Court Overrules DEP, Finds Developer Was Entitled to Exemption From Highlands Act

The New Jersey Appellate Division delivered a rebuke to the state’s Department of Environmental Protection (DEP) on August 1, finding that DEP’s Commissioner ignored undisputed evidence and made critical legal errors in holding that two development projects did not qualify for an exemption from the strict requirements of the Highlands Water Protection and Planning Act. The court’s decision in Lakeside Manor v. State of New Jersey Department of Environmental Protection reversed the Commissioner’s decision, finding that the developer had satisfied all statutory requirements for the exemption.

The statute, which was enacted in 2004, contains an exemption from its regulatory provisions for major projects that had received at least one of a specified list of land use approvals and at least one of a specified list of DEP permits by March 29, 2004. Jacinto Rodriguez, the president and owner of two development entities, obtained such approvals for both projects well before the deadline: subdivision and site plan approvals in 1999, and DEP permits for sewer lines in 2000. Based on these and other approvals, Rodriguez commenced construction of the projects.

The projects were not yet complete when the statute came into effect, so Rodriguez filed a combined application with DEP for a “Highlands Applicability Determination” for the two projects. DEP initially denied the application, citing doubts about whether the approvals were still in effect, but Rodriguez sought an adjudicatory hearing, and an Administrative Law Judge (ALJ), in his recommended decision, concluded that the projects qualified for the exemption. DEP’s Commissioner, however, rejected the ALJ’s recommendation, and determined that the projects were not eligible for the exemption. Both entities appealed the final decision to the Appellate Division.

The Court found unequivocally that the Commissioner lacked any basis for denying the exemption. With respect to the land use approvals, the Court noted that the Commissioner had overlooked both the stipulation of DEP’s counsel that the approvals remained valid, and clear evidence that the approvals were in fact effective as of the cut-off date. As for the Commissioner’s finding that the DEP sewer permits were no longer valid, the Court criticized both the legal conclusions and the factual findings of the Commissioner. The issue here was whether the development entities’ failure to comply with certain conditions of the permits (obtaining a mapping revision or waiver for wetlands from EPA) rendered the approvals, as the Commissioner had found, “null and void.” Not so, said the Appellate Division. While violation of a permit condition may be grounds for its revocation, revocation cannot occur without a proper proceeding, and may not even be the appropriate remedy for the violation. Moreover, even revocation does not mean the permit ceased to exist as of the date of the violation. The Commissioner, said the Court, could not do an end-run around these protections by simply declaring the permits null and void. Finally, the record evidence clearly showed that revocation of the permits was not warranted; DEP’s own staff had recognized that construction authorized by the sewer permits did not encroach on any EPA-regulated wetlands. In short, the Commissioner was wrong on the law and on the facts.

As previously covered in this blog, the Highlands Act continues to generate judicial opinions about its legality and its implementation, as well as new legislative developments. The Lakeside Manor decision may stand as a warning to future Commissioners that reviewing courts will scrutinize their decisions closely, even where the decision appears to give effect to the statute’s protective purposes.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department.

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