New Jersey Supreme Court Upholds Challenge to Highlands Act
By Michael J. Lipari, Esq.
The New Jersey Supreme Court upheld an Appellate Division decision that dismissed a challenge to the Highlands Water Protection and Planning Act, N.J.S.A. 13-20-1 et seq. The result of this decision, which is the first challenge to the Highlands Act to be heard by the Supreme Court, further stymies any chance of judicial invalidation of the Act. The opinion itself does not provide any additional reasons, but merely relies upon the August 10, 2007 opinion issued by the Appellate Division.
The Highlands Act took effect in 2004 and overrides local land use regulation for 88 municipalities in parts of Bergen, Hunterdon, Morris, Passaic, Somerset, Sussex and Warren Counties. This land-preservation act has curbed development in most of northern New Jersey. Landowners under the jurisdiction of the Highlands Council have seen a significant diminishment in property values as they can no longer develop their property with any meaningful or economically viable project.
In a case styled OFP, LLC v. State of New Jersey, the plaintiff was the owner of an undeveloped 93-acre tract of land in Washington Township. Plaintiff had received preliminary subdivision approval for 26 residential lots prior to the introduction of the Highlands Act to the Legislature. The only remaining permit that plaintiff needed was finally obtained after the introduction to the Legislature, but before it was enacted into law in August 2004. The language of the Highlands Act required all permits to be obtained prior to the introduction of the Act. As a result, plaintiff’s property became subject to the jurisdiction of the Highlands Act which would not allow plaintiff the density it desired. Plaintiff filed suit challenging the constitutionality of the Act. Plaintiff alleged that the Act constituted a taking of its property without just compensation because plaintiff could no longer develop its property with the 26 desired residential lots.
On December 10, 2008, the Supreme Court of New Jersey upheld the Appellate Division decision, finding that the plaintiff did not exhaust all of the available administrative remedies prior to filing suit. A determination of whether a governmental regulation results in the taking of property requires that the agency provide reasonable procedures to decide and explain any alleged breach of its regulations. The Highlands Council allows an aggrieved party to file for a hardship waiver, which would then be determined on a case-by-case basis. The Court found that this provision was sufficient to prevent a regulatory taking and that the Agency had to first make a determination on the application for a waiver before the Court could properly determine whether any taking took place.
The Supreme Court further upheld the Appellate Division holding that no due process violation occurred and that the retroactive application of the Highlands Act was valid and furthered a lawful purpose under the rational basis test. The purpose of the Act is to reduce development sprawl that threatens the region’s significant natural resources and large portion of the state’s drinking water supply.