New Jersey Case of the Month: Insight Into Court’s Review of Applications Under NJ Conversion Bill

October 2011Newsletters In the Zone

In July 2009, the New Jersey legislature adopted the “Age Restricted Conversion Bill”(N.J.S.A. 45:22A-46.3), et seq. (the Conversion Bill) in an attempt to reduce the existing glut of age-restricted housing and address the state’s deficiency of affordably priced workforce housing. The Conversion Bill created a mechanism for developers to convert approved age-restricted residential developments into developments with no age restriction by requiring a developer seeking such a conversion to set aside 20 percent of the units in the converted development as affordable housing units in accordance with the Council on Affordable Housing (COAH) regulations. The bill was intended to spur economic activity by allowing residential developers to reduce the oversaturated inventory of age-restricted housing while simultaneously providing municipalities with a tool to address their affordable housing obligation.

Not surprisingly, the bill meet with substantial opposition from municipalities throughout the state, which expressed concerns the bill infringed on local rule and would ultimately result in an influx of school-age children and corresponding demands on already limited resources. Several years later, New Jersey courts are now being tasked with reviewing planning board actions on applications under the Conversion Bill. In Heritage at Town Lake, LLC v. Planning Bd. of the Borough of Sayreville, ___ N.J. Super. ___ (Law. Div. 2010), the Superior Court of New Jersey, law division, provides an early framework for how courts will analyze the denial of conversion applications in the first published decision that addresses the Conversion Bill.

Heritage at Town Lake, LLC (Heritage) is the owner of Block 136.15, Lot 76 in Sayreville, New Jersey (the property). In 1998, Heritage secured major subdivision approval for 260 single family lots before the Sayreville Planning Board. In 2005, Heritage amended its plan to permit the construction of 200 age-restricted residential units based on Sayreville’s senior citizen housing density bonus. In 2007, Heritage amended the 2005 approval and obtained preliminary and final site plan approval to construct 184 age-restricted, multifamily units, citing the lack of market demand as the basis for the requested reduction.

In February 2010, Heritage filed an application to convert the age-restricted units to non-age-restricted units in accordance with the Conversion Bill. The application provided for 20 percent of the converted residential units to be designated for affordable housing as required by the Conversion Bill. In support of the application, Heritage provided the expert testimony of a professional engineer, a traffic engineer, a professional planner and a principal of the company. This testimony was tailored to address each of the proof standards under the Conversion Bill, which require the applicant to establish each of the following:

  • The site meets the Residential Site Improvement Standards parking requirement;
  • The recreation improvements and other amenities to be constructed on the site have been revised, as needed, to meet the needs of a converted development;
  • The water supply and sanitary systems are adequate to meet the needs of the converted development, in accordance with the applicable New Jersey regulations; and
  • If additional water supply, sewer capacity or parking is needed and the developer is unable to obtain it, the number of dwelling units in the converted development are reduced accordingly.

Heritage’s professional engineer testified that the only proposed change to the site plan was to modify the approved bocce courts (intended to service the age-restricted community) to passive recreational space. He further testified that there was sufficient water and sewer available for the development and the allocated capacity would not be impacted by the conversion. Heritage’s traffic expert testified that there would be no sufficient changes to the traffic patterns due to the conversion and the plan provided adequate parking for the residential units. Heritage’s planner testified that the recreational elements were suitable for the persons who would likely reside at the development. Additionally, the planner testified that the conversion would not result in a negative impact to the zone plan or public good. Lastly, a principal of Heritage explained there was no market for senior citizen housing either in Sayreville or in the surrounding municipalities. Due to the lack of market demand, there was also no construction financing available to develop the project as previously approved.

The Board denied Heritage’s application for conversion and set forth the following reasons in its resolution for the denial:

  • The applicant failed to provide the Planning Board with sufficient information to confirm its ability to develop the site in accordance with principles of sound planning;
  • The proposed conversion was inconsistent with the Borough’s Master Plan as the Master Plan calls for construction of housing that addresses the needs of senior citizens;
  • Because the applicant’s prior approval utilized the density bonus provided for age-restricted housing, the grant of the conversion would unilaterally increase permissible density in violation of the ordinance;
  • The applicant failed to provide the Planning Board with sufficient information or analysis of the residential component.

Heritage used the enforcement mechanism provided under the Conversion Bill to challenge the Planning Board’s denial by action in lieu of prerogative writs.
In reviewing Heritage’s appeal, the court framed its review with the following two questions: (1) have the statutory factors contained in the conversion statute been met, and (2) if so, was the Board’s denial unreasonable as to mandate a reversal by this court? The court further noted that, “if the Board’s decision is without reason or for the wrong reason, the decision is unreasonable.” The court systematically analyzed each of the Board’s purported bases for the denial and rejected each in holding that the Board’s decision was unreasonable.

In its analysis, the court noted the legislature’s clear intent was for planning and zoning boards to consider conversion applications as permitted uses, as opposed to use variances. As such, the court rejected the Board’s argument that the application was inconsistent with the zoning ordinance, as the Conversion Bill deems any application for conversion to be treated as a permitted use. The court also rejected the Board’s argument that the application would violate the Master Plan, which supports the development of age-restricted housing to fill a need in the community. The court noted that Heritage provided uncontroverted testimony that there was no demand in the market for age-restricted housing due to an oversupply of age-restricted housing approvals. The court further reasoned the Conversion Bill’s intent was to provide needed low and moderate income housing in lieu of age-restricted housing. Finally, the court addressed the issue related to the sufficiency of the recreational amenities by exercising its statutory authorization to impose reasonable conditions on the approval. Because the proofs suggested the conversion would result in school-age children, the Board required the development of a “tot lot” as a condition of the conversion.

In its concluding remarks, the court noted that it rejected the application of Sica v. Bd. of Adj. of Twp. of Wall as the appropriate standard of review in a conversion application. The court stated the Sica standard, which is applicable for a use variance application for inherently beneficial uses, is not appropriate for conversion cases. Rather, the standard should be more akin to a bulk variance standard, which requires the board to determine if the variance can be allowed without substantially impacting the zone plan or the public good. The case suggests that courts will give reviewing boards very little discretion in reviewing conversion applications in order to effectuate the legislature’s intent. So long as an applicant is able to meet the statutory criteria, the board will need to provide separate and independent testimony to show the grant of the conversion will result in substantial detriment to the zone plan or public good.

For more information, please contact Daniel V. Madrid at 609.844.7413 or [email protected].

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