N.J. Appellate Court Blocks Town from Stopping Affordable Housing Project

If you have been following our blog, you are probably aware of the difficulties that property owners face when fighting the government’s taking of private property. In many instances, Courts defer to the government’s asserted purpose, necessity, and procedural conduct for a proposed taking. However, as demonstrated by a recent decision from an N.J. appellate court, the government’s power is not unfettered.

In AAMHMT Property, LLC v. Township of Middletown, the Appellate Division considered an interlocutory appeal that arose in the context of pending “Mount Laurel” affordable housing litigation. To provide greater context, “[t]he Mount Laurel series of cases recognized that the power to zone carries a constitutional obligation to do so in a manner that creates a realistic opportunity for producing a fair share of the regional present and prospective need for housing low- and moderate-income families.”  In re Adoption of N.J.A.C. 5:96 & 5:97 ex rel. New Jersey Council on Affordable Hous. (Mount Laurel IV), 221 N.J. 1, 3-4 (2015) (footnote omitted). As a means to accomplish Mount Laurel’s goal, the Supreme Court created judicial remedies to impose municipal compliance. A “builder’s remedy” lawsuit is an action filed by a real estate developer to compel a municipality to allow the construction of affordable housing development where the municipality has failed to provide reasonable low and moderate income housing on its own. See In re Twp. of Bordentown, 471 N.J. Super. 196, 221 (App. Div. 2022) (“A builder’s remedy provides a developer with the means to bring ‘about ordinance compliance through litigation.'”).

On August 17, 2023, AAMHMT, a contract purchaser of a 50+ acre property in Middletown Township, filed a complaint seeking a determination that the Township is in violation of its  Mount Laurel compliance obligation and seeking the rezoning of the Property to redevelop it to include affordable housing, i.e., a “builder’s remedy.” A few days after AAMHMT filed suit, the Township began steps to designate the property an “area in need of redevelopment” for condemnation purposes, which would have permitted the town to use eminent domain to seize the property and prevent AAMHMT from developing it. On February 20, 2024, the Township adopted a resolution determining the subject property is a condemnation redevelopment area. This designation is significant because it satisfies one of the two constitutional requirements for the government to take private property (i.e., the “public use” requirement). On May 17, 2024, the trial court entered an order in the pending litigation finding that the Township was not constitutionally compliant with its Mount Laurel obligation.

On June 7, 2024, AAMHMT filed an Order to Show Cause (“OTSC”), seeking to enjoin the Township from (1) “[t]aking any further action or effort towards the condemnation of the Property, including, but not limited to, filing any Declaration of Taking or any other condemnation-related action with respect to the Property”; (2) “[t]aking any further action or effort towards designating a redeveloper for the Property (pursuant to the [LRHL], N.J.S.A. 40A:12-1 . . . )”; and (3) “[g]ranting any type of development approval for any parcel of land for any purpose, other than for an inclusionary housing development.”  On June 18, the trial court entered an initial OTSC with temporary restraints, enjoining the Township from taking any further action with respect to the condemnation and redevelopment of the Property, and scheduled a hearing to determine whether to maintain the restraints. Thereafter, the trial court heard argument and partially granted AAMHMT’s OTSC. The trial court clarified that the restraints will continue until “the later of the following: (a) the [c]ourt’s determination of whether plaintiff is entitled to a builder’s remedy in this Mount Laurel litigation; or (b) the court’s determination of whether plaintiff is entitled to an order permanently enjoining defendants from designating a redeveloper other than plaintiff for the Property.” The Township and Planning Board appealed the trial court’s decision.

The Appellate Division began its analysis by declaring that “[t]he law is well settled that a trial court has discretion on whether to grant a preliminary injunction, and the court’s decision will be overturned on appeal only for an abuse of that discretion.” To be entitled to injunctive relief, a litigant must present clear and convincing evidence demonstrating that: (1) irreparable harm is likely if the relief is denied; (2) the applicable underlying law is well settled; (3) the material facts are undisputed and there exists a reasonable probability of ultimate success on the merits of the claim; and (4) the balance of the hardship to the parties favors the issuance of the requested relief. Crowe v. DeGioia, 90 N.J. 126, 132-34 (1982). “Harm is generally considered irreparable in equity if it cannot be redressed adequately by monetary damages,” which “may be inadequate [due to] the nature of the injury or of the right affected.”  Crowe, 90 N.J. at 132-33.

Reviewing the trial court’s application of the Crowe factors, the Appellate Division found that the first factor was satisfied because, “while this dispute involves monetary issues, it also broaches the ‘bigger’ issue of ‘being able to move forward with development’ and address the Township’s constitutional noncompliance.” Slip op. at 16. Regarding the second factor, the Court found no abuse of discretion and held that “the law is well-settled on municipalities’ constitutional obligations, especially when, as in this case, the level of noncompliance is significant.” Id. at 17. Although the Township argued that the trial court failed to make adequate findings with respect to the third factor (i.e., the probability of success on the merits with a builder’s remedy lawsuit), the Appellate Division saw no reason to “second-guess the findings of a specially designated Mount Laurel judge in assessing the probability that plaintiff will succeed on the merits of its builders remedy lawsuit.” Id. at 18. Finally, the Court was also unpersuaded by defendants’ arguments regarding the fourth Crowe factor. To that end, the Appellate Division determined that the trial court adequately balanced the alleged hardships when it “concluded [the Township’s] hardship was mitigated by the fact that the Township can use its condemnation powers for commercial development elsewhere within the municipality.” Id. at 19. In sum, the trial court’s decision was affirmed on appeal.

It’s possible that the Township will file a petition requesting that the New Jersey Supreme Court hear this case given the public interest involved.  We’ll continue to track its progress.

The takeaway from this appeal is that a private party may be able to halt the redevelopment and taking of private property when the party and property are subject to a pending builder’s remedy lawsuit. It’s certainly a unique set of facts, but a positive result nonetheless as it reinforces both the importance of private property rights and the risk that a New Jersey municipality may face if it does not provide reasonable opportunities for the private sector to provide much needed low and moderate income housing. For over 55 years, McKirdy, Riskin, Olson & DellaPelle, P.C. has concentrated its practice in this special area of the law and has earned a reputation for persistently defending its clients’ property rights. Our firm has successfully handled a broad range of eminent domain and redevelopment cases involving almost every type of property, including commercial buildings, industrial properties, development land, single and multi-family residential properties, hotels/casinos, oil/gas pipelines, water rights and beachfront property, airports, farmland, and many more. If you are confronted with the threat of eminent domain, please contact McKirdy, Riskin, Olson & DellaPelle, P.C. to speak with an experienced attorney.