on grounds of immunity.The chancery judge also dismissed the nuisance counterclaim and denied the planning board’s request for counsel fees under the Frivolous Litigation Statute.

The plaintiffs appealed from the judgment of the trial court, which the Appellate Division affirmed. In upholding the trial court’s ruling on the estoppel issue, the Court found that the plaintiffs had no grounds for reliance upon the certificate of occupancy.

Although the CO was issued by the Planning Board on their engineer’s apparently erroneous recommendation, plaintiffs did not fulfill their obligations either.  The authorizing resolution and the application for the CO specifically required plaintiffs to bring any deviations to the Planning Board’s attention, and they chose not to do so. . . . [P]laintiff’s knowledge and failure to act in accord with the resolution and the application for a CO defeats their claim of equitable estoppel.

In light of this determination, the Court concluded that the planning board “[w]ill not be barred from compelling plaintiffs to modify their completed site, or seek approval of a modified site plan, despite the issuance of a CO.” 

In Gregory v. Borough of Avalon, recently approved for publication, the Appellate Division evaluated the legality of extending the period of limitations under Rule 4:69-6(a) for challenging resolutions of a municipal governing body that are closely related to a subsequent resolution of a municipal board that was challenged in a timely manner in the same action.  The Court answered this question in the affirmative based upon the unique set of circumstances involved in the case.

Specifically, the owner of a beachfront motel seeking preliminary and final major site plan and variance approval to expand its facilities, prior to the municipal board’s hearing on the matter, obtained permission to maintain these encroachments certain encroachments in the street right-of-way and over public dunes, which the governing body gave in the form of written agreements and authorized by resolution.  In partial reliance upon these encroachment continuation agreements, the municipal board granted the owner’s site plan application and request for variance relief.  Following the municipal board’s memorialization of these approvals by resolution, several objectors asked the municipal board to reconsider its decision based upon assertions supported by a transcript of testimony given in a prior proceeding that the owner had made misrepresentations to the municipal board on the aforesaid application.  Soon thereafter, the objectors filed an action in lieu of prerogative writs challenging both the validity of the municipal board’s action and, although out of time, the governing body’s resolutions.  In light of the pending litigation, the municipal board did not rule upon the objectors’ request for reconsideration.  The trial court dismissed the objectors’ challenge to the resolutions of the municipal governing body as untimely and upheld the municipal board’s resolution granting site plan and variance approvals without considering the objectors’ supplemental evidence.

In deciding the pivotal issue of the appropriateness of enlarging the time to appeal the resolutions of the municipal governing body, the Court first recognized the public interests involved in authorizing “a private property owner to encroach upon a public beach area or property dedicated to a street right-of-way” and the significance of “the issues presented by plaintiffs’ challenge to the resolutions,” namely whether the municipal governing body could legally authorize the parking and dune agreements only by ordinance.  Moreover, the Court found that the “close relationship between the . . . governing body’s resolutions authorizing the parking and dune agreements and the [b]oard’s resolution granting the land use approvals” further supported its decision in this regard.

Following its determination on the timeliness of the objectors’ appeal, the Court remanded the portion of the matter relating to the resolutions of the municipal governing body to the trial court “for a determination on the merits of plaintiffs’ challenge to the parking and dune agreements[,]”  and ordered the municipal board to reconsider the owner’s application for development “[i]n light of the court’s disposition of the challenge to the agreements and the evidential materials plaintiffs submitted in support of their application for reconsideration.”

In Weeden v. City Council of Trenton, recently approved for publication, the Appellate Division evaluated whether a zoning board of adjustment (“ZBA”) has jurisdiction to grant variances from a redevelopment plan that serves as an overlay to existing zoning.  The Court answered this question in the affirmative based upon, but apparently not limited to, the unique set of circumstances involved in the case.

Specifically, an applicant interested in constructing a combined fast food restaurant with drive-thru on property located within a redevelopment overlay zone, made application to the local ZBA for a use variance from an express prohibition in the redevelopment plan for drive-thru operations.  After the ZBA approved the application, an objector filed an appeal with the municipal governing body, which affirmed the ZBA’s grant of the use variance.  The original objector, along with others, then filed a complaint in lieu of prerogative writs alleging that the ZBA had no authority to grant a use variance and that, even if it did, the grant of a use variance in this case was otherwise arbitrary and capricious.  The complaint also challenged City Council’s decision affirming the ZBA’s grant of a use variance.  The trial court ruled that the ZBA, indeed, had jurisdiction to grant variances from the redevelopment plan, but remanded the matter to City Council due to that body’s failure to conduct a de novo review of the ZBA’s decision, and retained jurisdiction.  Upon remand, City Council reaffirmed its initial decision.  The parties provided dueling certifications addressing allegations that the grant of the use variance was based upon political considerations rather than substantial credible evidence.  Rather than permitting discovery and/or having additional hearings on this issue, which might be extensive and time-consuming, the trial court proceeded simply to evaluate the merits of the use variance application and decide the matter.

Although several issues were discussed and decided on appeal, the Court’s ruling on the jurisdictional question is the most significant, as it is one of first impression in this state.  Specifically, the Appellate Division held that although the Local Redevelopment and Housing Law (“LRHL”) does not address whether a ZBA may grant variances from the requirements of a redevelopment plan constituting overlay zoning, such authority is consistent with its power to grant variances under the Municipal Land Use Law (“MLUL”).  The Court then went on to adopt an opinion on this issue offered in the legal treatise New Jersey Zoning and Land Use Administration, and cautioned that if the objectors’ view were to prevail, “[p]roperty owners would be unable to obtain even the most minor exception to the requirements of a redevelopment plan without applying to the governing body for a plan amendment. . . . Nothing in the LRHL or its stated purpose suggests that the Legislature intended to impose such a cumbersome, impractical, and potentially unconstitutional requirement.”

In our opinion, the case is more significant for one of the issues it did not decide, that being whether a ZBA has jurisdiction to grant variances when a municipality adopts a redevelopment plan that supercedes the underlying zoning for the redevelopment area, and amends its zoning district map accordingly, pursuant to the LRHL.  The Court strictly limited its holding.  The Appellate Division noted that it was not addressing whether a ZBA had authority to grant variances from a redevelopment plan where a redeveloper has “covenanted with a municipality to carry out the redevelopment plan,” or where a redevelopment plan “required that all redevelopment be conducted by a designated redeveloper or with the redevelopers prior approval.”  Apparently, we will have to wait for further clarification and when that comes, whether it be through additional case decisions or legislative action, we will keep you posted.

On January 8, 2007, in the matter of Grubbs v. Slothower, the Appellate Division extended to applications for development seeking approval for density variances (building more units on land than may be allowed pursuant to local ordinance), “the relaxed standard of review” established for deviations from conditional use requirements in Coventry Square, Inc. v. Westwood Bd. of Adjustment, 138 N.J. 285 (1994). When considering such applications, the Court advised zoning boards of adjustment that an applicant need not prove that the property to be developed is particularly suitable for a more intense use, but rather must “[f]ocus their attention on whether the applicant’s proofs demonstrate ‘that the site will accommodate the problems associated with a proposed use with [a greater density] than permitted by the ordinance.’” (internal citations omitted).

According to the Court, in order to meet the positive criteria required for the grant of variances under the Municipal Land Use Law, N.J.S.A. 40:55D-1, et seq.,

[a] successful applicant for a density variance therefore must show that despite the proposed increase in density above the zone’s restrictions, and, thus, the increased intensity in the use of the site, the project nonetheless served one or more of the purposes of zoning . . . [and] in addressing the so-called negative criteria, the applicant would need to demonstrate that the increase in density would not have a more detrimental affect [sic.] on the neighborhood than construction of the project in a manner consistent with the zone’s restrictions.

By this case, the courts have now expanded the “relaxed” standard of review to all “d” variances that do not establish or expand non-permitted uses/structures. Such use variances remain subject to a more stringent standard of review, and, in applications for commercial development, an enhanced quality of proof. The Appellate Division’s decision in Grubbs v. Slothower may be viewed on WestLaw at 2007 WL 35245 (N.J.Super. A.D.) and has been approved for publication.

Redevelopment planning is a multifaceted task, approached in any number of ways depending upon the circumstances. First, before conceptualizing a redevelopment project, a builder should find a geographic area that elected municipal officials are interested in revitalizing. As an initial step, a developer should research government records to see whether any neighborhoods within a given municipality have already been designated as redevelopment areas. Certainly, municipal officials may be more receptive to a proposed redevelopment project for an existing redevelopment zone than one that will require the municipality to designate a brand new area, which, in turn, might necessitate the expenditure of public resources. In any event, the builder should be satisfied that the location it is interested in pursuing, whether it be within an established redevelopment zone or a non-designated area that needs to be studied and approved, actually satisfies the statutory criteria for redevelopment.

Under the Local Redevelopment and Housing Law (“LRHL”), a municipality shall not declare an area to be in need of redevelopment unless the municipal governing body concludes after investigation, notice to the public and the conduct of a public hearing, that the properties within the delineated area satisfy any one of the statutory criteria or are otherwise determined to be necessary for the effective redevelopment of the said area. Due to these legal requirements, it would be a mistake for a builder to spend time and money formulating a redevelopment proposal without first conducting some due diligence into the validity of an existing or proposed redevelopment area, which could include, for example, hiring a professional planner to evaluate the eligibility of properties within the subject area for redevelopment or, if the builder is considering an existing redevelopment zone, hiring an attorney to examine whether there is substantial, credible evidence in the record to support the determination and whether the municipality complied with all procedures required by the LRHL.

Indeed, the aforesaid due diligence inquiry is crucial if a builder’s proposal contemplates the acquisition of private property by eminent domain. Although the issue has not been determined definitively by the courts, there are several unpublished decisions that have permitted a property owner to challenge a condemning authority’s power to acquire property under a redevelopment plan by eminent domain as an affirmative defense. Therefore, irrespective of the enthusiasm that municipal officials might have about a particular redevelopment proposal, it would be unwise for a builder to pursue the matter further unless it were clear that the existing or proposed delineation, as applicable, would likely withstand a legal challenge.

Once a builder has found a geographic area that is acceptable to municipal officials and qualifies for redevelopment, the next step is to prepare a concept plan for the redevelopment project. How this is accomplished will depend to some degree upon whether the property that the builder seeks to redevelop lies within an existing redevelopment area and, if it does, whether a redevelopment plan for such area is in place.

If the builder is developing a concept plan for property that has not yet been delineated or a concept plan for property that has been delineated, but is not yet governed by a redevelopment plan, the builder initially will have to work closely with municipal officials in developing an overall vision for the proposed or existing redevelopment area, which will serve as the basis for the redevelopment plan. Only after this task has been accomplished should the builder do any significant work on formulating a proposal for the redevelopment of all or any portion of the proposed or existing redevelopment area. The easier, less time-consuming road is to focus effort on redeveloping an existing redevelopment zone for which the governing body has already prepared and approved a redevelopment plan. In this instance, a builder may proceed directly to the preparation a concept, which should as closely as possible conforms to the design, dimensional, density and use requirements contained in the redevelopment plan. Of course, the developer will still have to meet with municipal officials to refine the concept into a proposal that may be presented to the planning board for approval. In the event that an existing redevelopment plan is outdated or otherwise inadequate, the builder must seek to have the municipal governing body amend the redevelopment plan to accommodate a particular proposal.

In addition to working with municipal officials to develop concepts for a redevelopment project, the builder would be well advised to contact and meet with all owners of property and tenants, both commercial and residential, who may be impacted by the proposal. Certainly, there is some risk in reaching out to residents and businesses within a project area. However, by informing and being open to comments and suggestions from the public, a builder may actually enlist allies for, or at least neutralize potential opposition to, a redevelopment project. Moreover, interaction with persons who have lived and/or worked within the project area may result in the acquisition of valuable insight about the project area and surrounding neighborhoods, which could be used by the builder to refine the proposed redevelopment project in ways that address the concerns of all interested parties.

The process of achieving redevelopment by consensus-building is a formidable task, which entails many nuances and potential pitfalls that are beyond the scope of this article. However, builders should not shy away from this challenge. On the contrary, it is critical for builders to become adept at working with municipal officials and the communities they are seeking to reshape if they are to compete in the redevelopment arena.

Technorati Tags: New Jersey : Redevelopment : Eminent Domain

According to Mrs. Shelton, as reported in the October 4th edition of the Trenton Times, four council members in the past have expressed reservations about using eminent domain for K. Hovnanian's proposed 84-unit condominium complex known as the Villages at Delaware Run. At least one councilman, Jim Coston, has continued to buck K. Hovnanian's redevelopment effort due to, apparently, the City's and K. Hovnanian's less-than-satisfying approach in their attempts at acquiring the subject properties. Indeed, The Times reported in the October 4th news story, among other things, that "Coston complained" about the administration's failure to "sen[d] the property owners letters about the the [C]ity's intentions" regarding eminent domain, forcing property owners "to learn about it through a local newspaper."

City Council is expected to vote on proposed ordinances giving the City of Trenton authority to take the Sheltons' property and others by eminent domain at its meeting on October 10, 2006.

Technorati Tags: New Jersey : Eminent Domain : Condemnation

On August 8, 2006, in the matter of City of Asbury Park v. Asbury Park Towers, et. al. the Appellate Division of the New Jersey Superior Court affirmed the trial court’s denial of an application by a redeveloper to intervene in a condemnation action. Although the Court recognized that “. . . Asbury Partners, as the Master Developer, has a significant stake in this specific acquisition . . . we are satisfied that the interest of the redeveloper is adequately represented by the condemning authority in the valuation proceedings.” The Court based this decision on a multitude of factors. For example, the Court noted the impracticality of allowing a private redeveloper “. . . to micro-manage the proceedings once the matter is turned over to the condemning authority.” The Court also found that the City of Asbury Park’s track record clearly demonstrated a zealous and unyielding commitment to the acquisition of property necessary for redevelopment. The Court focused most of its attention on this circumstance and the failure of the redeveloper to offer any contrary evidence. Indeed, according to the Court, “[i]n the absence of a clear showing, by specifically articulated facts, of conduct by the public entity that palpably evinces a derogation of its fiduciary responsibilities, there is no basis upon which to conclude that the interest of the redeveloper is not adequately represented in these valuation proceedings. No such showing has been made here.”

The Appellate Division’s decision in City of Asbury Park v. Asbury Park Towers has been approved for publication.

On June 5, 2006, the New Jersey Supreme Court decided Mansoldo v. State of New Jersey. 187 N.J. 50 (2006). In this case, a property owner sued the Department of Environmental Protection (DEP) for just compensation after the Office of Administrative Law affirmed the DEP’s rejection of the property owner’s application for a hardship waiver from the Flood Hazard Area Control Act Rules, N.J.A.C. 7:13-1.1, et. seq. to construct two single-family homes in a floodway. The effect of the DEP’s denial of the hardship waiver was to limit the property owner’s use of his land to parkland, open space or a parking lot. The trial court ruled that the DEP’s action constituted a compensable taking, but also determined that compensation was due only “‘[f]or those uses for which there is no economic viability, and which do not pose a danger to the health and safety of the public.’” 187 N.J. at 56. The uses for the property that fit this description were limited to parkland, open space and parking. In the trial court’s view, development of single family homes in a floodway would be a “‘public danger’” and, therefore, could not form the basis for the value of the condemned property. Ibid. The Appellate Division affirmed.

The Supreme Court began its analysis by surveying the law applicable to inverse takings claims, and used the Mansoldo case as an opportunity to clarify the facts and circumstances that courts must consider in determining whether government regulation of property requires compensation. According to the Court, when action by government denies all economically beneficial or productive use of land the regulatory agency must provide just compensation to the affected property owner “[u]nless ‘background principles of the State’s law of property and nuisance’ would restrict the owner’s intended use of the property.” Ibid. at 58 (quoting Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1029, 112 S.Ct. 2886, 2900, 120 L.Ed.2d 798, 821 (1992)). However, even if the subject regulation does not deny all economically beneficial or productive use of the land, just compensation may still be due the property owner depending upon other factors, “the most important of which are the ‘economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations [and] the character of the government action.’” Ibid. at 59 (quoting Penn Central Transportation Co. v. New York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978)).

In applying this analysis to the case at hand, the Court determined that “[t]he lower courts incorrectly applied the governing case law to this appeal and, therefore the matter must be remanded to the trial court for further proceedings.” Ibid. at 58. According to the Court, the lower courts “[f]ocused on the State’s interest in enacting the floodway regulations and, using similar rationales, found that because the regulation prevented a public danger to the community, Mansoldo’s compensation should be limited only to those uses that did not pose such a danger. However, . . . considerations of ‘legitimate state interest[s]’ have no bearing on whether the DEP regulation effected a taking or what compensation is due.” Ibid. at 59 (quoting Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005) (emphasis added)). The Court in Mansoldo also addressed whether the doctrine of collateral estoppel and certain admissions given in discovery applied to the matter at hand and determined that they did not.

On February 21, 2006, the Law Division decided Riya Finnegan, LLC v. Twp. Council of South Brunswick, which has been approved for publication (but has not yet been given a book and page in the official reporter). In this case, Township Council amended its zoning ordinance to prohibit retail uses on a specific piece of property in direct response to objections raised by area residents over an application to construct a mixed-use retail and office complex on the subject property. This zoning change was completely inconsistent with the Township Master Plan for the area where the subject property was located and, as such, in order for the zoning change to be valid under the Municipal Land Use Law, N.J.S.A. 40:55D-1, et. seq., Township Council was required to pass the zoning change by a majority of its full authorized membership and set forth by resolution a statement of reasons for the proposed inconsistency. Although Township Council produced a statement of reasons to support the proposed change in the permitted uses for the subject property, Township Council based its decision exclusively on lay testimony from residents and unsupported planning-related conclusions from the Township Planner. The Court found that this was “insufficient” and concluded that action taken by Township Council in adopting the zoning amendment was “arbitrary and unreasonable and is void ab initio.” In addition, although not necessary to the decision, the Court also invalidated the zoning amendment on grounds that it constituted inverse spot zoning.

This week's New Jersey Legal Update is presented by Timothy Duggan and Vincent Mangini, both Shareholders in the firm.

You can download the New Jersey Legal Update Podcast # 39 here. (12 MB)

Be sure to also download the Redevelopment Process Flow Chart here (PDF)

Technorati Tags: New Jersey : Podcast : Redevelopment : Eminent Domain : Condemnation

• Condemnation in designated redevelopment areas prohibited if the property to be acquired therein is also located within an agricultural development area.
  • Replacement of the substantial evidence test with a requirement that the municipality show, by a preponderance of the evidence, that the delineated area fulfills the criteria set forth in the Local Redevelopment and Housing Law at N.J.S.A. 40A:12A-5.
  
• Expansion of the statute of limitations to challenge redevelopment area designations from 45 to 60 days.
  
• Limitation on the duration of a redevelopment area designation to 10 years following the final adoption of an ordinance making such determination or 10 years following the final adoption of the redevelopment plan, whichever occurs later. This amendment to A3257 includes a mechanism for extending the life of a redevelopment area designation by an additional five years (for a total of 15 years).
  
• Replacement of the originally proposed provision in Assembly bill A3257 that entitled persons displaced by redevelopment to all rights and benefits provided under the Uniform Transportation Replacement Housing and Relocation Act, N.J.S.A. 27:7-72, et. seq., with detailed amendments to the Relocation Assistance Act, N.J.S.A. 20:4-1, et. seq., providing for certain increases in the maximum allowance for moving and related expenses and the required replacement housing payments, and requiring annual adjustments for these (and other) payments based upon the Consumer Price Index for All Urban Consumers.
  
• Requirement that redevelopers reimburse the Department of Community Affairs for the cost of providing rental assistance to displaced tenants who are eligible for the rental assistance program for low income individuals or households established pursuant to N.J.S.A. 52:27D-287.1, et. seq., “for a period not to exceed four years from the commencement of occupancy of the new unit[.]”
  
• Establishment of a new mandatory provision in redevelopment agreements requiring redevelopers to provide written notice to any property owner who receives a written offer from the municipality or designated redevelopment entity pursuant to the good faith negotiations requirements under the Eminent Domain Act of 1971, N.J.S.A. 20:3-1, et. seq., detailing “the total compensation provided for in each contract of sale between the redeveloper and any property owner in the redevelopment area.”
  
• Requirement that municipalities disclose to the Department of Community Affairs “an accounting of the cost of all municipal investments made in the redevelopment area subsequent to the final adoption of an ordinance determining the area as in need of redevelopment[.]” The term “municipal investments” includes such items as tax abatements, density bonuses and municipal infrastructure. “In addition” the amendments to A3257 provide that “the municipality shall disclose any other public infrastructure to be provided in the redevelopment of the area using public funds.”
  
• Grant to prospective condemnees, by amending section 6 of the Eminent Domain Act of 1971 (codified at N.J.S.A. 20:3-6), of a right to “provide information, data or otherwise raise issues of concern to the owner relating to the valuation of the property and damages to the remainder arising from the proposed acquisition.” The amendments to N.J.S.A. 20:3-6 through the revised version of Assembly bill A3257 also extend the period of time within which the prospective condemnee has to respond to a written offer from 14 days (after mailing) to 45 days (after receipt), which may be further extended by 25 days (for a total of 70 days). The aforesaid amendments further provide that, during this post-offer period, a prospective condemnee may seek clarification of, additional information on, and/or otherwise discuss, the offer with a representative of the condemning authority, and may submit a counter-appraisal for review and consideration. Should negotiations fail or the prospective condemnee not respond, “the condemnor may then send . . . a letter setting forth an intent to commence condemnation proceedings in the Superior Court.”
  
• Requirement that a municipality or designated redevelopment entity pay to owners of businesses displaced through the use of eminent domain an additional payment “for the value of goodwill[,]” which means “the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in probable retention of old or acquisition of new patronage.”
  
• Limitation on the acceptance by municipalities or designated redevelopment entities of political contributions from redevelopers.

The debate over eminent domain reform now heads to the State Senate where a companion bill (No. S2088) was introduced on June 26, 2006, and referred to the Senate Community and Urban Affairs Committee for consideration.

One of the Public Advocate’s principal criticisms of the substantive law governing redevelopment acquisitions, the Local Redevelopment and Housing Law (“LRHL”), is the lack of objective, meaningful criteria for designating property as being in need of redevelopment – a prerequisite to condemnation - that is consistent with state constitutional limitations on redevelopment takings. Under Article VIII, Section 3, Paragraph 1 of the New Jersey Constitution, private lands may be taken for redevelopment only if they are “blighted areas.” Historically, according to the Public Advocate, blight has been understood to be a “current condition of . . . deterioration, decay and stagnation[,]” but current law far exceeds this understanding.

As a result of this self-searching process, it appears that New Jersey is now ready to take up the Supreme Court’s invitation to clarify the circumstances under which private property may be taken for redevelopment (and refine the statutory process for doing so).

On June 8, 2006, almost one year after the Supreme Court decided Kelo, a proposed reform bill (No. A3257) was introduced in the State Assembly, which incorporates many of the recommendations contained in the Public Advocate’s report. Significantly, the reform bill eliminates some of the overreaching and ambiguous language that the Public Advocate warned “could apply to virtually any property.” For example, under the reform bill a municipality would no longer be able to delineate property as being in need of redevelopment (the equivalent of “blighted” under the LRHL) merely because its current condition was “not fully productive.” Similarly, the reform bill deletes in its entirety the so-called “smart growth planning principles” criterion. The Public Advocate in its report strongly criticized the use of smart growth concepts as a basis for condemnation, because they have no bearing upon the present condition of the property being taken and this runs afoul of the “blighted areas” limitation under the New Jersey Constitution.

In addition to tightening up the criteria for the delineation of redevelopment areas, the reform bill treats many other aspects of redevelopment planning and the designation and acquisition of property for redevelopment purposes. Among these include the quality and quantity of pre-hearing and post-determination notices, the nature and extent of public participation in the redevelopment planning process, the content requirements for redevelopment plans, competitive bidding, the valuation guidelines for just compensation and relocation expenses. Of course, a complete evaluation of these (and other) proposed statutory changes is beyond the scope of this article. Suffice it to say that whether you own or lease property in an area being considered for redevelopment or are the designated redeveloper, a thorough understanding of redevelopment law as it continues to develop and change is crucial to protecting your interests – and, having competent legal counsel can make all the difference.

In New Jersey, there has been a flurry of recent activity in the area of eminent domain reform, with legislative proposals being directed towards how and when local governments may take private property located within redevelopment zones. For example, on January 10, 2006, Senators Gill and Allen reintroduced their bill from last legislative session as Senate bill S501, which would amend the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1, et. seq., to prohibit the use of eminent domain to acquire residential property. This proposed legislation would also require the designation of redevelopment areas by ordinance rather than by resolution. A companion bill in the State Assembly has also been introduced (A537), which on February 6, 2006, was transferred to the Assembly Commerce and Economic Development Committee. Senate bill S156 reintroduced from last session by Senator Connors is a bit stronger than S501/A537 and, if enacted into law, would amend the LRHL to prevent the use of eminent domain to acquire both residential and other private property. The Connors bill also proposes, among other things, that every redevelopment entity make "a declaration of public purpose" prior to undertaking any action to acquire any property by condemnation within an area in need of redevelopment.

Another example of proposed legislation at the state level is Assembly bill A1220, which is intended to amend the LRHL to make all condemnation effected thereunder for private economic development subject to voter approval. This bill, which is was reintroduced from last session by Assemblyman Diegnan, would also require all area in need of redevelopment designations to be approved by the Department of Community Affairs before they could become effective.

In addition to specific legislative proposals, some State legislators have taken the position that the whole concept of using government power to acquire property for such purposes as redevelopment needs to be further evaluated, and that government must be prevented from engaging this sort of condemnation activity until this study has been completed. Recently introduced in the State Senate is a bill (S211) that proposes to place a moratorium for a period of 24 months on the use of eminent domain for "any purpose other than the direct use of the property by the State, county, or municipality, or any agency or instrumentality thereof, as appropriate." Senate bill S211 would also create a new body known as the Eminent Domain Study Commission, "which shall conduct an examination of the use and application of eminent domain in the State[,]" and "issue a final report to the Governor, and to every member of this Senate and the General Assembly[.]" A companion bill introduced in the Assembly as A2423 would increase the moratorium period proposed by the Senate to 48 months.

The employment of a constitutional amendment is one other approach that certain members of the State Legislature are considering to effect eminent domain reform across New Jersey. Specifically, Senators Inverso and Allen have reintroduced their proposed amendment to Article VIII, Section III, Paragraph 1 of the New Jersey Constitution to limit the exercise of eminent domain to "essential public purposes" and specifically excludes redevelopment activities "undertaken by a private corporation". This proposed amendment was referred to the Assembly Commerce and Economic Development Committee on February 6, 2006.

It is uncertain what the fate of the aforesaid proposed legislation, moratorium and constitutional amendment will be in the coming months. However, it is interesting to see the impact that one Supreme Court decision has had on political landscape.

Technorati Tags: New Jersey : Real Estate : Redevelopment : Eminent Domain : Condemnation

In San Remo Hotel, et. al. v. San Francisco, et. al., decided on June 20, 2005, the United States Supreme Court considered the "narrow question" of whether it "should create an exception to the full faith and credit statute [28 U.S.C. § 1738] . . . in order to provide a federal forum for litigants who seek to advance federal takings claims that are not ripe until the entry of a final state judgment denying just compensation." 125 S.Ct. 2491, 2501 (2005). In order to understand the Supreme Court's answer to this question, a brief discussion of the procedural history of this matter and related case decisions is warranted.

In this case, hotel owners filed suit, among other litigation, in federal court challenging the constitutionality of a hotel conversion ordinance (HCO), which required payment of a hefty fee upon conversion of residential rooms to hotel units, on grounds that it effected a taking without just compensation on its face and as applied. The federal district court issued summary judgment against the hotel owners holding that their facial takings challenge was untimely and that the as-applied takings claim was unripe under Williams County Regional Planning Comm'n v. Hamilton Bank of Johnson City, which stands for the proposition that takings claims are not ripe until a litigant, first, has exhausted all State remedies and failed to obtain "adequate compensation for the taking." 473 U.S. 172, 195 (1985). On appeal, the Ninth Circuit Court of Appeals reversed the district court holding that the facial constitutional challenge was ripe for adjudication, but opting to abstain from ruling upon this claim pursuant to Railroad Comm'n of Tex. v. Pullman Co., 312 U.S. 496 (1941) on grounds that a ruling by the state court on the hotel owners pending action for a writ of administrative mandamus could moot the federal questions. The Court of Appeals affirmed the district court's ruling that the as-applied takings claim was unripe due to the hotel owners' failure to pursue an inverse condemnation action in state court.

Following the Court of Appeals' decision, the hotel owners reactivated their state court action for writ of administrative mandamus and reserved their right to return to federal district court for adjudication of their facial takings claim pursuant to England v. Louisiana Bd. of Medical Examiners, 375 U.S. 411 (1964). However, the "petitioners advanced more than just the claims on which the federal court had abstained, and phrased their state claims in language that sounded in the rules and standards established and refined by this Court's takings jurisprudence." San Remo Hotel, 125 S.Ct. at 2497-2498.

At the conclusion of state court review, which resulted in a dismissal of the hotel owners' complaint, the hotel owners returned to federal district court to litigate the facial takings claim. According to the Supreme Court's procedural history of the case, the district court threw out the facial constitutional challenge based upon its being barred by the statute of limitations and the general issue preclusion doctrine, as encompassed by the full faith and credit statute, "[b]ecause California courts had interpreted the relevant substantive state takings law coextensively with federal law, [and therefore] petitioners' federal claims constituted the same claims that had already been resolved in state court." Ibid. at 2500. The Ninth Circuit Court of Appeals affirmed the ruling of the district court and the Supreme Court, after granting certiorari, affirmed.

The Supreme Court rejected the hotel owners' contention that they should be allowed to return to federal court to resolve their federal takings claims. The Court began its analysis by stating that "[o]ur holding in England does not support petitioners' attempt to relitigate issues resolved by the California courts." Ibid. at 2503.

Of course, the Supreme Court recognized that the petitioners' "ultimate submission" could not be disposed of by England alone, but rather required the Supreme Court to address the question of whether federal courts should apply ordinary preclusion rules to state-court judgments when a case, as here, is forced into state court by the ripeness requirement of Williamson County. The Supreme Court ruled against the hotel owners in disposing of this issue.

We have repeatedly held . . . that issues actually decided in valid state-court judgments may well deprive plaintiffs of the 'right' to have their federal claims relitigated in federal court. This is so even when the plaintiff would have preferred not to litigate in state court, but was required to do so by statute or prudential rules.

As such, "[f]ederal courts . . . are not free to disregard 28 U.S.C. § 1738 simply to guarantee that all takings plaintiffs can have their day in federal court." Ibid. at 2501-2502. Therefore, unless Congress shall express an "intent to exempt from the full faith and credit statute federal takings claims[,] . . . we [shall] apply our normal assumption that the weighty interests in finality and comity trump the interest in giving losing litigants access to an additional appellate tribunal." Ibid. at 2505.

The concurring opinion of the Supreme Court, written by the late Justice Rehnquist (deceased), severely criticizes the theoretical underpinnings and the practical application of Williamson County. According to Justice Rehnquist, "[i]t is not clear to me that Williamson County was correct in demanding that, once a government entity has reached a final decision with respect to a claimant's property, the claimant must seek compensation in state court before bringing a federal takings claim in federal court." Ibid. at 2508. Indeed, "[i]t is not obvious that either constitutional or prudential principles require claimants to utilize all state compensation procedures[]" and, therefore, "further reflection and experience lead me to think that the justifications for its state-litigation requirement are suspect, while its impact on takings plaintiffs is dramatic." Ibid. at 2509-2510. Justice Rehnquist concluded by calling upon the Court to "reconsider whether plaintiffs asserting a Fifth Amendment takings claim based on the final decision of a state or local government entity must first seek compensation in state courts." Ibid. at 2510.

On August 2, 2005, the Appellate Division handed down its decision in Mount Laurel Township v. Mipro Homes, L.L.C., et. al. 379 N.J.Super. 358 (2005), which addressed the propriety of using the powers of eminent domain solely for the purpose of stopping future development. In this case, a municipality added a 16.3-acre parcel to its recreation and open space plan after discovering that the landowner intended to develop the site with new housing. The municipality first attempted to purchase the subject lands by negotiating with the landowner and, after all such efforts failed, proceeded to condemn the site. When the municipality sought to acquire the subject property by eminent domain, the zone in which the said lands were located had not been designated as open space in the municipal master plan. Actually, just two weeks before the start of condemnation proceedings the municipal planning board had granted to the landowner final subdivision approval for the construction of 23 single-family homes.

The Appellate Division first addressed the issue of whether a municipality lacks authority to condemn private property for open space if the zone in which the property is located is not designated as open space in the master plan. The court framed the answer to this question by stating that a municipality's eminent domain power is separate from its zoning power, and that "[t]he statutes authorizing acquisition of land for open space establish separate administrative procedures designed to assure that a municipality's open space program reflects sound planning." Mipro Homes, 379 N.J. Super. at 369. The court further noted that, in this case, the municipality had obtained a grant for the acquisition of the subject property under the Green Acres Program, "[w]hich reflects a finding . . . that the Mipro site is suitable for open space acquisition." Ibid. at 370. The court, therefore, concluded on this issue that the municipal governing body "[h]ad authority to condemn the Mipro site for open space even though the master plan did not then identify open space as a planned use in the area where it is located." Ibid. at 370.

The Appellate Division then went on to answer two additional questions. One of these was whether an action to condemn property for open space may be maintained even if the municipality's motive in selecting particular properties for acquisition is to slow down residential development. The other related question was whether a municipality may exercise this authority notwithstanding the municipality's lack of a plan to devote such lands to an active recreational use. In crafting its response, the court first affirmed a municipality's general authority under current law to acquire property by eminent domain for open space and recreational purposes. The court then answered the second question first by stating "that the conservation of land for open space is a public use, even though the government agency acquiring the land has no plans to put the property to any active use." Ibid. at 373.

Finally, the Appellate Division went on to address "the primary issue presented by this appeal" and determined that the acquisition of open space for the express purpose of stopping development is a legitimate public purpose. According to the court, such "statutory enactments" as the Garden State Preservation Act, N.J.S.A. 13:8C-1, et. seq., "recognize that open space acquisition may serve the public interest not only by setting aside land for potential future recreational use but also by preventing development." Ibid. at 374. (emphasis supplied). The court in Mipro Homes further developed its rationale for this holding as follows:

We conclude that even if the primary goal of . . . [the] open space acquisition program in general, and the condemnation of the Mipro site in particular, is to slow down residential development in the municipality, this does not provide a foundation for finding that the municipality's use of eminent domain for this purpose constitutes fraud, bad faith or manifest abuse. [The municipality] had a reasonable basis for concern that additional residential development would aggravate traffic congestion and pollution problems in the municipality and impose added stress on its school system and other municipal services. . . . Moreover, although [the municipality's] governing body had made a policy decision to focus in its open space acquisition program upon parcels that are likely to be the subject of residential development, the properties it acquires under the program nevertheless serve the public purpose of preserving open space. Ibid. at 375-376.

The court in Mipro Homes hinted that if the subject property had been approved for a medical rehabilitation center, nursing facility or some other inherently beneficial use it might have reached a different result. Notwithstanding this potential limitation on the scope of its ruling, the court's distortion of the public use doctrine in Mipro Homes is unnerving, and could open the floodgates to unplanned (as well as emotionally and politically driven) land acquisitions by municipal governing bodies.

On August 26, 2005, in Decker v. Borough of North Haledon Planning Board, et. al., an unreported opinion (Docket No. A-4801-03T3), the Appellate Division held that a local planning board could not deny an application for a variance based upon a perception that another agency having jurisdiction over the proposed development "will not competently discharge its statutory responsibilities" with respect to a required permit or approval.

In Decker, the applicant sought approval for a four-lot residential subdivision, lot size variance and de minimis exception from the Residential Site Improvement Standards. The planning board, which had expressed concerns over the impact that the proposed development might have upon a waterway running through the property and the potential for flooding, denied the application based upon the applicant's refusal to perform bank stabilization work in conjunction with the applicant's procurement of a required stream encroachment permit. According to the Appellate Division, the planning board "improperly" imposed this condition upon the applicant "in spite of its recognition that the regulation of that waterway is beyond the [b]oard's authority and subject to the jurisdiction and control of the Department of Environmental Protection (DEP)."

Although the majority in Decker acknowledged the views of it's "dissenting colleague" respecting the "special deference" that should be given to "a local board when it denies a variance" it could not uphold the denial in this case "where, as here, the local board's action is so openly predicated on mistrust and fear that a State agency will not competently discharge its statutory responsibility its action is arbitrary and no longer entitled to deference."

San Remo Hotel, L.P. v. City and County of San Francisco
Mount Laurel Township v. Mipro Homes, LLC
Decker v. Borough of North Haledon Planning Board

This week's New Jersey Legal Update is presented by Vincent Mangini, a member of the Firm's Real Estate group.

You can download the New Jersey Legal Update Podcast # 10 here.(16MB)