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American Dream at Marlboro, L.L.C. v. The Planning Board of the Township of Marlboro

A-0738-09T3 (N.J. Super. App. Div. 2011) (Unpublished)

ZONING; RESTRICTIVE COVENANTS — A restrictive covenant required by a land use board will be enforced in equity only so long as it remains reasonable in light of its purpose and, therefore, once that purpose no longer exists, the zoning board should approval removal of the earlier imposed required restrictive covenant it required be placed on the property.

A developer submitted a planning board application to develop land it owned in a residential zone. The minimum lot size in the zone was 80,000 square feet, and a minimum street frontage of 250 feet was required. The parcel would be subdivided and a street, ending in a cul-de-sac, was to be constructed adjacent to the lots. A flag lot needed a variance because it only would have a fifty foot frontage and, absent a long narrow driveway, it would be a landlocked parcel. The planning board, concerned the developer might return in the future and seek to further subdivide the flag lot, approved the application, subject to the flag lot deed restriction preventing its future subdivision. The board later approved a revision to the proposed development, again conditioned upon a deed restriction for the flag lot. The developer, however, never recorded this deed restriction.

Two months after the board approved the revised plans, the developer sold its interest to another builder. That builder entered into a developer’s agreement with the municipality to build homes on the approved subdivision and, in that agreement, the builder expressly promised to develop the flag lot in accordance with the deed restriction. Five years later, the builder purchased a 10 acre parcel located immediately behind the flag lot, alleging the purchase contract was subject to its obtaining the approval of the board to merge the flag lot into the 10 acre parcel, and allowing the entire 15 acre parcel into six residential lots. The builder submitted an application seeking approval of this plan. In it, it proposed to construct a new road to begin at what had been the cul-de-sac so as to provide access to six new single-family lots. The application did not include any reference to the flag lot’s unrecorded deed restriction. The board granted preliminary and final approval. Before the new development began, the builder sold the project to yet another developer. During the due diligence period, this new developer realized it needed a construction easement across a residential lot that backed up to the flag lot in order to build the proposed road from the cul-de-sac.

Negotiations with that residential lot’s owner failed, and the developer approached the planning board to proceed with the pending application based on constructing an access road that would not require the easement. Ultimately, the board advised the developer that the prior approvals had expired due to a lapse in time. The developer filed suit, seeking default approval of its proposed development concerning the flag lot and adjacent parcel. The owner of the neighboring residential lot was granted leave to intervene. It sought a declaratory judgment that the flag lot could not be subdivided, and an order to compel the developer to execute and record a deed restriction for the lot. The lower court ruled, pursuant to the planning board’s resolutions, that the flag lot was deed restricted against future subdivision. However, the court permitted the developer to file an amended complaint. The developer contended the proposed merger of the flag lot and the adjacent lot would eliminate the stated reason for the deed restriction, as it would allow adequate access the lot and would satisfy the public road and frontage. The residential owner again moved for summary judgment, alleging there were no changed circumstances that would warrant granting this relief. The lower court granted this motion, concluding the developer had failed to carry its burden of demonstrating that no benefit was served by the deed restriction.

The developer appealed, and the Appellate Division reversed and remanded the matter for further proceedings. It held that a restrictive covenant will be enforced in equity only so long as it remains reasonable in light of its purpose. The Court concluded that the purpose behind the board’s insistence on a deed restriction was to prevent the creation of additional flag lots or landlocked lots. That purpose no longer existed once the adjacent parcel of land was purchased, which if merged with the flag lot, would erase the flag lot’s characteristics. The Court said the test was not whether the neighbor’s residential lot achieved a benefit by having a large undivided parcel behind her property, but whether the original purpose behind the deed restriction was achieved by maintaining the deed restriction in place.

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