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.