July 16, 2012
JEFFREY R. JERMAN, PLAINTIFF-RESPONDENT,
THE ZONING BOARD OF ADJUSTMENT OF THE TOWNSHIP OF LACEY, DEFENDANT-APPELLANT, AND THE TOWNSHIP OF LACEY, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-2128-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: December 21, 2011
Before Judges Cuff and St. John.
The issue in this appeal is whether the Zoning Board of Adjustment of the Township of Lacey (Board) should have granted a variance to construct a single-family house on an undersized lot. The Board denied the variance; the Law Division judge reversed and ordered the Board to approve the development application in accordance with the plans submitted to it by the applicant. We affirm.
Plaintiff Jeffrey R. Jerman is the owner of property located on Newark Avenue in the Township of Lacey, Ocean County. The property is described as Block 1852, Lots 24 and 25. The property is located in the R-80 Residential Zone, which requires a minimum lot area of 8,000 square feet and a minimum width of 80 feet for construction of a single-family home. Plaintiff's property contains 4,000 square feet and a minimum lot width of 40 feet. Plaintiff acquired the lots through a final tax foreclosure judgment. Neither he nor any former owner ever owned adjacent property. The property and most of the surrounding area is unimproved vacant wooded land, although Newark Avenue is paved. In fact, the single-family home proposed by plaintiff would be one of the first, if not the first, homes constructed on Block 1852. The record suggests plaintiff's property may not be the only undersized lot in Block 1852. The record also suggests most lots conform to the zoning.
Plaintiff proposed construction of a 24' x 50' two-story frame dwelling, including an attached one-car garage, crawl space, front porch, and front and rear steps. The plan indicates a proposed roof drainage system and a proposed driveway, depressed curb, and concrete driveway apron to serve the lot.
The proposed gross first floor living area is shown as 1,650 square feet (the minimum allowable is 864 square feet). The proposed principal building lot coverage is shown as 27.5% (the maximum allowable coverage by a principal building is 35%).
The plan does not show existing water and sewer mains located in Newark Avenue.
Proposed lateral connections are shown.
Plaintiff applied for two bulk variances, pursuant to N.J.S.A. 40:55D-70c(1), to build the house on his property. Plaintiff testified at the February 1, 2010 hearing about his efforts to acquire adjacent property to cure the undersized nature of his property.
He explained there were four adjoining parcels including one to the north, one to the south, and two to the east along the rear of the subject property. He contacted 29 Properties, LLC, the owner of rear adjoining parcels 16 through 19. 29 Properties offered to purchase plaintiff's property for $14,000, but was not interested in selling its own lots. Joseph Dellechiaie, the owner of rear adjoining parcels 30 and 31, was interested in selling his property to plaintiff. Those parcels would only add to the depth but not the width of plaintiff's property, and would not avoid the need for a variance.
On January 7, 2010, plaintiff sent a "buy-sell letter" to James Dallmeyer, owner of nonconforming Lots 20 through 23 adjacent to the north of the subject property.*fn1 Plaintiff testified he never received a response regarding these lots. Dallmeyer also owned two lots (Lots 26 and 27) adjacent to the south of the subject property. Dallmeyer offered to sell Lots 26 and 27 to plaintiff for $50,000.*fn2
Plaintiff explained he called Dallmeyer after receiving his offer. Because of prior experience with similar parcels in the area, plaintiff believed the subject property was worth $85,000, if he obtained a variance. He objected to the $50,000 offer, and suggested Dallmeyer obtain an appraisal of his parcels to support his offer, an idea Dallmeyer rejected. On February 1, 2010, Dallmeyer offered $20,000 to purchase the subject property explaining he believed an appraisal would only be in the range of $10,000.
In light of plaintiff's testimony regarding the buy-sell negotiations with Dallmeyer, the Board sought to continue the hearing to give Dallmeyer an opportunity to participate and testify. Plaintiff requested, if there was an adjournment, that the Board require plaintiff and Dallmeyer to obtain appraisals for Dallmeyer's lots (Lots 26 and 27). The Board refused to require Dallmeyer to obtain an appraisal, noting it would be at his own peril if he failed to substantiate his position and adjourned the hearing.
On February 9, 2010, the Board sent Dallmeyer a letter notifying him of the upcoming April hearing and suggesting he should "attend . . . with an appraiser and appraisal report" to justify his offer of $20,000 for the subject property.
On April 5, 2010, the hearing continued. Plaintiff introduced an appraisal by Eric Birchler of the subject property of $85,000, and an appraisal of Dallmeyer's southern parcels of $15,000. Noting the two parcels were identical nonconforming parcels, plaintiff explained the discrepancy in appraised value resulted from the valuation method utilized: the subject property was "valued as if a variance [were] granted" while Dallmeyer's property was valued "under the assumption that that lot is to be combined with [his]." Birchler calculated the value of plaintiff's property using three recently sold comparable properties.
Dallmeyer appeared at the April hearing and testified he did not believe he needed an appraiser to establish the value of the property. He conceded plaintiff might be able to obtain $85,000 for his parcel, but contended plaintiff had not made a good faith effort to buy other property or sell his property before seeking a variance. He also stated he had "a contract purchaser on [his] 40-footer, which [he] ha[d] not signed yet, for $60,000." Dallmeyer did not produce the contract or any documentary evidence regarding the contract. He did however, present deeds for properties he sold, including one 40-foot nonconforming lot he sold in 2005 for $77,000.
Dallmeyer reiterated his offer to sell his lots for $50,000, and increased his offer to purchase plaintiff's parcels to $40,000. Dallmeyer's purchase of the subject property would convert his northern property (Lots 20 through 23) into a conforming corner lot. Dallmeyer testified he could work out a deal with the owner of Lots 28 and 29 to complete his purchase of the entire block (Block 1852) fronting Newark Avenue, creating two 100-foot conforming parcels.
Plaintiff supported his application with the testimony of Jeff Daum, a New Jersey licensed engineer and planner. Daum testified that notwithstanding the nonconforming nature of the subject property, it is sufficiently sized to support the proposed residence and otherwise conforms with all bulk zoning requirements, other than the area and width of the parcel. The proposed home would "meet the principles for open air, light and space." While there were presently no other homes built on parcels in the immediate surrounding area, Daum explained the construction of the planned home would fit into the character of the neighborhood as there were similar homes about a block away. Prior to concluding the hearing, plaintiff presented a final offer of $30,000 for Dallmeyer's southern contiguous lots, and rejected Dallmeyer's offer to sell them for $40,000.
The Board unanimously denied plaintiff's application for a variance, finding his hardship was "self-created," and a variance would create "a significant negative impact on the zone plan[.]" The Board also discounted the evidence of value presented by plaintiff because of the uncertainty surrounding the variance.
In its May 3, 2010 Resolution, the Board found plaintiff had not submitted sufficient credible evidence of value. The Board cited the uncertainty of the variance and discounted the comparables selected by plaintiff's appraiser.
The Board also discounted Dallmeyer's proposed fair market value of the subject property, but noted he offered $40,000 to purchase it. The Board also concluded plaintiff failed to "provide sufficient credible evidence that he was able, in good faith, to purchase sufficient property to make his lot conform or sell his property for fair market value in order to extinguish his hardship." Further, the Board determined plaintiff did not act in good faith because "it [wa]s feasible for [him] to purchase property from adjoining property owners at a fair and reasonable price and . . . refused to sell the lot at a fair and reasonable price . . . which would [have] extinguish[ed] the hardship[.]"
The Board also determined plaintiff failed to sustain his burden of showing a variance would not negatively affect the surrounding area because "the 200' radius is undeveloped and in its pristine state" and a variance allowing development "would have a substantial negative impact on the zone plan and zoning scheme." The Board found that allowing 40-foot lots would "create [a] potential domino effect wherein all the vacant properties in the neighborhood may be subject to development on undersized [40-foot] lots contrary to the zone plan." The Board concluded: "[plaintiff] failed to satisfy the negative criteria and, accordingly, the offer of Dallmeyer to purchase [plaintiff]'s property was reasonable and would provide [plaintiff] a fair and reasonable price thereby mitigating a finding of exceptional and undue hardship."
Plaintiff filed an action in lieu of prerogative writs challenging the action of the Board. In reversing the Board, Judge Millard held the Board rejected all evidence of value of plaintiff's property and proceeded to find that plaintiff had not acted in good faith to purchase or sell adjacent property to cure the hardship presented by the size of his property. Yet, the Board never made an explicit finding of the value of the property. Implicit in its finding that plaintiff did not act in good faith is a finding that the value was not only less than the value obtained by plaintiff's appraiser but also equal to or less than the value stated by Dallmeyer, the adjacent property owner. Yet, the Board rejected the testimony of the adjacent property owner as to value. The judge also held that the Board failed to recognize that the value of the property must assume that the variance has been granted. Therefore, Judge Millard held that the Board's finding that plaintiff did not act in good faith to cure the hardship was not grounded in the record and unreasonable.
Judge Millard also found that the Board did not evaluate the negative criteria based on the record. Rather, he found that the Board's review of the variance application was driven almost entirely by its desire to preserve the zoning plan. The judge stated:
The [c]court is satisfied that the Board disregarded the majority of the credible evidence presented at the hearing and focused almost solely on their desire to avoid variances for isolated lot cases in order to protect the local zoning plan as much as possible. During the meeting, multiple Board members stated that bringing undersized and isolated lots into conformity was their main concern. The transcript is also replete with comments regarding the Board's evasive approach to variance applications in isolated lot cases. While attempting to bring undersized lots into conformity where reasonably possible is commendable and even required under the law, the Board's desire to protect the zoning plan has overshadowed each of the other, equally important, factors to be considered in deciding these variance cases.
This [c]court recognizes the difficulty the law places on Board members seeking to protect local zoning plans, but the law in this area is well established.
Judge Millard also noted that the Board emphasized the effect of granting a bulk variance for construction of the first house on the block. The record, however, contained no evidence whether other undersized lots existed in this tax lot; therefore, the Board's fears of a wave of variance applications for undersized lots is without any support in the record.
Public bodies, such as municipal planning boards and boards of adjustment, are permitted "wide latitude in their delegated discretion" based on "their peculiar knowledge of local condition." Jock v. Zoning Bd. of Adjustment of Wall, 184 N.J. 562, 597 (2005). The scope of judicial review is "to determine whether [a] board [of adjustment] 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 board. Fallone Props., L.L.C. v. Bethlehem Twp. Planning Bd., 369 N.J. Super. 552, 561 (App. Div. 2004).
There is an assumption that the board of adjustment's conclusions are founded on the record, 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 board's decision was arbitrary, capricious, or a 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 & Stuart R. Koenig, New Jersey Zoning and Land Use Administration, § 33-4 at 749-50 (2012). 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).
Plaintiff applied for a c(1) variance. N.J.S.A. 40:55D-70c(1). In denying the variance, the Board found that plaintiff did not act in good faith to seek offers to sell his property to adjacent property owners or to make offers to purchase adjacent property. In doing so, the Board discounted the appraisal evidence submitted by plaintiff and the adjacent property owner.
An applicant for a c(1) variance, commonly referred to as a hardship variance, New Brunswick Cellular Telephone Co. v. Old Bridge Township Planning Board, 270 N.J. Super. 122, 134-35 (Law Div. 1993), must prove the positive and negative criteria for the variance they seek to obtain, Cell South of New Jersey v. Zoning Board of Adjustment of West Windsor, 172 N.J. 75, 82 (2002); New Brunswick Cellular Telephone Co. v. Borough of South Plainfield Board of Adjustment, 160 N.J. 1, 5 (1999); Lang, supra, 160 N.J. at 57.
The negative criteria for a c(1) variance is set forth in the last paragraph of N.J.S.A. 40:55D-70; it provides:
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.
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[.]
The main issue presented in this appeal is how the Board should evaluate plaintiff's offer to sell his property to the adjacent property owner and the adjacent property owner's offer to purchase plaintiff's property. The case law has varied throughout the years as to whether a variance applicant is required to make an offer to an adjacent 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 the applicant's 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 fair market value 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, "[i]t 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.'" Ibid.
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 fair market value (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, "[i]f 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*fn3 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," 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." Id. at 149.
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, 139 (Law Div. 1987), the trial court summarized much of the case law surrounding isolated lot cases. 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 (quoting 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, supra, 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 in Dallmeyer found 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.
Having determined that an 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. This approach 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." 52 N.J. 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) (emphasis added). 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-70c. [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 over and discretion as to the value of property." Id. at 109.*fn4
Applying these principles to the record in this case, we hold that the Board failed to recognize that a fair market offer to buy from or sell to the adjacent property owner is simply a factor to be considered in the Board's review of the variance application. Furthermore, FMV of the undersized lot assumes that a variance has been granted and the property is buildable. Here, the Board did not follow these principles. As found by Judge Millard, the Board made an implicit finding of value that had no factual basis in the record.
In addition, the Board's analysis of the negative criteria assumed facts not in evidence. The record contained no evidence of a proliferation of undersized lots in the block. The Board also ignored that the property owner required no other variance other than a variance for lot size. The proposed house can be constructed within the requirements for the R-80 zone for front, rear and side yard setbacks, as well as lot coverage. The stated goal of the setback and lot area requirements are not undermined in any way by the house plaintiff proposes to build.
We, therefore, affirm the March 8, 2011 order reversing the denial of plaintiff's application for a bulk variance.