• December 12, 2014

    Court Frees Lower Income Homes For Sale To Wealthier Buyers

    In a newly entered judgment, the Superior Court has freed 166 homes originally sold to low and moderate income families in Mahwah from further controls on resale imposed by Mahwah Township. The homes, which were built in the 1980s and 1990s, were originally subject to deed restrictions that limited resales to low and moderate income families at controlled prices. By their terms, the deed restrictions automatically expired after 25 years. By ordinance and policy, Mahwah attempted to maintain the limitation on resales beyond expiration of the 25 year deed restriction. The newly entered judgment bars Mahwah from enforcing those ordinances or policies.

    The final judgment follows a decision by the Superior Court holding that State regulation permanently restricting the resale of so-called Mt. Laurel housing does not apply retroactively to homes built in the 1980s and 1990s. The decision potentially affects thousands of families who bought low or moderate income homes during that period.

    Throughout the case, Hill Wallack LLP represented the166 homeowners.

    The 166 homes were built under the terms of an agreement approved by the Superior Court in 1985 to bring Mahwah Township into compliance with its constitutional fair share housing obligations under the so-called Mt. Laurel doctrine. The plaintiff homeowners purchased their homes with deed restrictions that required that if the homes were resold during the next 25 years, the homes could be resold only to other low or moderate income families and only at below market prices. The deed restriction provided that after the 25-year control period, the homeowners would be free to sell to any buyer at any price.
    Mahwah attempted to override this deed restriction on the grounds that the so-called Uniform Housing Affordability Control (UHAC) regulations issued by the State in 2004 required the town to restrict future sales forever, and that the regulation was retroactive, i.e., that it applied even to homes built and occupied long before 2004.

    In its decision, the court rejected Mahwah’s interpretation of the UHAC regulations. Accepting the arguments made by Stephen Eisdorfer, Esq., and Thomas F. Carroll, III, Esq., of Hill Wallack LLP, the court found that the UHAC regulations applied only to homes newly constructed after the effective date of the regulations. They do not apply retroactively to the plaintiffs’ homes constructed many years earlier.

    Mr. Eisdorfer stated: “The public policy when the Mahwah homeowners bought their homes was that low and moderate income households should be able to use homeownership as a means of accumulating assets just as other homeowners do. The deed restrictions for their homes embody this policy. In this case, the court held that UHAC regulations do not operate retroactively to override these deed restrictions. This potentially benefits not only the 166 homeowners in Mahwah, but homeowners in dozens of developments throughout the state who bought low or moderate income homes in the 1980s and 1990s.”

    For some of the 166 homes in Mahwah, the 25-year period of controls has already expired. The owners of these homes are now free to sell them on the open market immediately.

    The UHAC regulations are sometimes referred to as the “95/5 rules” because they provide that, if a low or moderate income home is sold after the expiration of the period of controls, the town may take 95 percent of the increase in value.

    The Township has agreed not to appeal the final judgment.

    For questions, please contact alert author Thomas F. Carroll, III or Stephen M. Eisdorfer.

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