On certification to the Superior Court, Appellate Division.
For affirmance -- Chief Justice Wilentz and Justices Schreiber, Pollock and Garibaldi. For reversal -- Justices Handler and O'Hern. The opinion of the Court was delivered by Garibaldi, J. O'Hern, J., dissenting. Handler, J., joins in this opinion.
This is another in our series of zoning cases involving conditional relief to avoid undue hardship under N.J.S.A. 40:55D-70 c. For the latest such case, see Commons v. Westwood Zoning Bd. of Adjustment, 81 N.J. 597 (1980). Specifically, the issue here is, after there has been a determination that the property owner is entitled to a variance, what is the proper method of determining the fair and reasonable price for property in a one family residential zone that adjoining property owners must offer the owner to avoid the grant of the variance.
The Board of Adjustment of the Township of Morris (Board) granted a variance under N.J.S.A. 40:55D-70 c*fn1 to Diana and
Edward Rochford. Plaintiffs, adjoining property owners, instituted this action in lieu of prerogative writs to set aside the variance granted by the Board.
To receive a variance under N.J.S.A. 40:55D-70 c, applicants must satisfy two criteria: (1) that they will suffer exceptional or undue hardship if the variance is not granted -- the so-called positive criteria; and (2) that the variance will not result in a substantial detriment to the public good or the zoning plan -- the so-called negative criteria.
The Board, the trial court, and the Appellate Division all agree that in this case the negative criteria had been satisfied; the granting of this variance would not damage the zoning plan or the public good.*fn2 We agree.
Property owners who meet the positive and negative criteria of the statute are entitled to a variance. In some circumstances, the court may decide to make the variance conditional on whether adjoining land owners offer to buy the property for its fair market value. This option to buy the property is a condition subsequent that may be imposed for the benefit of adjoining property owners. The question here is what is the proper standard to determine the property's fair market value in such cases.
The Board concluded that the alternative offer must approximate the value of the property as a buildable lot assuming the variance has been granted. The trial court disagreed. It concluded that the owners were not entitled to a price based on the property's highest and best use, but only to a price based on a fair and reasonable use. As long as they received a fair and reasonable offer for the property, they could not be said to suffer undue hardship even though the property's value as a buildable lot was much greater.
The Appellate Division affirmed the trial court's judgment insofar as it upheld the grant of the variance, but reversed the court's finding as to a fair and reasonable offer price for the property. It held that the fair and reasonable price was the value of the property as though the variance had been granted.
We granted certification, 94 N.J. 529 (1983), and now affirm the judgment of the Appellate Division.
The property in question is Lot 5 in Block 343 on the tax map of the Township of Morris. It is an isolated undersized, vacant, corner lot, located in the RA-35*fn3 single family detached residential zone under the Morris Township Zoning Ordinance. The lot was created by subdivision in 1932. From its creation until 1955, it conformed to the local zoning code, which required a minimum lot area of 15,000 square feet. In 1955, the area's zoning changed over to RA-35. Since then the lot has been nonconforming.
In 1976, defendant Dr. Myles C. Morrison, Jr. acquired the lot from his father by gift. In 1979, Dr. Morrison and his wife contracted to sell the property to the Rochfords for $35,000 with no contingency for a variance. A second contract dated August 6, 1979, superseded the first; in it, the Rochfords' promise to pay was conditioned on their ability to obtain the
variances necessary to build a single family residence on the lot. The contract's purchase price was reduced to $34,600.00, in part to reflect variance application costs. The Rochfords agreed to bear any risk of appeal of the variance approval.
On November 9, 1979, the Rochfords applied to the Board pursuant to N.J.S.A. 40:55D-70 c for the necessary variances. The home that the Rochfords proposed to build required the following variances:
Lot Area 35,000 sq. ft. 18,594.05
Per Family Area 35,000 sq. ft. 18,594.05
Lot Width 200 ft. 110 ft. +-
Lot Frontage 200 ft. 110 ft. +-
Lot Depth 200 ft. 175 ft. +-
Prior to the hearing before the Board, the Morrisons, with the Rochfords' knowledge and approval, offered to sell the lot to the DeSenas, the owners of the adjoining lot, for $34,600, the same price offered to the Rochfords. The DeSenas rejected the offer, but made a counter-offer of $17,250, which the Morrisons rejected. The DeSenas then made a "final offer" of $22,000, which the Morrisons also rejected. At the hearing, Mr. DeSena testified that he was still willing to purchase the property for $22,000.
After hearings conducted over a four month period, the Board granted the necessary variances. The Board found that "there was no feasible means of aggrandizing the property since the adjoining lot on Westminister [the DeSenas'] was improved * * * and acquisition to the north was blocked by a sewer easement"; the "subject lot is the only isolated lot in single ownership"; a substantial number of nonconforming lots within the zone "established the character of the neighborhood and one more drop in the bucket will not add or detract from that condition"; and "the proposed use would not adversely
affect values in general * * *. Indeed, the testimony was that it would be of more benefit than a vacant lot." Further, the Board accepted the applicant's expert's testimony that assuming a variance was granted, "the lot in question had a value of between $31,000 and $34,000"; and if not buildable, presumably the only likely purchaser would be the owner of the adjoining lot. "[I]n that case, he [the expert] felt that a reasonable purchase price would be $17,000, although * * * he thought a fair price might be as high as $22,000 but he did not think on resale of the combined properties the higher price would be fully recovered."
In its resolution, the Board held that the "strictures on any other use than residence make it evident that the suitability of the premises in question is limited to a single family dwelling"; that the nonconformity of the subject lot resulted from "an historical process in which the owners (and applicant) and their predecessors in title played no culpable part; and, if not afforded relief, will suffer an unwarranted loss."
Thus, the Board concluded that the "positive" criteria of exceptional hardship under N.J.S.A. 40:55D-70 c were met. Since the DeSenas' offer would be at least $10,000 less than the established value of the premises, the Board held that it was not sufficient to relieve the hardship.
A Board of Adjustment and a trial court have the power to grant a conditional variance. We specifically recognized this power in Chirichello v. Zoning Bd. of Adjustment, 78 N.J. 544, 555-56 (1979), where we stated:
It would certainly be consonant with the interest of all parties to deny a variance conditioned on the purchase of the land by adjoining property owners at a fair price. The immediate benefit to the adjoining property owners of maintenance of the zoning scheme and aesthetic enjoyment of surrounding vacant land adjacent to their homes is self-evident. The owner of ...