On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-2682-98.
Before Judges Skillman, Conley and Lesemann.
The opinion of the court was delivered by: Lesemann, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Defendant Ocino, Inc. (Ocino) appeals from a Law Division judgment declaring that it has no further contractual interest in a parcel of real property in Middletown Township. The property had been owned by Frank A. Vaccaro (Vaccaro) who contracted to sell it to Ocino, with the expectation that it would be developed—-at least in part—-for Mt. Laurel affordable housing. Vaccaro subsequently sold his interest in the property to plaintiff Home Properties of New York, L.P. (Home), subject to the pre-existing contract with Ocino. Closing was delayed for various reasons referred to below, and ultimately Home served a time of the essence notice on Ocino. Following a trial, the Law Division held that by its actions after serving the notice, Home had waived its right to proceed under the time of the essence notice. However, the court then held that Ocino had nevertheless failed to close within a reasonable time and on that basis, it declared Ocino's rights terminated and entered judgment in favor of Home.
We conclude that Home's time of the essence notice was reasonable and lawful and that it did not thereafter waive its right to proceed thereunder. Consequently, when Ocino failed to close in conformity with that notice, Home acted properly in declaring the contract terminated and was entitled to a judgment declaring Ocino's interest in the property terminated. We thus reach the same ultimate conclusion as the Law Division, albeit by a different route, and thus we affirm.*fn1
The facts of the case involve some arcane points within the maze which sometimes seems to characterize the world of affordable housing, the functions of the Council on Affordable Housing (COAH), so-called tax credit construction financing, and the interplay of those concepts with traditional planning board and municipal site plan approval. For purposes of this appeal, however, we need not delve too deeply into those details. The essential facts, as they affect and determine the rights of the parties, can be set out relatively simply.
In 1993, Vaccaro submitted to the Middletown Planning Board a site plan to construct 400 units of affordable senior housing on 23.5 acres of land known as Lots 1.01, 2 and 3.01 in Block 1490 in Middletown. Objections were raised by the Borough of Atlantic Highlands, which abutted the property, but after the Borough filed a complaint in lieu of prerogative writs, the matter was settled in 1994 by an agreement under which the number of senior housing units was reduced from 400 to 375. In May 1994, COAH approved the plan, which provided that of the 375 senior units, 281 were to be priced at market value, 47 were to be reserved for low income occupants and 47 for moderate income persons.
In October 1996, Vaccaro contracted to sell the property to Ocino. In April 1997, the Middletown Planning Board, and thereafter the municipal governing body, approved a development plan for the property which provided that all the units were to be "affordable housing," rather than the twenty-five percent called for by the prior settlement agreement. Further, that 1997 plan included an additional ninety-two units of "assisted living housing," and raised an issue as to whether those additional units had been contemplated within the 1994 settlement.
As a result of what it saw as an inconsistency between the prior settlement and the later municipal approval, COAH disapproved the latter and thereafter the Law Division set aside the municipal approvals for the same reason. That determination was appealed to this court and, while the litigation that led to this appeal was proceeding through the trial court, that appeal respecting the municipal approvals remained pending.
On February 18, 1998, Home bought the property from Vaccaro, subject to the existing contract between Vaccaro and Ocino. Before proceeding to the crux of this case—-the time of the essence letter which Home served on Ocino—-we turn to two points which bear on the significance of that letter: federal tax credits and the provisions of the Vaccaro-Ocino contract.
The tax credit program is a federal program which provides favorable financing for certain qualified housing programs. In New Jersey, it is administered by the New Jersey Housing and Mortgage Finance Agency (HMFA) which processes applications by prospective developers applying for the tax credits. The program is very competitive: many apply but few are chosen. Home asserts—-and Ocino does not deny—-that the contract of sale here anticipated Ocino's applying for tax credit financing, but did not make the contract contingent upon its obtaining that financing. Home also asserts, and again Ocino does not deny, that there were various other sources of financing (albeit not as favorable) which it could have sought for the project if it was unable to obtain tax credit approval.
As to the contract itself, Section 1.3.3, entitled "Contingencies," deals with tax credits and also, together with Section 9.2, refers to the time of closing of the anticipated conveyance. Section 1.3.3(a) reads in its entirety as follows:
This agreement is expressly contingent upon Purchaser and Seller obtaining before the Closing all governmental approvals described on Exhibit B attached hereto and made a part hereof other than low income housing tax credits referred in Item C(7) and the municipal real property tax abatement referenced in Item A(5) on Exhibit B, the applications for which shall be submitted and diligently pursued by Purchaser. Seller acknowledges that the Purchaser is acquiring the Property for the purpose of constructing 375 senior citizen low income housing units that qualify for federal low income housing tax credits granted by the New Jersey Housing & Mortgage Finance Agency, plus 92 assisted living units. If the parties are unable to obtain all such approvals including federal low income housing tax credits for a minimum of 185 units and municipal real property tax abatement by December 31, 1997, Purchaser or Seller shall have the right to terminate this Contract, subject however to Purchaser's right to extend the contract as provided herein. Seller and Purchaser agrees to proceed diligently with all applications to obtain all of the above stated approvals. Purchaser agrees to apply to the New Jersey Housing & Mortgage Finance Agency for an allocation of federal low income housing tax credits to the Property for 185 units in the April, 1997 application cycle.
Seller agrees to cooperate with Purchaser and to consent as owner of the Property to said applications if Seller's consent is required. Purchaser agrees to fund Seller's costs of obtaining the government approvals referred to above and as further described in Exhibit B. . . . As soon as tax credits are granted, Purchaser agrees to be responsible for the property expenses consisting of taxes, insurance and other related direct costs. If tax credits are not granted in this cycle, ...