Earlier today, the Appellate Division released its decision in Oceanport Holding, L.L.C. v. Borough of Oceanport, et al., docket no. A-6127-05T3. The issue on appeal was whether the trial court properly granted summary judgment to the municipality on the grounds that the plaintiff-developer did not engage in sufficient negotiations before filing the Mount Laurel litigation and seeking a builder’s remedy. The trial court granted summary judgment and dismissed the entire lawsuit before determining whether the municipality complied with its affordable housing obligations.

The Appellate Division reversed and remanded to the trial court. While on the surface the Appellate Division ruled in favor of the plaintiff-developer, the Oceanport decision restricts a plaintiff-developer’s entitlement to a builder’s remedy by breathing life into the once-thought dead requirement that a plaintiff-developer must engage in pre-suit negotiations in order to obtain a builder’s remedy. As stated on page 10 of the decision, “the requirement set forth in Mount Laurel II that a plaintiff-developer must attempt to obtain relief without litigation is relevant only to a developer’s entitlement to a builder’s remedy.”

The Oceanport decision makes clear that Mount Laurel litigation is to be divided into two phases. In the first phase, the trial court determines whether the municipality has complied with its affordable housing obligations. If the municipality has not complied, the municipality has a period of time to revise its land use regulations and bring itself into compliance. In the second phase, the trial court assesses whether the municipality’s revised regulations comply with the Mount Laurel doctrine and determines whether the plaintiff-developer is entitled to a builder’s remedy.

In Oceanport, the Appellate Division determined that the trial court erred in dismissing the entire Mount Laurel litigation early in the proceedings. Instead, the trial court should have first determined whether the municipality complied with its affordable housing obligations. If the municipality did not, the trial court could then decide whether the plaintiff-developer engaged in sufficient pre-suit negotiations while assessing the merits of a builder’s remedy during the remedial phase.

In Oceanport, the Appellate Division does not reference the numerous unpublished trial court decisions, which determined that pre-suit negotiations are no longer required due to the adoption of the Fair Housing Act, N.J.S.A. 52:27D-301, et seq., in 1985. Those decisions generally reasoned that the FHA creates an administrative procedure for municipalities to voluntarily address their affordable housing obligations and obtain substantive certification, which provides protection from Mount Laurel litigation. Therefore, those municipalities that want to address their affordable housing obligations have a means to do so and avoid Mount Laurel litigation.

In the Oceanport decision, the Appellate Division does not offer any insights as to what a plaintiff-developer must do to satisfy the pre-suit negotiation requirement.

By Susan Piperato of New Jersey & Company magazine

ScheinMedia and New Jersey & Company magazine announces that Newark Mayor Cory Booker will be the keynote speaker at The Newark Real Estate Conference, to be held September 27, 7:30am to 1:30pm, at NJPAC.

The conference will focus on the dramatic changes occurring in the City of Newark thanks to its mayor, the Honorable Cory Booker. Newark’s new initiatives include adding a new Land Use Element to its Master Plan in order to aid in the creation of new residential and commercial developments as well as proposed entertainment, cultural, sports, and parks facilities.

“The Booker Administration spent its first year in office laying the framework for economic development in the downtown core as well as in the neighborhoods, “says Ted Zangari, Chair of the Redevelopment Law practice group at the Sills Cummis law firm in Newark. “The city has now begun to make its sales pitch to corporate America, so the timing of a Newark-centric real estate conference could not be more perfect.”

The Newark Real Estate Conference will also serve to bring together the city’s leading real estate, legal, and government professionals in an open forum offering insights, conversation, and industry-wide networking.

In addition, the conference will also mark the launch of the premiere issued of New Jersey & Company magazine, a monthly magazine offering a unique mix of editorial on New Jersey as a progressive and nationally recognized corporate hub.

For more information on the conference, New Jersey & Company magazine, or conference sponsorship opportunities, call (732) 923-9433 or (845) 340-9600; or log onto www.njand.com.

TRENTON, NJ-This week’s unanimous decision by the New Jersey Supreme Court limiting towns’ eminent domain powers is drawing varied reaction from the legal and development communities. As reported by GlobeSt.com, in a case involving a property in Paulsboro, the Court ruled that municipalities have to prove a site is truly “blighted” before invoking eminent domain, and not simply “underutilized.” Specifically, the Court ruled as unconstitutional the use of the term “in need of redevelopment.”

In Gallenthin Realty Development, Inc. v. Borough of Paulsboro (A-51-2006), the New Jersey Supreme Court dramatically narrowed the definition of blight under Article VIII, Section 3 of the New Jersey Constitution, substantially limited the scope of criterion “e” of N.J.S.A. 40A:12A-5 and made other statements that likely could have the effect of substantially limiting the scope of all of the major redevelopment criteria of N.J.S.A. 40A:12A-5. In so doing, despite artful attempts to distinguish prior court decisions and the legislative history of the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq. (“LRHL”), the Court appears to have initiated a reversal of the course of over 40 years of New Jersey decisional law and legislative enactments, as well as national and international theories and policies on effective redevelopment. Read full report.

A review of New Jersey court cases shows the state law governing eminent domain use for private redevelopment is written in a way that leads to abuse, according to a Public Advocate report released today.

The Legislature must act swiftly to change the state’s redevelopment law, protect people’s rights and guarantee that sound redevelopment projects garner public support, Public Advocate Ronald K. Chen said.

“The findings in this report crystallize the urgent need for our Legislature to change the state redevelopment law,” Chen said. “When the government misuses the power of eminent domain, people can lose their homes without real evidence that their neighborhood is blighted, without adequate notice or hearings and without fair compensation.”

On May 21, 2007, the Appellate Division ruled that the New Jersey Meadowlands Commission (“NJMC”) has an obligation to provide affordable housing In the Matter of the Adoption of N.J.A.C. 19:3. The NJMC argued that the obligation to provide affordable housing rested with its constituent municipalities and NJMC was only obligated to work with those municipalities that sought rezonings for affordable housing as set forth in N.J.A.C. 19:4-3.8. The Appellate Division ruled that was not enough. “[W]e are convinced that the Commission has a constitutional responsibility to plan and zone for affordable housing to a far greater extent than is allowed by the interim rule ….” The NJMC is expected to adopt new affordable housing regulations after the adoption of COAH’s revised Round Three regulations.

Due to its different statutory mandate, the New Jersey Sports and Exposition Authority was not held to have a similar obligation to provide affordable housing.

The Appellate Division ruled that the primary mechanism for enforcing the constitutional obligation to provide affordable housing is a builder’s remedy against municipalities within the NJMC District. Sills Cummis obtained a builder’s remedy for land within the NJMC District on behalf of Tomu Development in different litigations against Carlstadt, East Rutherford and the NJMC.

On May 7, 2007, Acting Governor Richard Codey signed into law Bill S2095 (the “Bill”) effecting an amendment to the Neighborhood Revitalization State Tax Credit Act (the “Act”).

The purpose of the Act is to encourage private sector partnership with non-profits to revitalize neighborhoods in those municipalities that are eligible to receive Special Municipal Aid or are Abbott Districts. Businesses that financially assist neighborhood revitalization programs receive a tax credit against taxes on certain business income. The tax credit was previously for 50% of the assistance provided; effective immediately, this will be raised to 100%. The Bill also raises the total annual amount of tax credit allowed to a business from $500,000 to up to $1 million.

A not-for-profit entity seeking private investment must prepare a neighborhood preservation and revitalization plan and submit the plan to the Department of Community Affairs (DCA) for approval. N.J.S.A. 52:27D-493. The plan shall be approved if it meets the standards set forth at N.J.S.A. 52:27D-494, which include notice to the municipality and other nonprofit organizations, and consistency with the MLUL, and any redevelopment plans or neighborhood empowerment plans. The plan must also set forth an overall concept of the future of the neighborhood, including strategies and activities to foster preservation and revitalization. Upon approval of the plan, the non-profit can then prepare a specific project for DCA approval, which will include implementation strategies and demonstrate how the project will specifically use the tax credit investments. N.J.S.A. 52:27D-495. Each approved project can qualify for up to $1 million in tax credit investments. N.J.S.A. 52:27D-496.b(4). Businesses pay their money into the DCA and can fund specific projects or the DCA can act as a clearinghouse and apply unapplied monies to unfunded projects. N.J.S.A. 52:27D-496, -498

The DCA issues a tax credit certificate to the business providing support for a qualified project. Pursuant to N.J.S.A. 52:27D-492, the credit may be applied against state tax imposed on business related income, other than tax imposed under the New Jersey Gross Income Tax, including, but not limited to: business income subject to the provisions of the Corporation Business Tax Act (1945), N.J.S.A 54:10A-1 et seq., “The Savings Institution Tax Act,” N.J.S.A 54:10D-1 et seq., the tax imposed on marine insurance companies pursuant to N.J.S.A.54:16-1 et seq., the tax imposed on insurers generally, pursuant to N.J.S.A 54:18A-1 et seq. the sewer and water utility excise tax imposed pursuant to N.J.S.A 54:30A-54, and the petroleum products gross receipts tax imposed pursuant to N.J.S.A 54:15B-3.

The Assembly Appropriations Committee noted in its report on the bill that no tax credit was granted for calendar years 2003 and 2004, the most recent years for which data are available. Hopefully, the added incentives of the Act will encourage greater private sector participation in New Jersey’s urban revitalization.

This article explores what New Jersey law permits developers to do or not to do in the face of requests by municipalities for ” contributions” for schools, parks, fire equipment and the like. In an article which appeared in the March 26, 2007 issue of the New Jersey Law Journal, Sills Cummis attorney Thomas Jay Hall explores why towns are so desperate for money, and what the development community must do in the face of demands for “benefits” which are illegal and extortionate. To read the article, please click here.