June 26, 2009

In a unanimous decision styled New Jersey Shore Builders Association v. Jackson Township, the Supreme Court has affirmed the Appellate Division’s ruling that municipalities cannot require builders to set aside open space and recreation facilities or make monetary “in lieu” payments as a condition of receiving development approval under the Municipal Land Use Law (MLUL).

The case arose from ordinances in Jackson Township and Egg Harbor Township requiring builders to either set aside land or make a monetary “in lieu” payment as a condition of receiving approval. The Ocean County judge in the Jackson case determined that the requirement was unlawful under the MLUL, while the Atlantic County judge in the Egg Harbor case held that it was within the municipality’s “implied statutory authority” to make the exaction.

The Appellate Division consolidated the two cases and affirmed the trial court’s decision in Jackson, while reversing the other court’s decision in Egg Harbor. It determined that the MLUL did not provide either explicit or implicit authority for municipalities to require set asides or monetary payments.

In affirming the Appellate Division’s decision for “substantially the same reasons,” the Supreme Court injected a few additional thoughts concerning the limits of municipal power under the MLUL. While acknowledging that one of the enumerated goals of the MLUL is to preserve open space, the Court held that municipalities were going about it the wrong way. It determined that open space could not be exacted from property owners without “just compensation,” and that it could only be required under the MLUL when a developer seeks approval for large “Planned Unit Development” (PUD). Even as to PUDs, however, municipalities would not be allowed to exact money payments “in lieu” of providing actual open space or recreation.

This decision represents a significant victory for the homebuilding community in New Jersey, which has been forced into “donating” open space and recreational facilities or money for many years. It ends an abusive municipal practice and will require municipalities to create fair, new methods for preserving open space.

Henry T. Chou , is a partner of Hill Wallack LLP and member of the firm’s Land Use Division. His practice is concentrated in the areas of land use applications and litigation.