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Ramapo River Reserve Homeowners Association, Inc. v. Borough of Oakland

March 13, 2006

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.



On certification to the Superior Court, Appellate Division.

SYLLABUS BY THE COURT

(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).

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.

The opinion of the court was delivered by: Justice Rivera-soto

Argued November 29, 2005

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.

I.

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)*fn1 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,*fn2 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).*fn3 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 ...


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