New Jersey Appellate Court Rules Redeveloper Cannot Compel Amendments to Redevelopment Plan

Redevelopment agreements are the tool used to memorialize the respective obligations of the redeveloper and the municipality to effectuate a redevelopment project. Often, a concept plan has been agreed upon, but changes to the site-specific zoning embodied in the redevelopment plan are necessary in order for the project to advance. In an unpublished decision earlier this year, the New Jersey Superior Court, Appellate Division, ruled in Fieldstone Associates, L.P. v. Borough of Merchantville, A-1239-13T3, that the municipality cannot be contractually compelled to adopt such amendments.

The Borough of Merchantville, located in Camden County, designated portions of its downtown as an “area in need of redevelopment” and adopted a redevelopment plan. Following an RFP process, the Borough designated Fieldstone Associates, L.P., as the redeveloper and the parties entered into a redevelopment agreement which provided that “Redeveloper, in cooperation with Borough shall prepare documentation for amendments to the Redevelopment Plan deemed necessary by the Redeveloper to develop the Redevelopment Project in accordance with the Concept Plan.” It went on to explain that the “Borough has approved the Concept Plan for Redeveloper’s proposed redevelopment for the Project Site being in compliance with the intent of the Redevelopment Plan and Borough shall amend the Redevelopment Plan to establish zoning standards, including bulk regulations to permit development of the Project without the requirement of variances or waivers, consistent with the approved Concept Plan.” The Redevelopment Agreement also provided that the Borough and Redeveloper “shall cooperate with each other in all respects and shall use their best efforts to effectuate the purposes of this Agreement.” In particular, the Borough was obligated to “examine its master plan to the extent required to conform to the Redevelopment Plan,” and “consider the adoption of zoning with respect to the Project Area consistent with the Amended Redevelopment Plan…In the event that economic market or site conditions render the Redevelopment Project impractical or unfeasible, the Borough and Redeveloper shall cooperate to revise the Redevelopment Plan and Concept Plan to permit the uses and bulk standards reasonably necessary to develop an economically feasible redevelopment project….”

Redeveloper presented its Redevelopment Plan amendment to the Borough Council, contending that the amendment was “necessary to permit development of the area without variances or waivers consistent with the previously approved concept plan.” After about six months, the Borough Council referred the amendment to the Planning Board for a determination of consistency with the master plan, and eventually the Planning Board recommended that the Borough Council reject the amendment as inconsistent with both the Master Plan and the Redevelopment Plan. The Borough Council promptly did so. Redeveloper then declared a default under the Redevelopment Agreement and commenced litigation to compel the Borough to adopt the amendment.

The trial court, in deciding the Borough’s motion to dismiss and the redeveloper’s motion to compel specific performance, recognized the Borough Council’s finding, on the Planning Board’s recommendation, that the amendment was contrary to public policy as expressed in the Borough’s Master Plan and ruled that “[a] government entity is without power to contract away [its] governmental powers” and that the Redevelopment Agreement was unenforceable to the extent it required the adoption of a zoning amendment or redevelopment plan amendment dictated by the redeveloper. The Appellate Division affirmed, finding that the Redevelopment Agreement “does not disclose any obligation on the part of the Borough to adopt the specific plan amendments proffered by [redeveloper].” Instead, the Appellate Division read the Redevelopment Agreement as obligating the Borough to adopt standards which permit development in accordance with the approved Concept Plan, without the need for variances or waivers, but found “no obligation on the part of the Borough” to adopt the ordinance in question or any other ordinance proposed by the Redeveloper.

While the conclusion is well-established that a municipality cannot be bound by contract to adopt specific legislation, the application of that concept to this specific set of facts, and the language in the Court’s opinion, present redevelopers with a practical problem where they are in contract with a municipality but cannot obtain redevelopment plan amendments which the redeveloper believes are necessary to make the project marketable or to avoid the need for variance relief. Consideration should be given where possible to seeking zoning changes before signing a redevelopment agreement. Where that is not possible, another alternative would be to provide rights to redeveloper (perhaps termination and reimbursement of costs) if the municipality will not adopt amendments which are satisfactory to redeveloper. Although the Fieldstone decision is unpublished and, therefore, not precedential, it nevertheless provides useful insight to consider in drafting redevelopment agreements.

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