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Mid Atlantic Real Estate Journal
Court rejects NJ Municipality’s attempt to unilaterally extend affordable deed restrictions on condominium units I Steven G. Mlenak n a recent opinion, Society Hill at Piscataway Condo. Ass'n v. Township of Pisca- taway, Middlesex County Supe- rior Court Judge Douglas Wolf- son ruled that municipalities could not unilaterally extend certain expiring deed restric- tions encumbering affordable housing units if those restric- tions did not explicitly empower the municipality to do so. The Society Hill at Piscat- away Condominium was devel- oped more than thirty years ago following protracted Mt. Laurel litigation, which resulted in the rezoning of several properties throughoutMiddlesex County to accommodate affordable hous- ing development. As part of the settlement of the litigation, Soci- ety Hill sought site plan approv- al to build an inclusionary devel- opment containing 109 low- and moderate-income units. As a condition of the site plan ap- proval, an Affordable Housing Plan was adopted which, by its terms, was to expire thirty years from its execution. The Plan required that the Associa- tion's master deed and each of the unit deeds to the 109 units contain restrictions prohibiting the owner fromselling or leasing the unit to a purchaser or ten- ant whose income exceeded the threshold necessary to qualify for low- and moderate-income housing as set by the State. The settlement wasmemorialized by the Court and, as a consequence, Piscataway received credit for the 109 deed-restricted units against its fair share obligation since that time. On July 17, 1989, the Council on Affordable Housing (COAH) adopted its first recapture regu- lation, which prevented the purchaser of a deed-restricted unit from reaping a windfall after the expiration of the deed restrictions. In 2001, COAH adopted the Uniform Housing Affordability Controls (UHAC), which provided in pertinent part that "[a] municipality shall have the right to determine that the most desirablemeans of promot- ing an adequate supply of low- and moderate-income housing is to prohibit the exercise of the repayment option and main- tain controls on lower income
housing units sold within the municipality beyond the period required by N.J.A.C. 5:93-9.2." On December 8, 2012, nearly thirty years after the first af- fordable housing units were constructed and sold, Pisca- taway adopted an ordinance that purported to extend the deed restrictions on the 109 deed-restricted units in Soci- ety Hill through June 7, 2045. Piscataway asserted that the ordinance was adopted pursu- ant to the UHAC and N.J.S.A. 5:97-6.14(a), which permits a municipality to extend such restrictions to address its growth share obligation. Society Hill and five of its members sued Piscataway, claiming that the extension was unlawful, that it violated their legal rights, and that it constituted a cloud on their respective titles. The Township argued that its power vested in the UHAC and in the "state's strong constitutional and public policy imperatives, which com- pel municipalities to provide their respective fair share of affordable housing." With re- spect to the UHAC, the Town- ship claimed that the power contained therein for munici- palities to unilaterally extend the restrictions applied retro- actively because, when read as a whole, the Plan "reserved" the Township's right to amend or modify the covenants uni- laterally. The Court disagreed, finding no express language in the Plan, the Master Deed or in any of the individual deed restrictions which permitted the Township to unilaterally modify the restrictions. The Court found that "it is plain that the UHAC regula- tions were designed to imple- ment the Fair Housing Act [N.J.S.A. 52:27D-301 to -329] by assuring that low- and moder- ate-income units created under the Act are occupied by low- and moderate-income households for an appropriate period of time. . . . As contemplated by COAH, mu- nicipalities were clearly empow-
ered to impose deed restrictions, but only on newly constructed low and moderate income units subject to the FHA." As all the deed-restricted units within So- ciety Hill were constructed and approved prior to July 17, 1989 (the date of the first recapture regulation adopted by COAH), the Court refused to allow the unilateral modification power created by the UHAC to apply retroactively to deed restric- tions. Even had the restrictions come into play after 1989, the Court found that N.J.A.C. 5:80-26.5(a)(2) prohibited amu- nicipality's ability to extend the affordability controls for any "unit that, prior to December 20, 2004, received substantive certification from COAH, was part of a judgment of compli- ance from a court of competent jurisdiction or became subject to a grant agreement or other contract with either the State or a political subdivision there- of[.]" N.J.A.C. 5:80-26.5(a)(2). As a result of this case, the first to construe the UHAC provisions that appear to au- thorize the unilateral exten- sion of affordability controls, municipalities should think twice before unilaterally ex- tending the affordability con- trols on deed restrictions set to expire shortly unless such re- strictions explicitly empower the municipality to do so. This decision is not only im- portant to municipalities and the owners of deed-restricted units whose deed restrictions are set to expire; it is also impor- tant to those common interest communities whose member- ship includes the owners of such deed-restricted units. Following this case, associations in devel- opments containing affordable units with restrictions set to expire should consider taking a leadership role in defending against a municipality's at- tempt to unilaterally extend those restrictions. Steven Mlenak is a mem- ber of Greenbaum, Rowe, Smith & Davis LLP. n
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