On appeal from Superior Court of New Jersey, Chancery Division, Middlesex County.
Antell, Long and Baime. The opinion of the court was delivered by Baime, J.A.D.
The novel question presented by this appeal is whether a municipality may require a single lot owner to bear the full expense of extensive off-site improvements as a condition to the issuance of a building permit. Plaintiffs, individual lot owners whose contiguous properties abutted an unimproved street, were required by the Borough of Sayreville to install water and sewer extensions along the entire road. The extensions were to be connected to existing lines beneath a sidewalk that bordered an intersecting county roadway a substantial distance from plaintiffs' properties. Plaintiffs were additionally required to pave portions of the street and make other road improvements. While agreeing to bear the initial cost of these improvements, plaintiffs filed a complaint in the Chancery Division, seeking to compel the Borough to enter a "fair share" agreement in which they would be responsible for their pro rata portion of the expense and other lot owners would be assessed in accordance with the direct benefit they received. The Chancery Division Judge found no statutory authority permitting a municipality to enter into a "fair share" agreement with an individual lot owner. Consequently, judgment was entered in favor of the Borough. The effect of the Chancery Division's judgment is to compel plaintiffs to bear the full expense of the improvements while other similarly situated property owners will receive a direct benefit at no cost. We reverse.
The salient facts are not in dispute. In 1987, the Borough conducted a public land auction in which plaintiffs purchased individual lots abutting Jefferson Avenue, an unimproved road. Among other things, the resolution authorizing the sale provided that the Borough would "not assume any responsibility for opening streets or furnishing utilities." Another section of the resolution stated that "all information concerning existing [and] future water and sewer lines [could] be obtained . . . from the
Borough engineer." On file in the Borough engineer's office was a report which provided that "[u]tilities and roadway must be installed" with regard to the properties to be sold at the auction.
At the time of the sale, Jefferson Avenue was an unimproved street one block in length. At one end, the street bordered a Borough park. The other end of the street opened into a "T" intersection with a county artery, Washington Road. A single family house, the "Bailey residence," was built on an improved lot on the corner of Jefferson Avenue and Washington Road. The lot purchased by plaintiff Allen Vrabel was adjacent to the Bailey residence. Plaintiff Charles Fornal's property was next to that of Vrabel. At the time plaintiffs purchased their properties, all lots on the other side of the street were unimproved. Subsequently, a one-family house was constructed across the street from the Bailey residence. We digress to note that the owner of this property was permitted to connect to the water and sewer lines installed by plaintiffs.
Jefferson Avenue was paved up to the border of Bailey's property. Under N.J.S.A. 40:55D-35, plaintiffs were required to improve the street from the end of Bailey's lot. In addition, municipal ordinances required plaintiffs to connect to the Borough's water and sewer lines. Individual wells and septic tanks are not permitted in the Borough. At trial, plaintiffs testified that after purchasing their properties they became aware that it was not possible to make a connection to water and sewer lines at the location where the "blacktop began," i.e., the boundary of Bailey's property. Instead, the existing water and sewer lines ran along the opposite side of Washington Road. It became apparent that the only method for installing the water and sewer lines would be to improve the entire length of Jefferson Avenue, across the width of Washington Road and hook up to a connecting location beneath a sidewalk.
Plaintiffs made separate applications for building permits, but were informed that it was necessary to file plans prepared
by a licensed engineer. They were also advised by the Borough engineer that, although Jefferson Avenue was partially paved up to the southerly border of the Vrabel property, the adjacent roadway would have to be improved as a condition to receiving a building permit. Plaintiffs were told that they would be required to install water and sewer lines at least 12 feet below grade to connect with existing utilities.
Plaintiffs retained an engineer who prepared plans in accordance with these requirements. At the time, it was the policy of the Borough not to accept or dedicate streets by a formal resolution, but to request performance bonds prior to commencement of construction. At the Conclusion of construction, the Borough's practice was to accept the improved street. In this case, however, the Borough waived the requirement of a performance bond with the understanding that all items were to be completed prior to the issuance of certificates of occupancy. Plaintiffs complied with these conditions and, after inspection of the improvements, the Borough engineer issued the requisite certificates.
Plaintiffs spent $66,000 for the installation of the utility lines and the street improvements. On December 12, 1988, plaintiffs' attorney requested the Borough to take steps to require that four other lot owners whose properties were allegedly benefitted by the improvements, pay a fair share of the cost. The Borough officials refused, claiming that they lacked the requisite authority.
Plaintiffs thereafter instituted this action. Following a nonjury trial, the Chancery Division Judge rendered an oral opinion in which she found that plaintiffs had constructive notice of the requirement mandating installation of improvements at their own expense. She also concluded that the municipality had no authority to grant a "fair share" agreement to an individual lot owner. While noting that the Municipal Land Use Law (N.J.S.A. 40:55D-1 ...