A resurgence of cities is taking place across New Jersey. From a luxurious waterfront redevelopment project in Asbury Park, to the state's tallest building in Jersey City, redevelopment of long-neglected and deteriorating areas is on the rise. This article explores the law that has made it all possible—New Jersey's Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 et seq. (LRHL or “the Act”)—and the increasing role of municipalities in the wake of the Applied Monroe Lender v. Hoboken Planning Board appellate decision. (The authors of this article served as counsel to Applied Monroe Lender.) A review of this decision shows that courts are curtailing property rights in favor of increased municipal authority over the redevelopment process.

The LRHL affords New Jersey municipalities immense authority to revive deteriorating areas within their locality. The Act empowers municipal governing bodies, in conjunction with their planning boards, to investigate and determine whether an area is “in need of redevelopment,” and adopt a redevelopment plan to govern land use in the area. Once adopted, a municipality enjoys broad powers to effectuate the goals of the redevelopment plan, including the power to acquire property through condemnation and “[d]o all things necessary or convenient to carry out its powers.” N.J.S.A. 40A:12A-8(c), (n). Oftentimes the goals of a redevelopment plan are pursued through cooperative relationships between the municipality and a private redeveloper of its choosing, with whom it can negotiate a contract for a project and collect revenue “to defray the costs of the redevelopment entity.” N.J.S.A. 40A:12A-8(f).

Until recently, it was commonly believed that the redevelopment process could not curtail the property rights of property owners whose land was in a redevelopment area and who were willing to develop in accordance with the redevelopment plan. According to the leading authority on New Jersey zoning and land use law, our jurisprudence suggested that property owners within a redevelopment area maintained the right to develop their own property so long as there was no requirement to the contrary in the redevelopment plan. William M. Cox & Stuart R. Koenig, New Jersey Zoning and Land Use Administration, §11-7.3 (Gann 2019). In a recent unpublished decision, however, the Appellate Division suggested otherwise.

In Applied Monroe Lender v. Hoboken Planning Board, 2018 N.J. Super. Unpub. Lexis 536 (Mar. 9, 2018), the Appellate Division explained that the scope of municipal authority under the LRHL includes the ability to restrict redevelopment of properties located in an area in need of redevelopment to only “qualified” redevelopers. Such authority had been recognized previously in Jersey Urban Renewal v. City of Asbury Park, 377 N.J. Super. 232 (App. Div.), certif. denied, 185 N.J. 392 (2005), where the court upheld a restriction in a redevelopment plan that prohibited a property owner from bringing an application to the planning board unless it had been designated as the redeveloper. The Applied Monroe court, however, went a step further and held such restriction can be enforced even if the restriction is not expressly stated in the governing redevelopment plan.

Applied Monroe Lender had purchased a vacant former industrial lot in the northwest region of the City of Hoboken in a bankruptcy sale. Like many other New Jersey cities, Hoboken experienced growing demands to redevelop its industrial zone into residential and other nonindustrial uses. Accordingly, the City exercised its authority under the LRHL and designated the northwest region as “an area in need of redevelopment,” and established objectives and regulations for the area pursuant to the “Northwest Industrial Redevelopment Plan.”

Applied Monroe sought to develop its own property in accordance with the redevelopment plan, but the Hoboken Planning Board decided Applied did not have standing to pursue a site plan application because it had not been formally “designated” as the redeveloper for its property. Such designation is not required by the plain text of the LRHL or the Municipal Land Use Law, N.J.S.A. 40A:55D-1 et seq. (MLUL), but rather, is a matter of municipal discretion upon adoption of a redevelopment plan. In this vein, the LRHL can be viewed as the “floor” of redevelopment law. The Act authorizes municipalities to adopt unique regulations and procedural requirements for a particular redevelopment area, N.J.S.A. 40A:12A-13, including, if it so chooses, the requirement to obtain the redeveloper designation. In the case of the Northwest Industrial Redevelopment Plan, however, Hoboken did not expressly require redeveloper designation.

Despite the absence of any such language in the Northwest Industrial Redevelopment Plan or requirement in the Planning Board's application checklist, the Appellate Division held that Applied Monroe was required to be designated as the redeveloper before it could pursue development of its own property. The Supreme Court of New Jersey denied Applied Monroe's petition for certification. See Applied Monroe Lender v. City of Hoboken Planning Bd., 234 N.J. 10 (2018).

The consequences of Applied Monroe are significant. It means that owners of land in a redevelopment area may not necessarily pursue development as freely as they once thought or, in some instances, at all. As a result, property owners should assume that, in the absence of express language in a redevelopment plan to the contrary, they will have to negotiate with municipalities for a development project before they can even proceed with an application to the municipal planning board. In this vein, the Applied Monroe decision deviates from long-established precedent. In years past, our courts held that a private property owner could freely develop its own property absent a prohibition within the redevelopment plan. For example, in Weeden v. City Council of the City of Trenton, 391 N.J. Super. 214, 230 (App. Div. 2007), the court held that the Trenton Zoning Board of Adjustment had jurisdiction to grant a use variance application to a private property owner who had not been designated as a redeveloper. Likewise, in Britwood Urban Renewal v. City of Asbury Park, 376 N.J. Super. 552, 565 (App. Div. 2005), a private property owner was permitted to seek approval to renovate its building that was located within a redevelopment area, despite not being designated as a redeveloper.

By requiring a “redeveloper” designation as a prerequisite to applying for site plan approval, municipal governing bodies enjoy a gatekeeper function over the entire redevelopment process. They can decide who gets to pursue a development approval and, if they so choose, unilaterally withhold the “redeveloper” designation from property owners with the financial wherewithal to effectuate the redevelopment plan simply because they favor another candidate. More likely than not, redeveloper designation will be based on whomever is willing to make the most concessions to the municipality during negotiations over a redevelopment agreement. Such negotiations provide an additional avenue for a municipality to influence the eventual project by demanding certain design criteria, off-site improvements, or monetary payments.

Relying on Applied Monroe, municipalities will likely vet potential redevelopers based upon the terms they can extract pursuant to a redevelopment agreement. This increases the likelihood for the potential abuse of power, which has already been displayed on a number of occasions. In Vineland Construction v. Pennsauken Township, 395 N.J. Super. 230, 250 (App. Div. 2007), app. dism'd, 195 N.J. 513 (2008), a property owner was denied the right to redevelop its property consistent with the redevelopment plan because the plan called for a single master redeveloper to redevelop the entire area. Although the plaintiff was only a small-scale real estate developer, it had demonstrated the financial capability and commitment to a project design that was consistent with the subject redevelopment plan, and was initially supported by the township. Then, in an “about-face” manner, the township designated a master redeveloper and subjected the plaintiff's property to condemnation, effectively handing the property over to an entity with a record of political contributions. Eventually fraudulent conduct of the master redeveloper came to light, its rights to develop were terminated, and an appeal to the Supreme Court was dismissed as moot. See 195 N.J. 513 (2008).

From a legal standpoint, there are no guidelines set forth in the LRHL regarding the qualifications a redeveloper must possess, and no requirement that the municipality adhere to a competitive bidding process for a redevelopment opportunity, as it would for goods and services contracts under New Jersey's Local Public Contracts Law, N.J.S.A. 40A:11-1 et seq. At a minimum, the New Jersey Legislature should consider amending the LRHL to protect the rights of property owners who are willing to conform to the redevelopment plan. The burden should be on the municipalities to provide substantial reasons why a property owner should be required to be designated as a redeveloper before seeking site plan approval.

Kevin J. Coakley is the co-chair of Connell Foley's Real Estate and Land Use Group, and Michael J. Affrunti is an associate in the group. They are based in the firm's Roseland office and served as counsel to Applied Monroe in the case examined in this article.