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American Tower Asset Sub, LLC v. Borough of Somerdale

A-4481-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

LEASES; MUNICIPALITIES; PUBLIC BIDDING — Even though a lease should have been approved by a governing body and should have been subject to the public bidding statute, where the lease was addressed at multiple public hearings, and the municipality accepted rent, without question, for years, equity demands that the lease be held valid and enforceable.

A wireless company was encouraged by a former municipal employee to consider leasing an undeveloped site owned by the municipality as an antenna tower location. The parties negotiated and there were public meetings about the lease. Ultimately, the land-use ordinance was amended to permit the tower at the suggested location. Pursuant to a lease agreement, the tower was erected. It operated on the municipal premises for seven years, at which time the company assigned the lease to another wireless company. The assignee continued to pay rent as well as the rent increases called for under the lease. The municipality accepted the rents.

The municipality began to question the validity of the lease after it sought an increase of rental payments outside the lease terms, and the assignee refused to pay. The municipality argued the lease was invalid because it had never been submitted for public bidding and had never been approved by the governing body. It made this argument even though the lease was the subject of multiple public meetings, and even though the municipality collected rents, issued construction and building permits, and approved land-use applications for the site.

The assignee sued in response to the municipality’s challenge of the lease. It sought specific performance. The lower court granted summary judgment in favor of the assignee, finding the lease valid and enforceable for the remainder of the term.

On equitable grounds, the Appellate Division affirmed that the lease was valid and enforceable. The Court agreed that the lease should have been approved by the governing body and was subject to the bidding statute. Nevertheless, the lease was addressed at six public meetings, it was the municipality’s former employee who recommended the location, and the municipality accepted the rent without question. Though this was a private agreement outside the bidding process, the Court chose to uphold the agreement upon a record that showed the municipality had accepted the substantial benefits of the lease, and had only questioned the validity of the lease once its demand for additional rent had been rejected.

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