Real Property & Environmental Law Alert

Real Property & Environmental Law Alert

Transactional Real Estate, Development/Redevelopment & Environmental Law

Tolling of Approvals Under New Jersey’s Permit Extension Act: Will The End Of The Year Be The End Of The Line? Approved Projects Could Be At Risk

Posted in Development/Redevelopment

New Jersey’s Permit Extension Act (“PEA”) was initially enacted in 2008 — in response to “the crisis in the real estate finance sector of the economy” — for the purpose of tolling, through the end of 2012, expiration of various approvals necessary for development. It was later extended, in 2012, due to the then “current national recession,” to extend the tolling of the expiration of those approvals until December 31, 2014. Unless the Legislature approves a further extension, the PEA will sunset at the end of this year, and that could pose a problem for projects which have not yet started construction, because their approvals may expire.

The PEA provides for tolling of any “approval,” as defined in the statute, which is or was in existence during the extension period (January 1, 2007 through December 31, 2014). Although there are important exceptions, most subdivision, site plan and variance approvals granted pursuant to the Municipal Land Use Law are encompassed within covered “approvals,” as are many approvals granted by the New Jersey Department of Environmental Protection (NJDEP), New Jersey Meadowlands Commission (NJMC), Delaware and Raritan Canal Commission, New Jersey Pinelands Commission, and various other agencies.

The PEA further provides that “the running of the period of approval is automatically suspended for the extension period” (i.e., through December 31, 2014), but tolling “shall not extend the government approval for more than six months beyond the conclusion of the extension period” (i.e., through June 30, 2015). The PEA also shall not “shorten the duration that any approval would have had in the absence of [the PEA].” Thus, any included “approval” which was granted or which was set to expire after January 1, 2007, was extended by the PEA through the end of this year.
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Untapped Potential in New Jersey’s Nascent Craft Beer Industry

Posted in Liquor Licensing

Two years ago, New Jersey lawmakers revised an archaic law that had been a major obstacle to anyone who wanted to launch a start-up brewery in the state. New Jersey’s old law severely restricted craft brewers’ ability to actually sell their beer to visitors of the brewery, thus undermining the economics of on-site bars or tap rooms, which most small operations in other states rely on as an important revenue source, especially in the early stages. The old law even limited how many free samples a brewer could hand out, which proved particularly troublesome for entrepreneurs trying to gain brand recognition and market share, and appeal to consumers’ varied tastes. The new law was intended to put brewpubs, microbreweries and so-called “nanobreweries” on an equal footing with competitors in neighboring states. While this legislation was a welcome step for the craft beer industry, more can be done.

Under the new law, craft brewers—anyone brewing not more than 300,000 barrels per year—can now sell full pints at the brewery and customers can buy a keg’s worth of beer (15.5 gallons) for consumption off-premise (the old law restricted sales to two six-pack’s worth). The new law also lets brewpubs (restaurants with a small in-house brewery) produce up to 10,000 barrels of beer—instead of being limited to just 3,000—and raised the cap of how many brewpub licenses a business can hold—from two to ten. Further, brewpubs can now sell their beer to wholesalers for distribution to licensed retail stores and restaurants within the state.

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Turnpike Authority is Not a “Local Government Unit”: Tax Court

Posted in Environmental & Green Issues

All politics, the saying goes, is local. Not so with government, according to a recent decision from New Jersey’s Tax Court. In an opinion that teaches more about legislative drafting than it does about tax policy, the court in New Jersey Turnpike Authority v. Township of Monroe parsed a complex definition of “local government unit” in the Garden State Preservation Trust Act (GSPTA). It held that the New Jersey Turnpike Authority did not come within that definition, and thus could not claim that status to obtain an exemption from roll-back taxes on a parcel it purchased in 2009.

To mitigate the impacts of a construction project on wetlands, the Authority purchased some 400 acres of vacant land in Monroe Township for the purpose of donating it to the Department of Environmental Protection. The land was assessed as farmland for property tax purposes, but the Authority did not use it for agricultural or other permissible purposes. Monroe’s tax assessor then sought to impose three years of “roll-back” taxes on the land, as authorized both by the state Constitution and by statute, because the land had not been used for any purpose that entitled it to assessment as farmland.

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District of New Jersey Decision Highlights Procedural and Evidentiary Complexities Unique to the State’s Environmental Litigants

Posted in Environmental & Green Issues

In Leese v. Lockheed Martin Corp., one of the New Jersey’s foremost environmental jurists, the Honorable Jerome B. Simandle, Chief Judge of the United States District Court for the District of New Jersey, authored a comprehensive opinion explaining why several plaintiffs who alleged harm caused by contamination on their properties were without recourse under a number of state and federal environmental laws. In so doing, the Chief Judge highlighted the procedural and evidentiary complexities unique to environmental litigants.

In Leese, plaintiffs claimed that the volatile organic compounds (“VOCs”) trichloroethylene (“TCE”) and perchloroethylene (“PCE”), i.e., hazardous chemicals, migrated onto their residential properties from Defendant Lockheed Martin’s adjacent lot, in violation of the Resource Conservation & Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation & Liability Act (“CERCLA”), the New Jersey Spill Compensation & Control Act (“Spill Act”), and the New Jersey Water Pollution Control Act (“WPCA”). Importantly, plaintiffs’ Spill Act and WPCA claims were brought under the New Jersey Environmental Rights Act (“ERA”), which provides the basis for private actors to bring these – as well as a number of other – environmental enforcement claims. After considering the parties’ respective summary judgment motions, Judge Simandle dismissed each of these claims in turn.

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New Jersey Supreme Court Adopts O’Brien Factors For Determining When Real Estate Transactions Constitute an Equitable Mortgage

Posted in Transactional Real Estate & Leasing

Equitable Mortgages and the Eight Factor Test

Founded on the principle that equity looks to substance over form, courts will find an equitable mortgage to exist when a deed or contract, while lacking the characteristics of a typical mortgage, is used to pledge an interest in real property as security for a debt with the intention of acting as a mortgage. On September 9, 2014 in Zaman v. Felton, the New Jersey Supreme Court decided that when determining whether a particular transaction gives rise to an equitable mortgage, a trial court must utilize the eight factor test set forth by the Bankruptcy Court for the District of New Jersey in O’Brien v. Cleveland. The eight factors set out in O’Brien for evaluating whether an equitable mortgage exists are:

  1. Statements by the homeowner or representations by the purchaser indicating an intention that the homeowner continue ownership;
  2. A substantial disparity between the value received by the homeowner and the actual value of the property;
  3. Existence of an option to repurchase;
  4. The homeowner’s continued possession of the property;
  5. The homeowner’s continuing duty to bear ownership responsibilities, such as paying real estate taxes or performing property maintenance;
  6. Disparity in bargaining power and sophistication, including the homeowner’s lack of representation by counsel;
  7. Evidence showing an irregular purchase process, including the fact that the property was not listed for sale or that the parties did not conduct an appraisal or investigate title; and
  8. Financial distress of the homeowner, including the imminence of foreclosure and prior unsuccessful attempts to obtain loans.

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NJDEP Document Review Process Curtailed: More Autonomy for LSRPs

Posted in Development/Redevelopment, Environmental & Green Issues

Unable to keep up with submittals from Licensed Site Remediation Professionals (LSRP) and with the resulting increase in review times, the New Jersey Department of Environmental Protection (NJDEP) has recently decided to defer the review of non-Response Action Outcome (RAO) documents until an RAO is submitted. This announcement comes four years into the LSRP program, which as designed, has begun to eliminate the backlog of contaminated sites awaiting attention. However, the very success of the LSRP program has created its own backlog as NJDEP finds itself falling behind in review of submittals.

Under the statute, the NJDEP is required to “inspect all documents and information submitted by a licensed site remediation professional concerning a remediation upon receipt[,]” N.J.S.A. 58:10C-21. However, the NJDEP has stated that the review of non-RAO submissions upon receipt is not necessary or an efficient use of NJDEP personnel. The one important exception noted by the NJDEP is the review of submissions related to receptors, for example, a Receptor Evaluation Form. Protection of receptors continues to be a high priority of the department. Nonetheless, the deferral of review may have unanticipated results.

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Supreme Court Limits EPA’s Authority to Regulate Carbon Emissions from Stationary Sources

Posted in Environmental & Green Issues

Since the Supreme Court’s 2007 decision in Massachusetts v. EPA, it has been clear that the U.S. Environmental Protection Agency (“EPA”) has the authority under the Clean Air Act (“CAA”) to regulate emissions of greenhouse gases (“GHGs”) from mobile sources because GHGs fall within the CAA’s definition of an “air pollutant.” When EPA sought to regulate GHG emissions from stationary sources (mainly power plants and factories), however, the Court sang a slightly different tune. In Utility Air Regulatory Group v. Environmental Protection Agency (“UARG”), the Court rejected EPA’s attempt to regulate GHG emissions from stationary sources under two regulatory programs based solely on those emissions, while affirming the agency’s ability to regulate such emissions from so-called “anyway” sources that are already undergoing regulatory review because of emissions of other pollutants.

EPA has set limits on allowable concentrations in the air, called National Ambient Air Quality Standards (“NAAQS”), for six “criteria” pollutants — sulfur dioxide, particulates, nitrogen dioxide, carbon monoxide, ozone and lead. Under several EPA programs, whether a given area is in compliance (or “attainment”) of the NAAQS can determine whether a given stationary source will have to undergo special review when it is built or modified. Under the Prevention of Significant Deterioration (“PSD”) preconstruction permit program, certain stationary sources must use the best available control technology (“BACT”). Under the Title V operating permit program, certain stationary sources must obtain a CAA-compliant operating permit. EPA has not established an NAAQS for carbon dioxide, methane, or any other GHG.

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Potential Change Coming to NJ’s Economic Opportunity Act

Posted in Development/Redevelopment

The “New Jersey Economic Opportunity Act of 2013” overhauled New Jersey’s economic development programs. The Act retooled and substantially enhanced the State’s job creation and retention program known as the Grow NJ Assistance Program (Grow NJ), as well as the Economic Redevelopment Growth (ERG) Grant Program, the incentive program that provides gap financing to developers. As we wrote in Commerce magazine, Grow NJ and ERG improve New Jersey’s economic competitiveness with our neighboring states and may be game-changers for businesses and developers. After seeing the programs in action for under a year, the Legislature has revisited the programs to make technical changes and to further enhance NJ’s economic development arsenal.

In June 2014, the State Legislature approved legislation (Senate Bill 1551/Assembly Bill 3213) with strong bipartisan support in both chambers to amend various portions of the Grow NJ and ERG programs. The bill is currently being considered by Governor Christie and must be acted on by September 8, 2014. The key provisions include:

  • Making the transfer of tax credit more widely available by reducing the minimum amount of the credits that may be transferred from $100,000 to $25,000.
  • Clarifying a provision of the Grow NJ program concerning the standard of service generally accepted by custom or practice as full-time employment in a supermarket, grocery, or other similar retail industry, in order to encourage food purveyors to locate within Camden and Atlantic City.
  • Adding a new Grow NJ bonus credit of $1,000 for using a vacant space of 1,000,000 square feet of office or laboratory space available for occupancy for a period of over one year.
  • Adding a new Grow NJ provision that deems a project a “mega project” if it is in a southern county that is also in an area in need of redevelopment and invests $20 million and creates or retains 150 jobs.
  • Modifying the Grow NJ “net benefit test” to require a business to demonstrate that a capital investment would benefit both the State and the municipality in which the capital investment will be made;
  • Encouraging nonprofit development corporations to undertake development projects in the four designated “Garden State Growth Zones.”
  • Allowing the allocation of tax credits to the shareholders of New Jersey S corporations and New Jersey Qualified Subchapter S Subsidiaries that undertake projects in the Camden-Garden State Growth Zone.
  • Creating an incentive for the donation of substantial public infrastructure as part of certain redevelopment projects
  • Making technical changes and correcting the date from July 28, 2015 to July 28, 2018, by which the developer of a qualified residential project seeking an award of tax credits under the ERG program towards the funding of an incentive grant must submit a temporary certificate of occupancy for the project.

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Sixth Circuit Becomes Latest Federal Appeals Court to Rule That CERCLA’s Contribution and Cost Recovery Provisions Provide Mutually Exclusive Remedies to PRPs

Posted in Environmental & Green Issues

The United States Court of Appeals for the Sixth Circuit became the latest federal court of appeals to weigh in on the dichotomous nature of Superfund claims made under Sections 107 and 113 in the wake of the United States Supreme Court’s decision in United States v. Atlantic Research Corp., 551 U.S. 128 (2007). In Hobart Corp. v. Waste Management of Ohio, Inc., the Sixth Circuit held that Sections 107(a)(4)(B) and 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601-9675, “provide mutually exclusive remedies,” an issue left open in Atlantic Research.

Generally speaking, whereas Section 107 allows a potentially responsible party (“PRP”) who has funded remediation of a contaminated site to file a cost recovery action against other PRPs within six years, Section 113 allows a PRP who has at least partially resolved its liability to the United States only three years to file a contribution action against non-settling PRPs. The court in Hobart found that a PRP must proceed under Section 113 if it meets one of that section’s statutory triggers, e.g., entering into an administrative settlement that at least partially resolves that PRP’s CERCLA liability to the United States.

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New Jersey Supreme Court Finds Neither Plan Approval Nor Complete Remediation are Prerequisites to a Spill Act Contribution Action

Posted in Environmental & Green Issues

In Magic Petroleum Corporation v. Exxon Mobil Corporation, the New Jersey Supreme Court held that a party funding remediation of a contaminated site may bring a contribution claim against other potentially responsible parties (“PRPs”) before completing remediation and prior to receiving the New Jersey Department of Environmental Protection’s (“DEP’s”) written approval of the remediation plan. In so doing, the Court has provided certainty, to a degree, to the environmental remediation process in New Jersey.

In Magic Petroleum, the DEP required Magic Petroleum Corporation (“Magic”) to remediate a contaminated site pursuant to the Spill Compensation and Control Act, (“Spill Act”) N.J.S.A. 58:10-23.11 to -23.24. While that remediation was ongoing, Magic sued PRP Exxon Mobil for contribution. The trial court dismissed Magic’s contribution claim after ruling that such a claim could only be filed following complete remediation of the site. The Appellate Division agreed, finding that because the DEP — and not the trial court — has jurisdiction to identify contamination, analyze the extent of discharge, and devise a cleanup strategy, and those findings are a prerequisite to a court’s allocation of liability among multiple responsible parties, dismissal of Magic’s contribution claim was proper.

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