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  • August 10, 2009

    Important New Law Allows for Conversion of Age-Restricted Developments: Housing Units in Developments Covered by the Law May Now be Made Available to Those Less Than 55 Years in Age

    by Thomas F. Carroll, III, Esq

    After considerable legislative wrangling and a conditional veto by Governor Jon Corzine, the new law allowing for conversion of certain age-restricted developments became effective on July 2, 2009.

    Most approved age-restricted developments are eligible for conversion under the law. The law recognizes that we have an over-supply of age-restricted housing, and further recognizes that allowing for conversion of age-restricted developments will provide an economic boost in these most difficult economic times, as construction of developments for families may now take place. This article summarizes the new law, and provides guidance as to how developers and builders can seek to take advantage of the law.

    Which Developments are Eligible for Conversion?

    The new law applies to age-restricted developments, i.e., those developments approved under provisions essentially limiting occupancy to those who are 55 years of age or older. Upon conversion, that age restriction would be lifted, and the housing units in such developments could be marketed to families and other buyers of any age.

    Any age-restricted development that received preliminary or final approval prior to the effective date of the act, i.e., prior to July 2, 2009, is eligible for conversion. Applications to convert the development may be submitted until August 1, 2011, although the act also provides that approving boards (e.g., planning boards or boards of adjustment) may extend that application window for an additional 24 months.

    The act further provides that applications for conversions may be submitted only for those age-restricted developments in which no units have been sold, and no deposits are being held. Thus, partially sold age-restricted developments are not eligible for conversion under the bill (although there may be ways to do so outside of the ambit of the bill).

    What’s in it for Builders?

    Prominent housing economists have concluded that there is a “glut” of approved age-restricted developments in New Jersey. In certain areas of the state, it is envisioned that it will be decades before there is a housing demand able to absorb the already approved age-restricted developments throughout New Jersey. On the other hand, economists envision that the market for non-age-restricted housing will be much stronger, and will rebound much sooner.

    Thus, the new bill allows builders to substitute viable developments for the age-restricted developments that would otherwise have little or no value for decades.

    The new law also allows for a straightforward conversion application process, and expedited litigation procedures should the same be necessary, so that eligible developments can be converted quickly.

    What’s in it for Towns?

    Most importantly, the act provides that 20% of the total number of units must be made affordable to low and moderate income households, thereby assisting municipalities in meeting their Mt. Laurel/COAH obligations. The act further provides that resultant low and moderate income units are to “automatically” be eligible for credits toward the municipality’s COAH obligation. Moreover, the act specifies that municipalities will incur no “growth share” fair share obligation as the result of the construction of the market rate or lower income units in converted developments.

    The new law also allows municipalities to provide for “preferences” for the lower income units, e.g., preferences for up to 50% of the lower income units for those who already live or work in a given town. Such preferences, while often desired by municipalities, have always been viewed as legally suspect, but the new law at least provides for a statutory basis for such preferences.

    How Does the Conversion Process Work?

    To seek conversion of an age-restricted approval, the applicant must file an application with the board that approved the development initially, requesting that the approval be amended. The new law specifies that the non-age-restricted developments sought per such conversion applications are to be considered applications for permitted uses, thereby eliminating the need to ask for “use variances.”

    Documentation supporting the following is to be submitted in support of a conversion application: (1) satisfaction of the RSIS parking standards; (2) revision of recreational and other amenities as needed to meet the needs of the converted development; (3) adequacy of the water supply to handle the needs of the converted development; and (4) adequacy of the sanitary sewer systems to handle the needs of the converted development.

    If additional water, sewer treatment systems or parking are required to meet the needs of the converted development, and such additional water, sewer or parking cannot be provided, the number of units is to be reduced. If additional parking is required and the impervious coverage is increased by more than one percent, the storm water system calculations and improvements will have to be revised accordingly.

    The act provides that applications for conversion “shall be approved” if the requirements of the bill are satisfied and “the conversion can be granted without substantial detriment to the public good and will not substantially impair the intent and purpose of the zone plan and zoning ordinance…” The precise meaning and import of the latter language is somewhat unclear, and future applications for conversion will help in defining its contours. However, the legislative intent of the bill is to allow for the elimination of the age-restriction limitation and its replacement with a development available to all, including families with children. It is therefore not envisioned that courts will allow the denial of conversion applications simply because families with children will now be allowed to occupy the converted housing units.

    Additional Requirements

    The bill further provides that a converted development “shall also conform to any requirements for, and limitations on, size and square footage imposed pursuant to a preliminary approval.” However, the act also states that “any floor plans of the dwelling units may be revised without requiring any further approving board approval or review.”

    The previously approved subdivision or site plan layout may be “reasonably revised” per the bill, in order to accommodate any additional parking, recreation and other amenities, infrastructure enhancements, a need to reduce the number of dwelling units, height requirements, a “revision to dwelling footprints that do not modify square footage of the development or the individual buildings,” or a need to construct the lower income units as attached housing. The bill further allows for the construction of the lower income units in a separate section under certain circumstances, and a separate management entity if required.

    The bill also states that the “size, height, floor area ratio, number of bedrooms and total square footage of buildings established as part of a preliminary or final approval for an age-restricted development shall not be increased, but may be decreased,” although the number of bedrooms for the lower income units may be increased within the footprint to meet state regulatory requirements for such units.

    Expedited Approval Process

    Reviewing boards have a period of 30 days following the submission of a conversion application to decide whether an application is “complete,” i.e., whether documentation concerning the four issues noted above has been provided. If a board fails to make any completeness determination within that 30 day period, the application will be deemed complete

    The reviewing boards will then have a period of 60 days within which to decide whether to approve a conversion application, unless that time period is extended with the consent of the applicant. Conversion applicants are not to be charged application fees, although reasonable escrow fees may be charged. Boards must then issue resolutions memorializing their approvals or denials within the time set forth in the Municipal Land Use Law, i.e., within 45 days.

    Expedited Judicial Proceedings

    Appeals contesting boards’ denials of conversion applications, or appeals contesting denials with unacceptable conditions, must be filed within 30 days. Those appeals are, per the law, to be heard “in a summary manner.” Such appeals (complaints to be filed with the courts) are to include copies of the plans and reports, if any, that were filed with the reviewing board, along with a transcript of the proceedings and any other items filed with the board.

    A court hearing such appeals shall consider the reasonableness of any adverse board decision and, upon finding that a conversion should have been approved, the court is to instruct the board to approve the converted development, along with any reasonable conditions of approval the court deems necessary

    Conclusion

    Like most legislation, the law providing for the conversion of age-restricted developments is not perfect. It does, however, provide builders with an additional way to convert an age-restricted development and replace a largely unmarketable product with a product that can be sold. The new law does provide resistant municipalities with ways in which they can seek to frustrate the conversion of age-restricted developments, and great care at the outset must be taken to ensure that a conversion application meets the statutory criteria, thus maximizing the prospects of a successful conversion.

    Thomas F. Carroll, III is a partner of Hill Wallack LLP and is partner-in-charge of the Land Use Division which encompasses the Land Use Litigation and Land Use & Environmental Applications Practice Groups. He has significant experience in the land development application and permitting process, as well as the litigation of land use matters at the trial level and in the appellate courts.

    Hill Wallack LLP is one of the largest law firms in Central New Jersey, with offices in Princeton and Atlantic City, New Jersey and Yardley, Pennsylvania. Over the past 30 years, Hill Wallack LLP has earned a reputation for comprehensive problem solving. The firm’s well-known practice groups in Land Use -- Planning, Zoning, Affordable Housing, and Redevelopment -- Environmental Regulation and Litigation, Regulatory and Government Affairs, Workers’ Compensation, Insurance Defense, Real Estate, Community Association Law, Construction and Business Law are complemented by its specialty practices in Gaming Law, Employment, Professional Liability, Government Procurement, and Public Finance.