Good Faith Pre-litigation Negotiations Needed For Builder's Remedy Suit

Good Faith Pre-litigation Negotiations Needed For Builder's Remedy Suit

On December 7, 2007 the Appellate Division issued its opinion in Oceanport Holding, LLC v. Borough of Oceanport, A 6127 05T3 changing the trial court's dismissal of a Mount Laurel action brought by a developer to deem the defendant's zoning ordinance unconstitutional. The trial court dismissed because the plaintiff did not negotiate in good faith with the borough to achieve a compromise prior to commencing litigation.The Appellate Division reversed, concluding that "the developer's obligation to seek relief from the zoning applicable to its property without litigation is relevant only to the developer's entitlement to a builder's remedy. It does not have to make the showing in order to have standing to maintain a Mount Laurel action."The plaintiff is the contract purchaser of a three acre parcel in the defendant Borough with waterfront frontage on two sides. It is currently used as a marina and located within a residential zone. Plaintiff submitted a concept plan to Oceanport's governing body proposing construction of a six-story condominium containing 60 units, 20% of which would be affordable to low and moderate income households. Because change in the existing zoning ordinance would be required, Oceanport inquired whether the governing body would entertain such a request. The matter was referred to the Planning Board for review. The Board responded that it would entertain a development application and then decide the zoning issue. The plaintiff replied that it would not submit an application unless the site was first rezoned for affordable housing purposes. Plaintiff filed suit, seeking both a "builder's remedy", and a declaratory judgment that the existing zoning ordinance violated affordable housing requirements.Art IV, Sec. 6. Par. 2 of the N.J. Const. of 1947 places the zoning power generally in the hands of municipalities. Zoning ordinances are exercises of the State's general police power. S. Burlington County NAACP v. Mt. Laurel, 67 N.J. 151, 174 (Mount Laurel I), cert. denied and appeal dism. Mt. Laurel v. Southern Burlington County NAACP, 423 U.S. 808 (1975). Mount Laurel I held that the police power of the State and its subdivisions, including zoning, are subject to the requirements of equal protection and substantive due process which are implied in Art. I, Par.. 1 of the N.J. Const. of 1947. The state requirements may be more rigorous than those imposed by the federal constitution. The Court broke new ground in concluding that these constitutional requirements demanded that every municipality "must, by its land use regulations, presumptively make realistically possible an appropriate variety and choice of housing." The Court continued (ibid): The criteria of inexpensive housing has now been more specifically defined in the Fair Housing Act, N.J.S.A. 52:27D-301 et seq and its implementing regulations. As might be imagined, local elected officials in exclusive towns didn't leap at the opportunity to place their votes on record to rezone for low-income housing. This reluctance was addressed by our Supreme Court in S. Burlington County NAACP v. Mt. Laurel, 92 N.J. 158 (Mount Laurel II) (1983) and more recently in Toll Bros., Inc. v. Twp. of W. Windsor, 173 N.J. 502 (2002). These elaborated upon the "builders' remedy". A builder may charge a municipality to force issuance of a building upon the builder's own parcel. To do so, the court must consider three issues: (1) The developer must demonstrate that the zoning ordinance is exclusionary; (2) The developer must propose a substantial amount of affordable housing in its own development plan. (Once the developer establishes these two elements, the municipality bears the heavy burden to establish by a preponderance a third element); and (3) The impact of the development plan on environmental or other legitimate land use planning concerns renders the proposed project unsuitable for the municipality. As to this last concern, the courts generally demands that to as a pre-requisite to bringing a builder's remedy action, that the developer establishes that it attempted to take on the municipality in good faith negotiations prior to bringing suit.Oceanport held that although pre-suit negotiations are required for a builders' remedy claim, that they are not required of a builder as a pre-condition to bringing a declaratory judgment action to establish that a zoning ordinance is per se invalid as in violation of the substantive requirements of Mount Laurel I. How did the Oceanport court reach this distinction?The requirement of pre-suit negotiations prevents the developer in builders' suit claims from taking unfair advantage of the municipality. Correspondingly, the absence of such a requirement in declaratory relief claims prevents the municipality from taking unfair advantage of the developer.This

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