New Jersey Land Use and Environmental Law

By: Michael J. Lipari, Esq.

A legal battle between developers of competing retail outlet shopping centers has culminated in a key ruling that allows creative leases to restrain competition by impeding the entry of competitors into the marketplace. The opinion, Sussex Commons Outlets, LLC, v. Chelsea Property Group, Inc., et al., held that commercial leases that prevent tenants from operating stores within competing commercial centers are valid, so long as they do not violate the “rules of the game.”

Sussex Commons Outlets, a proposed retail outlet center in northern New Jersey, was being developed and marketed as an alternative to two existing outlet centers located in New York (Woodbury Commons) and Pennsylvania (The Crossings) owned by Chelsea Property Group and CPG Partners. Sussex Commons was located between, and nearly equidistant from, the two existing outlet centers.

Sussex Commons filed suit against Chelsea Property Group and CPG Partners for tortious interference with prospective business advantage, unfair competition, and other similar causes of action. The lawsuit challenged the tactics employed by the defendants, including the use of radius and site-specific clauses in tenant leases, lower rent incentives, lobbying activities, and financially supporting a local citizen group that opposed the Sussex Commons application.

The defendants were concerned that Sussex Commons would acquire a significant portion of the retail outlet market share that was controlled by defendants, and impact the defendants’ interest in percentage rent, which is proportionate to tenant sales. In an attempt to protect its business interests, defendants negotiated restrictive clauses in their tenant leases. Certain leases included a radius clause that prohibited tenants from operating outlet stores within a defined number of miles from the existing outlets.

Other leases included a site-specific provision that prevented the tenant from operating an outlet store at Sussex Commons. A tenant in breach of this clause was subject to the “added sales remedy” provision that would increase the tenant rent based upon the sales figures at the tenant’s Sussex Commons location. In exchange for the additional burden imposed by these clauses, the tenants obtained a reduced rent.

Common Industry Practice

The Appellate Division affirmed the trial court’s dismissal of Sussex Commons’ complaint and found that these restrictive lease provisions were commonly used in the retail outlet industry. In fact, Sussex Commons had incorporated similar provisions into its leases with future tenants.

The court therefore concluded that the standard for determining tortious interference is whether the defendants engaged in conduct that was fraudulent, dishonest, or illegal, or if it violated the “rules of the game” as defined by the industry. As a result, the court ruled that radius and site-specific clauses in defendants’ tenant leases were legitimate ways to protect market share from competitors.

Posted by Henry T. Chou, Esq. at 03:37 PM | Permalink | Comments (0) | TrackBacks (0)

By: Henry T. Chou, Esq.

The Pinelands Commission has approved a solar farm project on top of a closed landfill in Stafford Township. Recognizing the benefits of the solar farm and its consistency with the goals of the Pinelands Master Plan, the Commission granted a waiver from the conservation easement requiring the former landfill to be maintained as open space.

The solar farm, which will consist of 24,624 solar panels to be set in 1,026 arrays on top of the 1.6-acre capped landfill, will generate approximately six megawatts of DC power.

Like other solar farm developers, the Walters Group was attracted to New Jersey's innovative solar-renewable energy certificate program, where energy companies generating power from non-renewable energy sources purchase certificates from producers of renewable energy to offset carbon emissions and avoid fines associated with carbon emissions.

The certificates, which are traded on the open market, currently sell for $400-$500. It is estimated that the solar farm will generate approximately 5,000-6,000 certificates per year, which means that in addition to the energy it sells, the developer can make up to an additional $3 million in certificate sales.

Posted by Henry T. Chou, Esq. at 05:17 PM | Permalink | Comments (0) | TrackBacks (0)

By: Henry T. Chou, Esq.

On October 20, 2010, a partnership of Dallas-based Panda Power Funds and New York-based Con Edison Development began construction on one of the nation's largest solar farms in Pilesgrove, New Jersey, a rural community in Salem County, approximately 20 miles from Wilmington, Delaware.

The 100-acre former farm was slated for residential development, but in the down housing market, the energy companies were able to acquire the property for use as a solar farm, consisting of 71,000 solar panels which will be installed and generating power by next spring.

Producing 20 megawatts of DC power, it will be the nation's second largest solar farm. The only existing solar farm that is bigger is a 25-megawatt facility in Arcadia, Florida.

The solar farm developer was lured to New Jersey with an innovative solar-renewable energy certificate program, which works like the emissions trading program currently being considered by the U.S. Congress. Under the program, energy companies generating power from non-renewable energy sources must buy certificates from producers of renewable energy in order to avoid paying fines for carbon emissions.

The certificates, which are traded on the open market, cost approximately $400-$500 each. The Pilesgrove solar farm will generate about 27,000 certificates per year, which means that in addition to selling the energy they produce, the developers can make an additional $11-12 million per year in certificate sales.

Posted by Henry T. Chou, Esq. at 04:47 PM | Permalink | Comments (0) | TrackBacks (0)

Princeton, NJ -- In a case brought by Hill Wallack LLP on behalf of the New Jersey Builders Association, the Appellate Division of the New Jersey Superior Court today struck down key provisions of the affordable housing regulations promulgated by the New Jersey Council on Affordable Housing (COAH). The Appellate Division ruled that the regulations would impede construction of affordable housing by private builders in New Jersey. The court also held that the regulations improperly permitted municipalities to reduce or avoid their constitutional obligations to provide for affordable housing.

The decision strikes down regulations promulgated in 2008, and affects housing construction in all of New Jersey’s 566 municipalities.

The 72-page opinion declared that regulations requiring builders to set aside 25 percent of new housing units for low and moderate income households are invalid. It found that this requirement, coupled with standards that would set minimum densities only at four, six, or eight units per acre, did not create sufficient incentives for the construction of affordable housing.

The court also struck down regulations that would have permitted towns to receive credit against their housing obligations for non profit or municipal housing projects for which no site has been selected, no funding has been secured, or no developer has been designated. It held that these speculative proposals would not create realistic housing opportunities for low and moderate income families. This regulation would have permitted municipalities to propose speculative projects instead of rezoning for privately constructed inclusionary projects.

The court also rejected the so-called “growth share” methodology used by COAH to determine municipal affordable housing obligations. It held that the growth share regulations would have permitted municipalities to reduce or avoid their affordable housing obligations by engaging in exclusionary zoning.

The court also invalidated a number of other regulations that would have permitted municipalities to receive “bonus” credits against their housing obligations for activities that do not create additional housing.

The court ordered COAH to adopt compliant regulations within five months. It left the impact of its decision on individual towns to be determined on a case-by-case basis.

Hill Wallack LLP partners Thomas F. Carroll, III, Stephen Eisdorfer and Henry T. Chou prepared the briefs in this matter. Mr. Eisdorfer made the oral arguments before the three-judge court. This is the second case brought by Hill Wallack LLP on behalf of the New Jersey Builders Association in which the Appellate Division struck down versions of COAH’s “third round” regulations. The previous decision invalidated an earlier version of the regulations promulgated in 2004.

Posted by Henry T. Chou, Esq. at 02:51 PM | Permalink | Comments (0) | TrackBacks (0)