August 14, 2009
GC LANDMARKS, LLC, PLAINTIFF-APPELLANT,
ZONING BOARD OF ADJUSTMENT OF THE TOWNSHIP OF HILLSBOROUGH, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-464-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: December 17, 2008
Before Judges Cuff and Baxter.
Plaintiff GC Landmarks, LLC (GC) is the contract purchaser of an undersized vacant lot (the Property) located in a Residential (R) district in Hillsborough Township. It is undisputed that the lot is undersized as a result of a taking by the New Jersey Department of Transportation (DOT). GC originally sought variances from defendant Zoning Board of Adjustment (the Board) for development of a three-story mixed-use building. After receiving negative feedback on its application, GC amended the application and proposed construction of a two-and-one-half-story single-family dwelling for which a variance was required because of the undersized lot. The Board denied GC's application because it failed to make a good faith offer to sell the Property to an adjacent land owner. The Board also remarked that the Property was best suited to be developed in accordance with the initial proposal, an unpermitted use. The trial court affirmed the denial and GC appeals. We reverse.
GC owns a vacant parcel of land with an area of 23,727.13 square feet or 0.545 acres located in an R district. This district requires minimum lot sizes of one acre, lot widths of 150 feet, front yard setbacks of fifty feet, side yard setbacks of thirty feet, and rear yard setbacks of forty feet. The maximum impervious coverage in the R district is fifteen percent and the maximum building height is thirty-five feet and two and one-half stories.
In addition to the R district, the Property is also located in the Transit Village of the Architectural and Site Design Overlay (ASDO) district. The ASDO district does not apply to construction of single-family dwellings. If the Property is used for another purpose, the ASDO district bulk standards apply, which include a minimum lot size of three acres.
The property to the north of the Property is owned by DOT and was acquired in conjunction with the Amwell Road Relocation Project. A portion of the GC parcel has been taken by DOT for the road project and construction of this project renders the GC parcel a corner lot. Prior to the taking, the property was over 35,000 square feet. Following the taking, the property has 220.24 feet of frontage along Steinmetz Road and will have 137.77 feet of frontage along the future relocated Amwell Road. DOT also owns the site to the rear of the Property.
The properties located to the west of the Property are in the Home Occupation Office (HOO) district. The Property is surrounded by single-family dwellings along Steinmetz Road and scattered residential and commercial buildings along Amwell Road.
On October 27, 2005, the Township adopted Phase 2 of its Master Plan Amendment, which recommended that the Township institute a Transit Oriented Village (TOV) district to encourage mixed-use development next to the proposed West Trenton rail line passenger station. If adopted, the Property would be located in this TOV district. In July 2007, a Town Center (TC) district was added to the Township, which may be part of or a replacement for the much discussed TOV district. However, at the time of the trial on October 29, 2007, and at oral argument of this appeal, GC's attorney advised that the zoning remains residential. Therefore, we assume that the Property is still located in an R district.
In April 2006, GC submitted a bifurcated development application to the Board for a use variance. GC proposed to improve the Property with a three-story mixed-use building. The first floor would contain offices and a garage, and the second and third floors would contain residential units. GC required a use variance, as well as several bulk variances and waivers. A preliminary concept plan was created on March 2, 2006, and was revised on July 11, 2006. On April 25, 2006, the Somerset County Planning Board approved the project.
Robert Ringelheim, P.P., A.I.C.P. submitted a report dated June 8, 2006, somewhat critical of the application. He found that the proposed development "[did] not promote the type of pedestrian friendly design that was envisioned for the [TOV] District." However, "[t]he mixed-use development is in keeping with the recommendations for the [TOV] District in the Phase 2 Master Plan Amendment."
The Architecture & Site Design subcommittee reviewed GC's application on July 10, 2006. The subcommittee noted that the main objectives of the TOV district were: to establish a higher density mixed-use district to maximize use of the rail line; to create pedestrian friendly networks; to promote desirable visual environment; to reduce vehicular trips and to link neighborhoods with major elements and community attributes of the Township by promoting pedestrian/bicycle circulation; and to concentrate on office development with limited retail and residential uses. The subcommittee commended GC because the site layout of the building was consistent with the TOV district and the spirit and intent of the ASDO standards. GC was also commended "for working constructively with the subcommittee."
At the July 26, 2006 hearing, GC presented its expert planner, Roger DeNiscia. In response to DeNiscia's comments regarding the reclassification of the Property from an R district to the TOV district, the Board Chair stated, "But that's proposed. It may never come to fruition," and "[w]e have to judge this upon what the existing zoning is right now." Nevertheless, given the foreseeable changes to the zoning district, DeNiscia opined that the application demonstrated the necessary special reasons to warrant a use variance because the Property is particularly suited for the proposed use and it would advance the purposes of planning. The Board Chair questioned DeNiscia further as to how the mixed-use building was particularly suited for the site because of its location in a residential area.
Based upon the repeated comments at the first hearing that GC had proposed development consistent with a proposal to amend the zoning that may never occur, GC indicated at the start of the October 4, 2006 hearing that it would like to amend its application to reduce the number of residential units in the mixed-use building from three to two, one of which would be designated as an affordable housing unit. GC also reduced the height of the building and the number of parking spaces.
GC's planner continued his testimony, explaining the changes made to the proposal and justifying the variances that were being sought. Once again, the Board Chair and some of the other Board members emphasized that the Property is presently located in an R district, and GC should not focus on future permitted uses.
During the October 4, 2006 hearing, the issue of whether a single-family dwelling would be a better use for the Property was addressed. At the end of the hearing, GC's attorney asked Richard Cannerella, the principal of GC and the project's engineer, whether there were any other amendments he would be willing to make to the application in light of the concerns expressed by the Board. GC's principal responded that he believed the proposed mixed-use development was best suited to the site but would amend his proposal to a single-family house due to the negative sentiment by the Board. Although the Board Vice Chair stated that the reservations concerned the intensity rather than the mixed-use nature of the proposal, GC decided to alter its proposal.
On December 6, 2006, GC amended its application from a request for a use variance to a request for a bulk variance required to construct a two-story single-family dwelling. GC requested the following bulk variances: lot area, 43,560 square feet required, 23,727.13 square feet existing; and lot width at setback on Amwell Road, 150 feet required, 137.77 feet existing.
GC's principal described the current state of the Property as an overgrown wooded site with piles of debris on it from wood sheds that may have collapsed. At the hearing GC informed the Board that it had not offered to purchase adjacent properties or to sell the Property to adjacent property owners. The Board Chair responded that the applicant was required to do that; GC's attorney argued that such offers were relevant, but not dispositive. The Board's attorney agreed, but noted that offers to sell or buy adjacent properties are relevant, and "the Board's rules have always been that it wants to see that."
In order to address the issue, GC suggested that the Board grant a conditional variance contingent on it making the appropriate offers. GC also argued that making offers to sell to adjacent property owners did not make sense in this case because one adjacent lot has been taken by DOT and the other contiguous lot is already developed and undersized. Nevertheless, the Board Chair advised GC that it should pursue a sale to the contiguous neighbor.
The owner of the non-DOT-owned contiguous lot was in the audience during the December 6, 2006 hearing, and the Board provided a short recess to allow GC to speak with him. During the recess, the contiguous property owner indicated some interest in acquiring the lot, but neither party was in a position to make an offer.
By letter dated December 14, 2006, GC made an offer to the contiguous property owner to sell the Property for $173,000 based upon an appraisal prepared by Joseph L. Gorsky.
The hearing reconvened on January 17, 2007. At that time, only four members of the Board who initially heard GC's application were present. Rather than carry the matter to another meeting, it was determined that the application could proceed as long as GC provided the missing Board members with the transcript.
Gorsky, the appraiser, testified at the January 17, 2007 hearing to explain how he calculated the Property's appraised value. GC advised the Board that its offer had been rejected.
GC also presented testimony from its planner, who explained the amended application to the Board in more detail. He explained that the Property had previously been developed, but that development has since been demolished. GC proposed a twoand-one-half-story single-family residential building with a 27.4-foot by 65-foot footprint and an "enclosed" two-car garage. The house would be oriented toward Steinmetz Road with a 50.25 foot setback. The southerly setback towards the interior of Steinmetz Road would be 46 feet, the northerly setback towards Amwell Road would be 62.5 feet, and the rear setback would be 40.45 feet. The planner explained that the only contiguous developed lot has a substantial side setback and there is mature vegetation separating the two properties.
The planner testified that Steinmetz Road is a local access street in a residential neighborhood and the homes and lots lining the street are fairly uniform on each side of the street. The Property is rectangular, but it is wide and shallow, as opposed to the lots on the other side of Steinmetz Road which are more regular in size measuring 185 feet by 240 feet. The lots on the same side of the road as the Property are more similar in shape, but larger in size. Prior to the DOT taking, the Property had a width in excess of 300 feet. The lot adjacent to the Property on the right, lot 1A, contains 38,750 square feet. The surrounding properties are located in the R district, except for two lots opposite the Property, which are located in the HOO district.
The planner emphasized that most of the bulk standards are met except for lot size and the proposal even exceeds most of the bulk standard minimums. DeNiscia testified that the building envelope as defined in the R district is 34 feet by 111 feet creating an allowable footprint of 3774 square feet. The proposed structure would have a footprint of 1781 square feet. The neighboring houses have footprints that range from 2500 to more than 3000 square feet.
The planner opined that a N.J.S.A. 40:55D-70 c(1) variance was appropriate because the applicant has not done anything to the Property to make it nonconforming.
The contiguous property owner testified that he was concerned the proposed home would depress the value of neighboring properties due to the proposed structure's large size. He noted that the government should be responsible for making the lot conforming and that Amwell Road is already too overbuilt. He also objected to the appraised fair market value (FMV) price of the Property because it is based upon an assumption that the Property is buildable. Additionally, he testified that the assessed value of the Property is only $60,000.
Only four members qualified to vote on the application were present that evening. GC required three votes in favor of the variances to prevail. A motion to deny the bulk variances was evenly divided. A motion to approve the variance was not seconded.
The Board adopted a resolution denying GC's application at its February 21, 2007 meeting. The resolution focuses upon GC's offer to sell the Property to the contiguous property owner for $173,000. The Board found that the appraisal did not represent the FMV of the Property and consequently, GC's offer to sell was not a good faith offer as required to obtain a bulk variance. The Board added, "The Applicant's appraiser provided no data to substantiate his adjustments . . . leaving the adjusted values, and therefore the appraiser's opinion of the value of the property, a matter of conjecture."
The Board also found that a mixed-use development would be "more consistent with the Master Plan" and that GC has not presented any evidence that "would indicate that a mixed use development would not be an economic use of the property." As to the undersized character of the property, the Board found that there are other "clearly permissible" uses given the location and size of the Property. The Board concluded that GC's "proposed use is not the only economic use that appears to be available for the property."
On March 16, 2007, GC filed a complaint in lieu of prerogative writs. The complaint alleged that the Board's denial of GC's application and its denial of GC's request to reschedule the matter to permit the full Board to review the matter and to permit the planner to complete his testimony was arbitrary, capricious, and patently unreasonable. GC also alleged that the Board's reconsideration and denial of GC's application outside the presence of GC was arbitrary, capricious, patently unreasonable, and contrary to law.
The trial judge found that GC's application failed to satisfy the positive criteria required for a c(2) variance because there was no proof that a bigger home would benefit the surrounding community and present a better zoning alternative. The judge also found that GC failed to satisfy the positive and negative criteria for a c(1) variance. Therefore, he affirmed the Board's decision.
Addressing the c(1) variance, the judge acknowledged that GC was not responsible for the nonconforming condition. He noted, however, that the Board denied the application because GC did not demonstrate that the Property could not be used in some other beneficial way. For example, GC did not adequately demonstrate that the Property could not be sold to the contiguous property owner and it did not demonstrate that the Property would not have been better as a mixed-use building.
On the issue of the offer to sell to the contiguous property owner, the judge observed that there was scant evidence of a good faith effort to reach a reasonable selling price for the property. Despite these concerns, the judge found that the Board was within its discretion to reject the testimony of GC's appraiser because the appraiser failed to adequately explain or support some of the adjustments he made in the appraisal. The judge also found that the evidence provided to the Board was insufficient to allow it to conclude that the Property could not be sold to the contiguous property owner at a fair price; therefore, the hardship aspect of the c(1) variance had not been proven.
Alternatively, the judge found that the Board was within its discretion to take into consideration the Master Plan's recommendation for a change in zoning in determining whether there was another potential use for the Property. The Master Plan recommendation was made in 2005, and the judge noted that the amount of time that had passed was not enough to allow the court to infer an implicit rejection of that recommendation. Therefore, "[w]hile the master plan recommendation does not have the force of law as far as being a zoning ordinance, it is relevant on the issue of whether there are other uses of the property that would benefit the property owner," and "the Board could use that factor in determining that there is another use of the [P]roperty other than as an undersized lot with the house that's bigger than other houses in the neighborhood."*fn1
Public bodies, such as municipal zoning boards, are allowed wide latitude in their delegated discretion because of their particular knowledge of local conditions. Jock v. Zoning Bd. of Adjustment of Wall, 184 N.J. 562, 597 (2005). The scope of judicial review is to determine whether a zoning board could reasonably have reached its decision on the record, not whether a better decision could have been made by that board. Ibid. The reviewing court is not to substitute its own judgment for that of the zoning board's. Fallone Props., L.L.C. v. Bethlehem Twp. Planning Bd., 369 N.J. Super. 552, 561 (App. Div. 2004).
There is an assumption that there was an adequate basis in the record for the zoning board's conclusions, so deference to its judgment is generally appropriate, Lang v. Zoning Board of Adjustment of North Caldwell, 160 N.J. 41, 58 (1999), but greater deference is given to variance denials than to variance grants because variances tend to impair sound zoning, Medical Center at Princeton v. Township of Princeton Zoning Board of Adjustment, 343 N.J. Super. 177, 199 (App. Div. 2001). A trial court is to determine whether the zoning board's decision was arbitrary, capricious, or in manifest abuse of its discretionary authority. Jock, supra, 184 N.J. at 597. However, determinations of law are subject to de novo review by the trial court. Wyzykowski v. Rizas, 132 N.J. 509, 518 (1993); Isihos Bros. P'ship v. Twp. of Franklin, 376 N.J. Super. 591, 595 (Law Div. 2000).
An appellate court applies the same standard of review as the trial court. N.Y. SMSA, L.P. v. Bd. of Adjustment of Weehawken, 370 N.J. Super. 319, 331 (App. Div. 2004). "[T]he appellate court will give substantial deference to findings of fact, and will overturn discretionary rulings only if arbitrary and capricious." William M. Cox, New Jersey Zoning and Land Use Administration, § 33-4 (2008). Special deference is not shown to the trial court's interpretation of the law and the legal consequences that flow from established facts. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
GC argues that it is entitled to either a c(1) or a c(2) bulk variance for lot area pursuant to N.J.S.A. 40:55D-70. The lot is 0.545 acres or 23,727.13 square feet and the ordinance requires a minimum lot size of 1 acre or 43,560 square feet. The application complied with all other zoning requirements such as setback, coverage, and floor area ratio. In denying a variance, the Board found that GC did not show that it made a good faith offer to the Property's neighbor because its offer was based upon a faulty appraisal. The Board also faulted GC because the Property location was more suitable for a mixed-use development as envisioned by the Master Plan's recommended TOV district. The Board concluded that the "proposed use is not the only economic use that appears to be available for the property."
We reverse because the Board improperly rejected the appraisal and improperly considered an alternative use for the Property that was not permitted at the time, and remand for a new hearing before the Board.
Subsection c of N.J.S.A. 40:55D-70 governs the Board's power to grant relief from the strict application of a zoning ordinance in the form of a c(1) or a c(2) variance. See New Brunswick Cellular Tel. Co. v. Old Bridge Twp. Planning Bd., 270 N.J. Super. 122, 134-35 (Law Div. 1993) (noting that the c(1) variance is a hardship variance and the c(2) variance is a "flexible c" variance). All applicants for a "c" variance must prove the positive and negative criteria for the type of variance for which they are applying. Cell S. of N.J. v. Zoning Bd. of Adjustment of W. Windsor, 172 N.J. 75, 82 (2002); New Brunswick Cellular Tel. Co. v. Borough of S. Plainfield Bd. of Adjustment, 160 N.J. 1, 5 (1999); Lang, supra, 160 N.J. at 57.
Both c(1) and c(2) variances must satisfy the same negative criteria, which is provided for in the last paragraph of N.J.S.A. 40:55D-70. The statute states:
No variance or other relief may be granted under the terms of this section . . . without a showing that such variance or other relief can be granted without substantial detriment to the public good and will not substantially impair the intent and the purpose of the zone plan and zoning ordinance. [N.J.S.A. 40:55D-70.]
The positive criteria for a c(1) variance is provided in N.J.S.A. 40:55D-70c(1), which states the board of adjustment shall have power to:
Where: (a) by reason of exceptional narrowness, shallowness or shape of a specific piece of property, or (b) by reason of exceptional topographic conditions or physical features uniquely affecting a specific piece of property, or (c) by reason of an extraordinary and exceptional situation uniquely affecting a specific piece of property or the structures lawfully existing thereon, the strict application of any regulation pursuant to article 8 [N.J.S.A. 40:55D-62 to -68.6] of this act would result in peculiar and exceptional practical difficulties to, or exceptional and undue hardship upon, the developer of such property, grant, upon an application or an appeal relating to such property, a variance from such strict application of such regulation so as to relieve such difficulties or hardship. [footnote omitted.]
The positive criteria for a c(2) variance is provided in N.J.S.A. 40:55D-70c(2), which states the board of adjustment shall have the power to:
[W]here in an application or appeal relating to a specific piece of property the purposes of this act . . . would be advanced by a deviation from the zoning ordinance requirements and the benefits of the deviation would substantially outweigh any detriment, grant a variance to allow departure from regulations pursuant to article 8 [N.J.S.A. 40:55D-62 to -68.6] of this act.
The main issue presented in this case is how the Board should evaluate GC's offer to sell the Property to the contiguous property owner. All parties agree that the contiguous property owner is the only potential buyer for the Property because DOT owns the other surrounding lots. The case law has varied throughout the years as to whether a variance applicant is required to make an offer to a contiguous land owner and whether that offer should assume that the variance has been granted. There are two paths in which a land owner can make his lot conforming and mitigate his undue hardship. He may offer to purchase some of his neighbor's land or his neighbor may offer to purchase his undersized lot. See Harrington Glen, Inc. v. Mun. Bd. of Adjustment of Leonia, 52 N.J. 22, 30-31 (1968) (describing two solutions to an undersized lot, the purchase of additional land or the sale of the undersized lot).
In Gougeon v. Board of Adjustment of Stone Harbor, 52 N.J. 212, 224 (1968) (Gougeon I), the Court found that if the overall proof satisfies the negative criteria of the hardship variance, then the variance should be granted "unless a binding offer is made on the record to pay plaintiff the [FMV] of his lot." The Court added, plaintiff may in the discretion of the Board be denied the permission to build his house on condition that a binding offer as described above is made and is available for prompt payment to him. If plaintiff refuses such a fair and reasonable offer, the Board may conclude that his case falls short of the exceptional or undue hardship which justifies relief. [Ibid.]
Chirichello v. Zoning Board of Adjustment of Monmouth Beach, 78 N.J. 544, 555 (1979), also advocated the grant of a conditional variance in situations involving an undersized lot. The case noted that undue hardship is measured by the salability of the land. Ibid. In Chirichello, buyers were willing to acquire the undersized lot for "whatever fair value figure an appraiser would fix," to which the Court commented, "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." Ibid. The Court added, "if the owner refused to sell, then he would have no cause for complaint. Or if the adjoining owners would not agree to purchase, then perhaps the variance should be granted, less weight being given to their position particularly when the land in question will have been rendered useless." Id. at 556. In either circumstance, the Court found that a conditional variance may lead to a satisfactory solution. Ibid..
In Commons v. Westwood Zoning Board of Adjustment, 81 N.J. 597, 606 (1980), the Court found that "[r]elated to a determination of undue hardship are the efforts which the property owner has made to bring the property into compliance with the ordinance's specifications." Relevant considerations include "[e]ndeavors to sell the property to the adjoining landowners, the negotiations between and among the parties, and the reasonableness of the prices demanded and offered." Ibid. The Court concluded that if an owner is willing to sell at a "fair and reasonable" price, but the neighbor refuses to make a reasonable offer, then undue hardship exists. Ibid. The Court also cited Gougeon I, supra, 52 N.J. at 224, finding that it stood for the principle that "if an owner of land refused to sell at a 'fair and reasonable' price he would not be considered to be suffering an 'undue hardship.'" Commons, supra, 81 N.J. at 606.
In Nash v. Board of Adjustment of Morris, 96 N.J. 97, 102 (1984), the Court found that if an applicant meets the positive and negative criteria and is thus entitled to a variance, that variance may be granted contingent on whether adjoining land owners offer to buy the property for its FMV. The Court explained that this approach would be a condition subsequent that benefits adjoining property owners by avoiding the variance to which the property is entitled. Ibid. If the neighbors failed to make a fair and reasonable offer, then the hardship continues to exist and the variance is unconditionally granted. Id. at 106. Accord Jock, supra, 184 N.J. at 594.
In other cases the offer process is viewed simply as one factor that should be considered in the undue hardship evaluation. Even in some cases where courts indicate that an offer process is a conditional requirement, courts have cautioned that requirement has been qualified with the warning that any offer made or received should not be viewed as the dispositive factor of an application.
For example, in Harrington Glen, supra, the Court stated that the purchase of additional land at FMV may offer the solution to an undersized lot because the purchase may bring the lot into conformity or "may bring the lot into such improved status as to warrant the conclusion that the criteria set out in the statute have been met." 52 N.J. at 30. Thus, the Court suggested that the board could grant the variance conditioned upon the acquisition of the additional land. Ibid. However, the Court then emphasized that if the applicant is fairly entitled to a hardship variance, then such relief should not be denied because other property owners are willing to sell additional land to them in order to avoid construction of the proposed home on the undersized lot. Id. at 31. In addition, the Court stated, "If that neighbor or any other interested person is willing at the time of the renewed hearing to buy [the applicant's] lot at a fair price -- for example, at the front-foot value*fn2 of conforming lots in the general residential area --that fact may be considered on the issue of hardship." Ibid.
Despite the conditional language utilized in Gougeon I, when reviewed again following remand, Gougeon v. Board of Adjustment of Stone Harbor, 54 N.J. 138 (1969) (Gougeon II), the Court did not apply the strict conditional approach to the applicant's failure to accept an offer for his undersized lot. In Gougeon II, on rehearing the board of adjustment found that the applicant would be denied relief if the intervenors offered to pay FMV for the undersized lot, which the board determined to be $8100. Id. at 141. An offer to buy the lot was made and rejected. Id. at 141-42. While the Court reiterated that a board could consider whether the applicant had received any offers from third persons to buy the undersized lot at FMV in determining whether the application for a variance should be granted, the Court granted the applicant relief despite the offers made due to the irreplaceable nature of the lot. Id. at 146, 149. The Court stated, "it was not intended that existence of such an offer, of itself, would warrant denial of relief," id. at 149, but "[i]t was intended that such an offer would constitute a circumstance to be considered in the application of the Board's statutory discretion to the whole case." Ibid.
In Davis Enterprises v. Karpf, 105 N.J. 476, 482 (1987), the Court once again emphasized that an offer to buy an undersized lot at FMV only becomes relevant after the applicant has established that he or she is otherwise entitled to the variance. The Court held that while an FMV offer is relevant, it is not dispositive in determining whether a hardship exists, stating that "[t]he import of our decisions is that an offer to purchase by an adjacent owner authorizes, but does not require, the denial of a hardship variance." Id. at 483.
In Dallmeyer v. Lacey Township Board of Adjustment, 219 N.J. Super. 134 (Law Div. 1987), the trial court summarized much of the case law surrounding isolated lot cases. Id. at 139. In doing so, the court noted that efforts to bring the isolated or undersized lot into compliance with zoning ordinances, either by sale of the property or by acquisition of additional property, should be considered when evaluating undue hardship. Ibid. The court found that if it is feasible to purchase additional land or if the owner of the undersized lot refuses to sell the property at a "fair and reasonable" price, then "the owner might not suffer an 'undue hardship.'" Id. at 139 (citing Gougeon I, 52 N.J. at 224). "Conversely, if the adjacent property is not available or the applicant is willing to sell at a 'fair and reasonable' price and an adjoining property owner refuses to make a reasonable offer, then 'undue hardship' generally exists." Ibid. (citing Commons, 81 N.J. at 606). See also Jock, supra, 184 N.J. at 594-95.
Yet the court added, "that the availability or unavailability of adjacent property or the willingness or unwillingness of the owner to buy or sell are factors the board must consider. They are not necessarily controlling."
Dallmeyer, supra, 219 N.J. Super. at 140. Like this case, the board of adjustment in Dallmeyer found that there was insufficient evidence to show that the variance applicant made a substantial good faith effort to contact the neighbors to sell the undersized lot. Ibid. The court pointed out that the applicant's agent contacted the neighbors twice regarding a possible sale, but received no responses. Ibid.
Having determined that a FMV offer is simply a factor to be considered and an adjoining property owner, who refuses to make a reasonable offer, cannot block an otherwise meritorious application, the next issue is how a board should determine the appropriate price for an undersized lot in the context of an offer to buy or sell the property. While there is some variation in the cases, the greater weight of authority directs that the appropriate valuation for the undersized lot is FMV based upon the assumption that a variance has been granted to the lot and it is buildable. The trial judge expressed some discomfort with this approach, and it is not without its flaws as it overestimates the present value of property in favor of the owner. However, it is the approach that has been adopted by our Supreme Court.
In Gougeon I, supra, the Court noted that no offer to purchase the undersized lot should play a part in the board's consideration of the applicant's case "unless it represents at least the [FMV] of a 30' x 110' lot on which a home could be built, i.e., at least the front-foot value of conforming lots in the general residential area." Id. at 224.
In the concurring opinion of Chirichello, supra, it was noted that when determining the fairness of an offer, case law requires that the offer "be gauged in relation to the [FMV] of the premises assuming that the variance has in fact been granted." 78 N.J. at 562 (Pashman, J., concurring). Justice Pashman added, "Were [FMV] determined without assuming the existence of a variance, a plaintiff would rarely, if ever, meet the statutory criterion of 'undue hardship.' That is, if no use whatsoever can be made of a particular parcel of property, its '[FMV]' would approach zero." Id. at 562-63.
In Nash, supra, the Court directly addressed, "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." 96 N.J. at 101. The Court held, that the proper standard of valuation in deciding the fair price to be offered to an owner to avoid hardship . . . is the [FMV] of the property assuming that all necessary variances have been granted. We find this to be the only measure of valuation that can truly relieve the hardship of an owner of an isolated lot who has satisfied the positive and negative criteria of N.J.S.A. 40:55D-70 c. [Id. at 107.]
The Court also noted that if the property was valued as presently zoned, as suggested by the dissent, then local neighbors and boards of adjustment would have undue power and discretion over the value of the property. Id. at 109.*fn3
Applying these principles to this case, we hold that the Board exceeded its discretion when it found that GC had failed to make a good faith offer to the contiguous property owner. Ignoring for a moment whether GC's appraisal was adequate, the fact remains that when GC demonstrated a willingness to sell the Property, the contiguous property owner did not make any offer or counteroffer for the Property. The contiguous property owner objected to a valuation that assumed a variance had been granted.
The sale of an undersized lot involves a conflict between the public interest represented by the zoning restriction and the private property interest rights of the owner. Gougeon I, supra, 52 N.J. at 225. Nash, supra, emphasized that an opportunity to buy an undersized lot is not for the property owner's benefit, but rather for the neighbors' benefit, 96 N.J. at 106, 109, so the balance of these interests should have been considered by the Board.
GC should not be penalized because it initiated the offer process, and the contiguous property owner failed to make a reasonable offer in response to that initiative. GC based its offer on the appraisal of a licensed real estate appraiser. If the neighboring property owner was truly interested in purchasing the Property and he believed that this value was too high, then he could have made a counteroffer or hired his own appraiser. This record demonstrates that GC suffered undue hardship because a taking rendered the lot nonconforming, GC made an effort to make the lot conforming, and the contiguous property owner refused to make a reasonable offer. The confluence of these factors generally supports a finding of undue hardship. Dallmeyer, supra, 219 N.J. Super. at 139.
Normally, we would not disturb a board's rejection of expert testimony. Where, as here, that decision was infected by legal error, we will not defer to its finding. Manalapan Realty, supra, 140 N.J. at 378. The Board's outright rejection of GC's appraisal was informed by its failure to appreciate the price at which GC was obligated to offer the Property to the contiguous property owner. As noted, case law dictates that the price at which an undersized lot must be offered to a neighbor is the FMV of that property assuming that the variance has been granted. Nash, supra, 96 N.J. at 107; Chirichello, supra, 78 N.J. at 562-63 (Pashman, J., concurring). To be sure, the appraisal was higher than the contract price, but it was not determined whether the contract price was conditioned upon the grant of a variance. Without this information, a difference in contract price and appraisal price does not warrant a rejection of the appraisal's estimate of the FMV. See, e.g., Somol v. Bd. of Adjustment of Morris Plains, 277 N.J. Super. 220, 223 (Law Div. 1994) (finding that an offer of $4000 for an undersized lot did not represent a fair value where the contract purchaser was paying a conditional contract price of $85,000); Dallmeyer, supra, 219 N.J. Super. at 147 (noting that the property owner was willing to sell for the contract price, even though he could have demanded FMV).
The second principal reason cited by the Board in its resolution denying GC's application was its failure to promote the purpose of the proposed TOV district. The resolution criticizes the application because it "does not promote the type of mixed-use, pedestrian-friendly design that is envisioned for the [TOV] District." It also states that a mixed-use development would be more consistent with the Master Plan and that the Board was not presented with any evidence to demonstrate that a mixed-use development "would not be an economic use of the property." Denial of a development application that is a permitted use because it is out of step with a proposed zoning amendment is unreasonable municipal action.
Here, the Property at issue is undersized; therefore, without a variance for lot size the Property will be zoned into idleness. See Gougeon I, supra, 52 N.J. at 220 (noting that the square foot area and side yard requirements of the ordinance and use restrictions have zoned property into idleness). This is precisely the type of hardship that the positive criteria of the c(1) variance is meant to address. See N.J.S.A. 40:55D-70c(1) (providing variance may be granted when a hardship is caused by "exceptional narrowness, shallowness or shape of a specific piece of property").
The negative criteria for the variance, that the variance can be granted "without substantial detriment to the public good and will not substantially impair the intent and the purpose of the zone plan and zoning ordinance," N.J.S.A. 40:55D-70, must be evaluated in the context of the zoning ordinance that is in effect at the time of the application. See Manalapan Realty, supra, 140 N.J. at 378-79 (noting that a municipality has the right to change an ordinance in direct response to a variance application and the applicant must abide by the new ordinance). Interestingly, when GC initially proposed a mixed-use development, it was repeatedly reminded by the Board Chair that the Board has "to judge [GC's application] upon what the existing zoning is right now."
The Board, however, did not evaluate GC's application based upon the zoning in effect at the time of its decision. It ignored the fact that the two-and-one-half-story house was a permitted use. It measured GC's application against the standard of the TOV district as recommended by the Master Plan, but without subject to any further action, including an amendment of the zoning ordinance. "The Master Plan does not have the operative effect of a zoning ordinance." Id. at 381. The Board erred when it measured this application by a zoning amendment.
GC's application presented a permitted use in the R district, but required a variance for lot size. It complied with all other requirements of the zone, and the proposed house conformed in all other respects. The ordinance allows for a height of two-and-one-half stories; therefore, a finding that the proposed house impairs the zoning the area is unfounded.
GC also contends that the Board improperly determined that the application did not present a better zoning alternative pursuant to the requirements for a c(2) variance. It is clear from the record that GC was mainly attempting to prove that it was entitled to a c(1) hardship variance and not a c(2) variance. The record contains almost no references to a c(2) variance, except for a short statement by GC that it is entitled to such a variance because the current Property is an eyesore. A development that makes a piece of property more visually desirable can sometimes justify the approval of a c(2) variance, but there was insufficient evidence in this record to make such a finding. See Lang, supra, 160 N.J. at 49 (finding the installation of a nonconforming in-ground pool was aesthetically preferable and more visually desirable to the community).
In sum, we hold that the Board erred in its consideration of GC's application because it made the offer to sell a determinative rather than a relevant factor, evaluated the expert appraiser's opinion in accordance with an erroneous understanding of FMV, and evaluated the application in accordance with a proposed zoning scheme rather than the existing zoning scheme for the district. We reverse and remand to the Board for further proceedings consistent with this opinion. Due to this disposition, we need not address the remaining issues raised by GC.
Reversed and remanded.