SYLLABUS
(This syllabus is not part of the opinion of the Court. It has
been prepared by the Office of the Clerk for the convenience of the
reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not
have been summarized).
Argued November 29, 2005 -- Decided March 13, 2006
RIVERA-SOTO, J., writing for a majority of the Court.
This appeal requires that the Court harmonize, as a matter of public policy, the provisions of the Municipal Land Use Law, N.J.S.A. 40:55D-1 to -99, governing municipal development agreements, with the obligation set forth in the Municipal Services Act requiring that a municipality either provide or reimburse the cost of certain enumerated services to a statutorily defined “qualified private community.” N.J.S.A. 40:67-23.2e and -23.3.
Pursuant to the provisions of the Municipal Land Use Law, N.J.S.A. 40:55D-45.21, on
October 2, 1996, the Borough of Oakland (Borough) and Baker Residential, LP (Baker)
entered into a written development agreement for the development of Ramapo River Reserve,
a planned residential development consisting of three hundred seventy-five townhouses and single-family homes,
and additional common open space. In addition to the customary easement provisions, Paragraph
34(a) sets forth a specific limitation on each party’s obligations. More specifically, Baker
agreed to maintain the roadways within the development and keep them clear of
snow and other debris until the dedication of said roadways for public use
was completed in its entirety. In addition, Paragraph 16 states that Baker shall
be liable to the Borough for “damages or money loss” and shall “defend,
save, indemnify and hold harmless” the Borough, etc.. Baker developed Ramapo River Reserve
and created the Ramapo River Reserve Homeowners Association, Inc. (Homeowners Association). Among the
services provided by the Homeowners Association were snow and ice removal from the
roadways within Ramapo River Reserve.
On April 15, 2002, the Homeowners Association filed a complaint in lieu of
prerogative writs against the Borough, alleging that (1) the Homeowners Association is a
“qualified private community” under the Municipal Services Act; (2) the Borough provides snow
and ice removal to all residents of the Borough save the residents of
Ramapo River Reserve; and (3) the Borough is required to either provide such
services to, or reimburse the cost of such services to, Ramapo River Reserve.
The Borough answered and asserted several affirmative defenses, and filed a third-party complaint
against Baker seeking to invoke the provisions of the development agreement.
The Homeowners Association sought partial summary judgment against the Borough and, by an
order dated April 4, 2003, the trial court held that the Borough was
required under the Municipal Services Act to either pay for or reimburse the
Homeowners Association for the cost of snow and ice removal. The Borough filed
its own motion for partial summary judgment seeking to enforce the provisions of
Paragraphs 34(a) and 16. Baker filed a cross-motion for summary judgment. On May
9, 2003, the trial court denied the Borough’s motion for summary judgment and
granted Baker’s cross-motion. In an unreported decision, the Appellate Division affirmed. On the
strength of Briarglen II Condo. Ass’n, Inc. v. Twp. of Freehold,
330 N.J.
Super 345 (App. Div. 2000) (Briarglen II), both the trial court and the
Appellate Division held that the public policy against double-charging residents of a planned
development for certain municipal services, once through real estate taxes and again through
assessments from the homeowners’ association, is non-delegable and trumps the provisions of any
development agreement between the municipality and the developer.
The Supreme Court granted the Borough’s petition for certification.
HELD: Nothing in either the Municipal Land Use Law or the Municipal Services
Act prohibits a limited bargained-for delegation of a municipality’s obligations to a developer
and, under a properly adopted development agreement as provided in the Municipal Land
Use Law, a municipality may delegate to a developer the obligation to provide
or pay for the municipal services enumerated in N.J.S.A. 40:67-23.3 until such time
as the developer’s control of the executive board of a homeowners association established
pursuant to the Planned Real Estate Development Full Disclosure Act, N.J.S.A. 45:22A-21 to
-56, terminates.
1. Briarglen II holds that, because the residents of a “qualified private community”
pay real estate taxes to their municipality, they are entitled to statutorily enumerated
municipal services, by the municipality either performing the services itself or reimbursing the
costs of such services to the “qualified private community.” Because the proposition that
a resident of a “qualified private community” should not be subject to the
equivalent of double taxation, once by the municipality and again by the homeowners
association, is self-evident, we agree with that holding. However, to the extent that
Briarglen II adopts a blanket prohibition against a municipality delegating any of its
service obligations under N.J.S.A. 40:67-23.3 to a developer pursuant to a valid development
agreement entered into pursuant to the Municipal Land Use Law, it is too
broad. At one extreme, a municipality cannot in perpetuity delegate its statutorily imposed
service obligations to a developer. By the same token, it is inequitable to
transfer the cost of statutorily imposed municipal services obligations to the municipality without
a concomitant increase in municipal revenues. The Court is thus asked to harmonize
two statutory provisions the trial court and the Appellate Division viewed as in
an irreconcilable conflict: the mandate of the Municipal Services Act requiring that a
municipality provide or pay for a qualified private community’s roadway snow and ice
removal, and the provision in the Municipal Land Use Law permitting a written
development agreement between a municipality and a developer “relating to the planned development.”
(Pp. 11-14)
2. At the core of the controversy lie opposite but nonetheless correct concepts:
a municipality should not be obliged to provide increased municipal services in the
absence of increased municipal revenues; and, conversely, a municipality that receives increased municipal
revenues should provide the municipal services those revenues are intended to cover and
not view those revenues, simply because of the happenstance of a development agreement,
as a windfall untethered to any municipal obligation. The Court rejects the Appellate
Division’s conclusion that any delegation of the municipality’s obligations under N.J.S.A. 40:67-23.3 would
be void as against public policy. Because it ignores the economic realities of
municipalities caught in the whipsaw of lagging property tax revenues in the face
of increased demand for municipal services, the Appellate Division’s blanket conclusion goes too
far. In order to allow for a bridging of the gap between the
time a municipality is called upon to provide statutorily required increased municipal services
and the time when property taxes catch up to cover the municipality’s added
costs for those services, we hold that a municipality, under the provisions of
the Municipal Land Use Law and within the context of a written development
agreement thereunder, may delegate to a developer the obligation to provide or pay
for the municipal services enumerated in N.J.S.A. 40:67-23.3. The scope of that delegation
not only must be limited to the specific municipal services enumerated in N.J.S.A.
40:67-23.3, but also such delegation must terminate once the developer is required to
terminate its control of the executive board of the homeowners association of that
“qualified private community.” (Pp. 14-18)
3. The Court concurs with the trial court that the Borough had the
statutory obligation to provide or pay for roadway snow and ice removal services
to the Homeowners Association. However, because we hold that the Borough’s statutory obligations
under N.J.S.A. 40:67-23.3 are delegable, the Borough is still entitled to the benefit
of its bargain with Baker under Paragraphs 16 and 34 of the development
agreement. The matter is remanded to the trial court for a determination of
when Baker terminated its control of the executive board of the homeowners association
and how much is owed by Baker to the Borough by way of
contractual covenant and indemnity. (Pp. 18-19)
The judgment of the Appellate Division is REVERSED and the cause is remanded
to the trial court for further proceedings consistent with this opinion.
JUSTICE ALBIN filed a separate dissenting opinion stating that the developer’s agreement in
this case is in direct conflict with N.J.S.A. 40:67-23.3 and that, as a
result of the majority decision, qualified private communities again will suffer the unfair
burden of double taxation.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, and WALLACE join in JUSTICE
RIVERA-SOTO’s opinion. JUSTICE ALBIN filed a separate dissenting opinion.
SUPREME COURT OF NEW JERSEY
A-
135 September Term 2004
RAMAPO RIVER RESERVE HOMEOWNERS ASSOCIATION, INC.,
Plaintiff,
v.
BOROUGH OF OAKLAND, a municipal corporation,
Defendant and Third Party Plaintiff-Appellant,
v.
BAKER RESIDENTIAL, LP
Third Party Defendant-Respondent.
Argued November 29, 2005 – Decided March 13, 2006
On certification to the Superior Court, Appellate Division.
Brian M. Chewcaskie argued the cause for appellant (Gittleman, Muhlstock &
Chewcaskie, attorneys).
Lawrence H. Wertheim argued the cause for respondent (Himelman, Wertheim & Geller, attorneys).
JUSTICE RIVERA-SOTO delivered the opinion of the Court.
This appeal requires that we harmonize, as a matter of public policy, the
provisions of the Municipal Land Use Law, N.J.S.A. 40:55D-1 to -99, governing municipal
development agreements -- “written agreement[s] between a municipality and a developer relating to
the planned development[,]” N.J.S.A. 40:55D-45.2l. -- with the obligation set forth in the
Municipal Services Act requiring that a municipality either provide or reimburse the cost
of certain enumerated services to a statutorily defined “qualified private community[,]” N.J.S.A. 40:67-23.2e
and -23.3. On the strength of Briarglen II Condo. Ass’n, Inc. v. Twp.
of Freehold,
330 N.J. Super. 345 (App. Div. 2000) (Briarglen II), both the
trial court and the Appellate Division held that the public policy against double-charging
residents of a planned development for certain municipal services, once through real estate
taxes and again through assessments from the homeowners’ association, is non-delegable and trumps
the provisions of any development agreement between the municipality and the developer.
We hold that a reading of the relevant provisions of the Municipal Land
Use Law and the Municipal Services Act in pari materia requires an outcome
different from the one reached below. As a threshold matter, we hold that
there is nothing in either the Municipal Land Use Law or the Municipal
Services Act that prohibits a limited bargained-for delegation of a municipality’s obligations to
a developer. Specifically, we hold that, under a properly adopted development agreement as
provided in the Municipal Land Use Law, a municipality may delegate its statutory
obligations under N.J.S.A. 40:67-23.3 until such time as the developer’s control of the
executive board of a homeowners association established pursuant to the Planned Real Estate
Development Full Disclosure Act, N.J.S.A. 45:22A-21 to -56, terminates.
Pursuant to the provisions of the Municipal Land Use Law, N.J.S.A. 40:55D-45.2l, on October 2, 1996, the Borough of Oakland (Borough) and Baker Residential, LP (Baker) See footnote 1 entered into a written development agreement for the development of Ramapo River Reserve, a planned residential development consisting of three hundred seventy-five townhouses and single-family homes, and additional common open space, all located within the Borough in Bergen County, New Jersey. As is customary in such development agreements, Paragraph 34 of the development agreement required that Baker “dedicate to the public use . . . all roads, easements, the two well sites, and rights-of-way” within the development by “deliver[ing] to the [Borough] a deed, free and clear of all liens and encumbrances and conditions. . . .” However, that same paragraph made clear that “[n ]otwithstanding anything to the contrary, no obligation is imposed on the Borough to accept any new streets, easements, rights-of-way, playgrounds or other areas shown on the subdivision plans, site plans and/or other drawings referred to herein.” Moreover, Paragraph 34(a) set forth a specific limitation on each party’s obligations until such dedication was completed in its entirety:
Until such time as [Baker] has completed all of the public improvements, including roadways, and the Borough has accepted the same by formal Resolution, [Baker] shall be responsible to maintain said roads and keep same free of all snow and other debris so as to give access to fire and other emergency and police vehicles which may render assistance with said subdivision and/or site. Notwithstanding anything to the contrary, no obligation is imposed on the Borough to accept any street shown on the subdivision plans, site plans and/or other drawings referred to herein.
Further, under Paragraph 16 of the development agreement, Baker covenanted that it
shall be and remain liable for any and all damage or money loss
(including but not limited to attorney’s fees) occasioned to the Borough or the
[Planning] Board or their officers or agents by any neglect, wrongdoing, omission or
commission of any act by [Baker] . . . arising from the making
of the improvements, the performance of the terms hereof or from or out
of this [development agreement]. [Baker] shall also defend, save, indemnify and hold harmless
the Borough, its officers, agents, boards and employees from any and all claims,
actions at law or in equity, charges, debts, liens, encumbrances, costs and counsel
fees which may arise from any such damage or loss, from the making
of the improvements, the performance of the terms hereof or from or out
of this [development agreement], except where the Borough or its agents have been
judicially determined to have acted contrary to law or failed to perform acts
required by law or by this [development agreement] or have been guilty of
negligence.
It is the interplay of these two latter provisions, and their relationship to
both the Municipal Land Use Law and the Municipal Services Act, that lies
at the core of this appeal.
As provided in the development agreement, Baker developed Ramapo River Reserve, a “qualified
private community” under the Municipal Services Act,
See footnote 2
and residents began occupying its townhomes
and single-family homes. As an initial part of that development, on December 4,
1997, Baker caused to be filed with the Office of the Clerk of
Bergen County, New Jersey a “Declaration of Restrictive and Protective Covenant (sic), Easements,
Conditions, Charges and Liens,” which, in turn, created the Ramapo River Reserve Homeowners
Association, Inc. (Homeowners Association).
See footnote 3
The purpose of the Homeowners Association was to “promote
the health, safety and welfare of the owners and residents therein, and to
administer, operate and manage the common property.” Among the services provided by the
Homeowners
Association were snow and ice removal from the roadways within Ramapo River Reserve.
The Homeowners Association is funded by, and paid for these services from, assessments
made against the residents of Ramapo River Reserve.
At the outset, as is the case in all such developments, the Homeowners
Association was controlled by its developer, Baker. Although the record does not disclose
when Baker’s control over the Homeowners Association terminated, the Planned Real Estate Development
Full Disclosure Act provides that
[i]rrespective of the time set for developer control of the association provided in
the master deed, declaration of covenants and restrictions, or other instruments of creation,
control of the association shall be surrendered to the owners in the following
manner:
(1) Sixty days after conveyance of 25 percent of the lots, parcels, units or
interests, not fewer than 25 percent of the members of the executive board
shall be elected by the owners.
(2) Sixty days after conveyance of 50 percent of the lots, parcels, units or
interests, not fewer than 40 percent of the members of the executive board
shall be elected by the owners.
(3) Sixty days after conveyance of 75 percent of the lots, parcels, units or
interests, the developer’s control of the executive board shall terminate, at which time
the owners shall elect the entire executive board; except that the developer may
retain the selection of one executive board member so long as there are
any units remaining unsold in the regular course of business.
[N.J.S.A. 45:22A-47a. See also N.J.A.C. 5:26-8.4(a).]
On April 15, 2002, the Homeowners Association filed a complaint in lieu of
prerogative writs against the Borough, alleging that (1) the Homeowners Association is a
“qualified private community” under the Municipal Services Act; (2) the Borough provides snow
and ice removal to all residents of the Borough save for the residents
of Ramapo River Reserve; and (3) the Borough is required to either provide
such services to, or reimburse the cost of such services to, Ramapo River
Reserve. The Borough’s response was two-fold. First, the Borough answered and asserted several
affirmative defenses to the Homeowners Association’s complaint, alleging that it was not liable
to the Homeowners Association as a matter of law. Second, pursuant to Rule
4:8-1, the Borough filed a third-party complaint against Baker seeking to invoke the
provisions of the development agreement and asserting that, “[w]hile the case of [Briarglen
II] prohibits the municipality from avoiding its obligation to reimburse the [Homeowners Association]
for certain services during construction, the holding in that case does not prohibit
the [Borough] from seeking compensation from [Baker], pursuant to a valid agreement by
and between [them].” Baker denied any such obligation.
The Homeowners Association sought partial summary judgment against the Borough and, by an
order dated April 4, 2003, the trial court held that the Borough’s
failure and refusal to either provide snow/ice removal services to the [Homeowners] Association’s
residents or reimburse the [Homeowners] Association for its costs not to exceed the
amount which the [Borough] would have expended on that service if it were
provided directly by the [Borough] to [the Homeowners Association] incurred to provide those
services to its residents itself constituted, and continues to constitute, a violation of
the [Municipal Services] Act.
Neither the Borough nor Baker challenged that holding. Instead, the Borough filed its
own motion for partial summary judgment seeking (1) a declaration that the provisions
of Paragraph 34(a) of the development agreement “as it concerns street maintenance, is
valid and enforceable;” (2) a declaration that Baker is responsible for all damages
due from the Borough to the Homeowners Association; and (3) indemnity for the
Borough’s fees, costs and expenses under Paragraph 16 of the development agreement. By
way of response, Baker filed a cross-motion for summary judgment, seeking dismissal of
the third-party complaint. The issues were thus joined for resolution.
On May 9, 2003, the trial court heard argument on the Borough’s motion
for summary judgment and Baker’s cross-motion for summary judgment. Denying the Borough’s motion
for summary judgment and granting Baker’s cross-motion for summary judgment, the trial court
held that
the economic reality of the [Borough’s] contractual right to shift the reimbursement to
[Baker] would result in the residents of the qualified private communities . .
. paying double for services. There is no perfect mathematical doubling, suffice it
to say that it belies common sense that [Baker] does not pass on
in the price of the unit, if not in perhaps the budget of
the initial associations, the projected cost over a reasonable period of time of
the street cleaning services. I don’t see that today’s case is at its
core any different than [Briarglen II]. I think the principles of law and
I think the logic, and I think the economics of this situation are
substantially the same, if not exactly the same. It’s clearly not identical, but
it’s as close as you can come.
Addressing Briarglen II directly, the trial court observed:
I don’t believe that the declaration of rights of the developers and municipalities
in [Briarglen II] is mere dicta. Now it may not necessarily have been
necessary for the determination, but it [is] such a forthright statement of law,
that [it] is one that I only [at] my peril can disregard. And
even if I were to disagree with it, I will not disobey it.
I think the force of logic, the force of common sense, the force
of this jurisprudence, leads me to the conclusion that [Baker] has it more
correct on this issue than the [Borough]. And having said that, there are
some aspects of unfairness in that. That unfairness, however, being obviated by the
overarching public policy of this state expressed by the Legislature. Municipalities, being creatures
of the Legislature, don’t have the same freedom of contract as others might
have, and are bound to and beholden to changes in the law such
as this and, of course, we know the Statute is constitutional.
In an unreported decision, the Appellate Division affirmed. Starting from the proposition that
“a failure to provide municipal services equally to all citizens denies equal protection
of the law,” the panel reaffirmed the holding of Briarglen II that “[t]he
legislative intent of the [Municipal Services] Act was to help eliminate double payment
for some services which the residents of qualified private communities now pay through
property taxes and fees to their association.” Briarglen II, supra, 330 N.J. Super.
at 353 (citations and internal quotation marks omitted). The Appellate Division then considered
whether a municipality is permitted to delegate to a developer the municipality’s statutory
obligation to provide road snow and ice removal. Conceding that “the statute does
not expressly prohibit a municipality from delegating its duties thereunder,” the panel again
cited Briarglen II to the effect that
[t]he legislative purpose would be frustrated if municipalities were permitted to contract away
their statutory duty to either provide or reimburse qualified private communities for the
enumerated services. If municipalities were permitted to do so, the result would be
that the residents of qualified private communities would be paying double for services,
that is, through property taxes and fees to their association. It is just
such a result that the [Municipal Services] Act seeks to avoid.
[Id. at 356.]
We granted the Borough’s petition for certification,
183 N.J. 592 (2005), and, for
the reasons that follow, we reverse the judgment of the Appellate Division and
remand the cause to the trial court for further proceedings consistent with this
opinion.
Before us, the parties’ positions remain unchanged: the Borough argues that Briarglen II does not prohibit the type of contractual cost-shifting present here, while Baker urges that Briarglen II flatly proscribes any such delegation. See footnote 4 Therefore, we are called to examine the holdings of Briarglen II in detail.
Briarglen II stands for two separate propositions. First, Briarglen II holds that, because the residents of a “qualified private community” under N.J.S.A. 40:67-23.2e pay real estate taxes to their municipality, N.J.S.A. 40:67-23.3 entitles them to the statutorily enumerated municipal services, by the municipality either performing the services itself or reimbursing the costs of such services to the “qualified private community.” Because the proposition that a resident of a “qualified private community” should not be subject to the equivalent of double taxation, once by the municipality and again by the homeowners association, is self-evident, we agree with that holding.
However, to the extent that Briarglen II adopts a blanket prohibition against a municipality delegating any of its service obligations under N.J.S.A. 40:67-23.3 to a developer pursuant to a valid development agreement entered into pursuant to the Municipal Land Use Law, it is too broad. We agree that, at one extreme, a municipality cannot in perpetuity delegate its statutorily imposed service obligations to a developer. By the same token, we recognize, as the trial court did here, that before any units in a “qualified private community” are sold, the developer is paying real estate taxes at the same rate it did before any improvements to the realty were made and, hence, it is inequitable to transfer the cost of statutorily imposed municipal services obligations to the municipality without a concomitant increase in municipal revenues.
The problem here lies in the middle: the period between the time when some, but not all, of the units have been sold, and the time when enough units have been sold so as to generate sufficient tax revenues to cover the costs of the municipally-provided services. During that period, their respective real estate tax assessments have increased, but those tax revenues well may be insufficient to cover the costs of roadway snow and ice removal. The Appellate Division did not focus on that interim period when, in Briarglen II, it adopted a blanket prohibition against delegation to a developer of duties of the municipality imposed by the Municipal Services Act. This case presents a context for consideration of the broad holding of Briarglen II.
We are guided by standard principles of statutory construction:
The Legislature’s intent is the paramount goal when interpreting a statute and, generally, the best indicator of that intent is the statutory language. We ascribe to the statutory words their ordinary meaning and significance, and read them in context with related provisions so as to give sense to the legislation as a whole. It is not the function of this Court to rewrite a plainly-written enactment of the Legislature []or [to] presume that the Legislature intended something other than that expressed by way of the plain language. We cannot write in an additional qualification which the Legislature pointedly omitted in drafting its own enactment, or engage in conjecture or surmise which will circumvent the plain meaning of the act. Our duty is to construe and apply the statute as enacted.
A court should not resort to extrinsic interpretive aids when the statutory language
is clear and unambiguous, and susceptible to only one interpretation. . . .
On the other hand, if there is ambiguity in the statutory language that
leads to more than one plausible interpretation, we may turn to extrinsic evidence,
including legislative history, committee reports, and contemporaneous construction. We may also resort to
extrinsic evidence if a plain reading of the statute leads to an absurd
result or if the overall statutory scheme is at odds with the plain
language.
[DiProspero v. Penn,
183 N.J. 477, 492-93 (2005) (citations and internal quotation marks
omitted).]
When, as here, we are called to harmonize separate statutory provisions, our task
is clear:
When reviewing two separate enactments, the Court has an affirmative duty to reconcile
them, so as to give effect to both expressions of the lawmakers’ will.
In other words, it is our obligation to make every effort to harmonize
separate statutes, even if they are in apparent conflict, insofar as we are
able to do so. . . . .
Statutes that deal with the same matter or subject should be read in
pari materia and construed together as a “unitary and harmonious whole.”
[St. Peter’s Univ. Hosp. v. Lacy,
185 N.J. 1, 14-15 (2005) (citing In
re Adoption of a Child by W.P. and M.P.,
163 N.J. 158, 182-83
(2000) (Poritz, C.J., dissenting) (citations and footnote omitted).]
We must, then, harmonize two statutory provisions the trial court and the Appellate
Division viewed as in an irreconcilable conflict: the mandate of the Municipal Services
Act, N.J.S.A. 40:67-23.3, requiring that a municipality provide or pay for a qualified
private community’s roadway snow and ice removal, and the provision in the Municipal
Land Use Law, N.J.S.A. 40:55D-45.2l, permitting a written development agreement between a municipality
and a developer “relating to the planned development.”
We return to the evil the Legislature sought to eradicate by enacting N.J.S.A. 40:67-23.3, that is, “to ‘help eliminate double payment for some services which the residents of qualified private communities now pay through property taxes and fees to their association.’” Briarglen II, supra, 330 N.J. Super. at 353 (citing Legislative Fiscal Estimate Statement to S. 2869 (April 18, 1989)). Conversely, if the residents of the “qualified private community” are paying only once for the statutorily mandated municipal services, be it to their homeowners association by way of fees or to their municipality in the form of property taxes, then the proscription applied by the Appellate Division is inapplicable. The difficulty, again, lies in determining when the burden shifts along this continuum: starting with the payment of property taxes on unimproved realty; followed by the provision of increased municipal services but still without an increase in property taxes; then followed by the provision of increased municipal services without full coverage of the municipality’s costs but with the residents also paying for these municipal services through their association fees; and ending with the provision of increased municipal services with fully assessed and paid property taxes but with the residents also paying for the municipal services in their association fees. How one views the competing interests that arise at each of those points will determine whether and to what extent a municipality can delegate its statutory duties to a developer. At the core lie opposite but nonetheless correct concepts: a municipality should not be obliged to provide increased municipal services in the absence of increased municipal revenues; and, conversely, a municipality that receives increased municipal revenues should provide the municipal services those revenues are intended to cover and not view those revenues, simply because of the happenstance of a development agreement, as a windfall untethered to any municipal obligation.
In Briarglen II, the Appellate Division set forth the proper paradigm, one that informs our understanding here:
the dictates of public policy may require invalidation of private contractual arrangements where those arrangements directly contravene express legislative policy or are inconsistent with the public interest or detrimental to the common good. Our power to declare a contractual provision void as against public policy must be exercised with caution and only in cases that are free from doubt. We must employ a balancing test, weighing the legislative policy and the public interest against the enforcement of the contractual provision, to determine whether the contractual provision at issue is void.
[Briarglen II, supra, 330 N.J. Super. at 355-56 (citations and internal quotation marks
omitted).]
Applying these precepts, both the panel in Briarglen II and the Appellate Division
below concluded that any delegation of the municipality’s obligations under N.J.S.A. 40:67-23.3 would
be void as against public policy. We reject such a broad reading of
the Municipal Services Act.
Because it ignores the economic realities of municipalities caught in the whipsaw of
lagging property tax revenues in the face of increased demand for municipal services,
the Appellate Division’s blanket conclusion that “[t]he legislative purpose would be frustrated if
municipalities were permitted to contract away their statutory duty
to either provide or
reimburse qualified private communities for the enumerated services[,]” id. at 356, goes too
far. Given the unique private yet quasi-public nature of homeowner associations, we hold
that the Planned Real Estate Development Full Disclosure Act provides the proper tipping
point for analysis, particularly in light of the Legislature’s overarching concerns in the
overlapping areas of municipal land use regulation and municipal services. As noted in
the Planned Real Estate Development Full Disclosure Act, a developer must terminate its
control of the executive board of a homeowners association “[s]ixty days after conveyance
of 75 percent of the lots, parcels, units or interests, . . .”
N.J.S.A. 45:22A-47a(3).
There is a gap between the time a municipality is called upon to
provide statutorily required increased municipal services and the time when property taxes catch
up to cover the municipality’s added costs for those services. In order to
allow for a bridging of that gap, we further hold that a municipality,
under the provisions of the Municipal Land Use Law, N.J.S.A. 40:55D-45.2l, and within
the context of a written development agreement thereunder, may delegate to a developer
the obligation to provide or pay for the municipal services enumerated in N.J.S.A.
40:67-23.3. However, in order to harmonize that holding with the Municipal Services Act’s
requirement that the municipality provide or pay for those enumerated services to “qualified
private communities,” we further hold that the scope of that delegation not only
must be limited to the specific municipal services enumerated in N.J.S.A. 40:67-23.3, but
also that such delegation must terminate once the developer is required to terminate
its control of the executive board of the homeowners association of that “qualified
private community.”
See footnote 5
The application of these principles to this case remains. Here, the trial court ruled that the Homeowners Association was entitled to reimbursement from the Borough for the costs of roadway snow and ice removal. That ruling is not challenged. What is at issue is the contest between the Borough and Baker. In that regard, the trial court, following Briarglen II, ruled that the Borough had the statutory obligation to provide or pay for roadway snow and ice removal services at Ramapo River Reserve, an obligation that was non-delegable as a matter of public policy. We concur that the Borough had the statutory obligation to provide or pay for roadway snow and ice removal services to the Homeowners Association. However, because we hold that the Borough’s statutory obligations under N.J.S.A. 40:67-23.3 are delegable until the developer must terminate its control of the executive board of the homeowners association, the Borough is still entitled to the benefit of its bargain with Baker under Paragraphs 16 and 34 of the development agreement. The summary judgment record before us does not disclose when that event occurred or, once passed, how much is owed by Baker to the Borough by way of contractual covenant and indemnity. Therefore, we remand this cause to the trial court for those determinations.
The judgment of the Appellate Division is reversed and the cause is remanded to the trial court for further proceedings consistent with this opinion.
The judgment of the Appellate Division is reversed and the cause is remanded to the trial court for further proceedings consistent with this opinion.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, and WALLACE join in JUSTICE
RIVERA-SOTO’s opinion. JUSTICE ALBIN filed a separate dissenting opinion.
SUPREME COURT OF NEW JERSEY
A-
135 September Term 2004
RAMAPO RIVER RESERVE HOMEOWNERS ASSOCIATION, INC.,
Plaintiff,
v.
BOROUGH OF OAKLAND, a municipal corporation,
Defendant and Third Party Plaintiff-Appellant,
v.
BAKER RESIDENTIAL, LP
Third Party Defendant-Respondent.
JUSTICE ALBIN, dissenting.
Today’s majority decision allows municipalities to do indirectly what the Municipal Services Act,
N.J.S.A. 40:67-23.2 and -23.3, specifically prohibits -- collect real estate taxes from residents
of qualified private communities without providing, or reimbursing for, such basic services as
snow and ice removal and garbage and recyclable disposal. Because municipalities now will
be able to evade their responsibilities under the Municipal Services Act through the
clever subterfuge of a “developer’s agreement,” qualified private communities again will suffer the
unfair burden of double taxation: payment of real estate levies without receiving municipal
services. Because I cannot conceive that the Legislature intended that result, I respectfully
dissent.
Under the Municipal Services Act, a municipality must provide certain services to a
qualified private community “in the same fashion as the municipality provides these services
on public roads and streets,” or the municipality must reimburse the qualified private
community for the services. N.J.S.A. 40:67-23.3(a). The services referred to in the Act
are “[r]emoval of snow, ice and other obstructions from the roads and streets”;
“[l]ighting of the roads and streets, to the extent of payment for the
electricity required”; and “[c]ollection of leaves and recyclable materials along the roads and
streets and the collection or disposal of solid waste along the roads and
streets.” N.J.S.A. 40:67-23.3(a). The purpose of the Act was to “eliminate double payment
for some services which the residents of qualified private communities [paid] through property
taxes and fees to their association.” Sponsors’ Statement to Senate Bill No. 2689,
at 3 (Apr. 18, 1989); see also Stonehill Prop. Owners Ass’n v. Twp.
of Vernon,
312 N.J. Super. 68, 75 (App. Div. 1998) (observing that Legislature’s
intent was “to relieve condominium owners of the burden of paying twice for
municipal services”).
In Briarglen II Condominium Ass’n v. Township of Freehold, the Appellate Division held
that a municipality could not delegate its statutory duty to provide or reimburse
for the services enumerated in N.J.S.A. 40:67-23.3(a) to the developer of the project.
330 N.J. Super. 345, 348 (App. Div.), certif. denied,
165 N.J. 489 (2000).
In that case, an agreement between the municipality and the developer required the
developer to clear the community’s roads of snow and ice until the municipality’s
“final acceptance” of those roads. Id. at 348-49. Writing for the Briarglen II
panel, Judge Newman observed that
[t]he legislative purpose would be frustrated if municipalities were permitted to contract away
their statutory duty to either provide or reimburse qualified private communities for the
enumerated services. If municipalities were permitted to do so, the result would be
that the residents of qualified private communities would be paying double for services,
that is, through property taxes and fees to their association. It is just
such a result that the Act seeks to avoid.
[Id. at 356.]
The Briarglen II court declared the contractual provision delegating a municipality’s duty to
provide snow and ice removal to be in direct conflict with “the express
legislative policy of N.J.S.A. 40:67-23.3 and, thus, . . . void as against
public policy.” Ibid.
In the present case, the Borough of Oakland and Baker Residential, LP, the
developer of Ramapo River Reserve, entered into an agreement similar to the one
found offensive in Briarglen II. The Appellate Division affirmed the trial court and
rejected Oakland’s argument that it had a legitimate right to recoup the costs
of providing snow and ice removal from the developer until the Borough by
formal resolution accepted the “public improvements” required of the developer. For the same
reasons expressed in Briarglen II, the Appellate Division found the contractual provision delegating
snow and ice removal to the developer to be contrary to the legislative
intent of N.J.S.A. 40:67-23.3(a), understanding that the developer would merely pass its costs
along to the homeowners.
In reversing the Appellate Division, the majority in this case engages in a
reformation of the developer’s agreement to allow the municipality to delegate its obligation
to provide the services enumerated in N.J.S.A. 40:67-23.3(a) until the developer transfers control
of the homeowners’ association to its members. The majority accomplishes that end by
superimposing the Planned Real Estate Development Full Disclosure Act (PREDFDA), N.J.S.A. 45:22A-21 to
-56, over the Municipal Services Act and then concluding that the developer is
responsible for snow and ice removal, garbage and recyclable disposal, and street lighting
until the homeowners take control of the association. Under the PREDFDA, control passes
from the developer to the homeowners when there is seventy-five percent homeownership in
the community. N.J.S.A. 45:22A-47(a)(3).
The majority’s result does not square with the statutory language or legislative history
of the PREDFDA or the Municipal Services Act. Nothing in the provision of
the PREDFDA relied on by the majority, which was enacted four years after
passage of the Municipal Services Act, indicates that the Legislature intended to lessen
a municipality’s obligations to provide services to a taxpayer under the Municipal Services
Act until residents in a qualified private community achieve seventy-five percent ownership and
gain control of the homeowners’ association.
Perhaps the only point that the parties in this case can agree upon
is that the majority’s interpretation of the applicable statutes is wrong. In response
to a written question from this Court, both parties and amicus curiae New
Jersey Builders Association (NJBA) have expressed their view that the developer’s transfer of
ownership to the homeowners’ association is completely irrelevant to the Municipal Services Act.
Amicus curiae NJBA accurately points out that the provision in the PREDFDA terminating
a developer’s control does not “contain any language modifying or eliminating the requirement
that a municipality provide services to a qualified private community, no matter what
the composition of the association board may be.” The resolution achieved by the
majority completely undercuts the homeowner protectionist policy that animates the Municipal Services Act.
The majority also ignores the fact that it may take years in a
large subdivision before control is transferred from the developer to the homeowners. Because
a developer is not an eleemosynary institution, it assuredly will pass the costs
to the homeowners in the form of increased sales prices of homes. Thus,
the homeowner will pay twice for municipal services, once through inflated home purchase
prices and again through real estate taxes. This cannot be the result intended
by the Legislature that passed the Municipal Services Act.
Moreover, we should keep in mind that a developer is unlikely to balk
at a contractual provision delegating a municipality’s duty to provide snow removal and
garbage disposal and thereby threaten approval of a subdivision project, when that developer
can simply make up the added cost by increasing the price to the
home buyer. Although this case involves only snow and ice removal, the majority’s
decision will allow a municipality to contract away all of its duties under
N.J.S.A. 40:67-23.3(a), including its duty to collect garbage, recyclable materials, and leaves. Thus,
homeowners in qualified private communities will lose the very benefit the Legislature intended
in enacting N.J.S.A. 40:67-23.3 -- basic services for their tax dollars.
Last, the majority premises its opinion on the unproven notion that the real
estate taxes collected from the first tier homeowners in Ramapo Reserve and in
other qualified private communities are not sufficient to cover the costs of removing
snow and ice from the roadways or collecting garbage. The majority has failed
to support that position by reference to the record in this case. Even
if there were support in the record, the Municipal Services Act does not
require the rigid formula suggested by the majority -- that for each dollar
of services provided to a homeowner there must be a concomitant tax dollar
collected.
If the Legislature concludes that the majority has not only misconstrued its statutes
but also disadvantaged the homeowners it intended to protect through the Municipal Services
Act, it has the power to correct the error by a statutory amendment.
The developer’s agreement in this case is in direct conflict with N.J.S.A. 40:67-23.3
and should be declared void. I therefore dissent.
SUPREME COURT OF NEW JERSEY
NO. A-135 SEPTEMBER TERM 2004
ON CERTIFICATION TO Appellate Division, Superior Court
RAMAPO RIVER RESERVE
HOMEOWNERS ASSOCIATION, INC.,
Plaintiff,
v.
BOROUGH OF OAKLAND, a
municipal corporation,
Defendant and Third Party
Plaintiff-Appellant,
v.
BAKER RESIDENTIAL, LP
Third Party Defendant-Respondent.
DECIDED March 13, 2006
Chief Justice Poritz PRESIDING
OPINION BY Justice Rivera-Soto
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY Justice Albin
CHECKLIST
Footnote: 1
Although the pleadings in this case refer to Baker both with the
designation reserved for, and explicitly as, a limited partnership, the text of the
development agreement and its notarized acknowledgment identify Baker as a “Connecticut general partnership.”
This factual anomaly, however, ultimately has no effect on the outcome of this
case.
Footnote: 2
In relevant part, N.J.S.A. 40:67-23.2e defines a “qualified private community” as “a
residential condominium, cooperative, fee simple community, or horizontal property regime, the residents of
which do not receive any tax abatement or tax exemption related to its
construction, comprised of a community trust or other trust device, condominium association, homeowners’
association, or council of coowners, wherein the cost of maintaining roads and streets
and providing essential services is paid for by a not-for-profit entity consisting exclusively
of unit owners within the community.”
Footnote: 3
Neither the Borough nor Baker disputes that the Homeowners Association qualifies as
“qualified private community.”
Footnote: 4
After argument, the parties were requested to submit supplemental briefs on the
following question:
What effect, if any, does Section 5 of the New Jersey Planned Real
Estate Development Full Disclosure Act, N.J.S.A. 45:22A-47, have on whether and to what
extent a municipality, consistent with public policy, may delegate the provision of statutorily
required municipal services under the Municipal Services Act, N.J.S.A. 40:67-23.3, to a developer
pursuant to a written development agreement under the Municipal Land Use Law, N.J.S.A.
40:55D-45.21?
In their supplemental submissions, both the Borough and Baker argued that the Planned
Real Estate Development Full Disclosure Act has no effect on the Municipal Services
Act. As noted below, infra, ___ N.J. ___ (2006) (slip op. at 17-18),
we reach a different conclusion.
Footnote: 5
To the extent the dissent asserts that, due to the overlapping nature of
his association fees and his municipal real estate taxes, there may be a
period when a homeowner in a qualified private community may pay more than
his fair share for certain enumerated services, we agree. The dissent, however, then
concludes that the inability to ascertain with exactitude the precise moment when such
overlapping assessment may occur dooms any cost-shifting. We reject such absolutism and, in
the absence of legislative direction, we adopt, instead, limits on that cost-shifting so
as to achieve a fair and equitable balance.