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Borough of Bloomingdale v. Flarlas, LLC

A-1418-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

ZONING; AGREEMENTS; ENFORCEMENT — A municipality may be deprived of the right to enforce a zoning settlement agreement if the municipality later acts in a way that gives the property owner reasonable cause to believe that the municipality will not enforce the agreement.

A municipality sued a property owner-company, alleging the company had unlawfully expanded a prior non-conforming use, had engaged in certain construction activities on its property without approval, and was maintaining an unsafe structure. Penalties had been assessed against the company for these violations. The parties subsequently entered into a stipulation of settlement under which a municipal zoning officer was to inspect the property and advise the company what was required to bring the property in compliance with code. The company would then have ninety days to bring the property into compliance. The agreement stated that if the zoning officer was satisfied that the property was in compliance, the company would pay a penalty of only $5,000 to the municipality. However, if the zoning officer was not satisfied, the company would pay a $40,000 penalty and a lien would be attached to the property.

Nine months after the parties entered into the settlement agreement, the municipality sought entry of a $40,000 judgment because the company had failed to bring the property into compliance. The company responded that it had taken steps to bring the property up to code as required by the zoning officer, including the submission of planning board applications, but it also relied upon the municipality’s representation that it might want to enter into negotiations to purchase the property. The company argued that it did not commit to the costs of compliance while pursuing sale of the property to the municipality. Further, after the municipality moved for judgment, it advised the company that it would decide if it wanted to revisit sale negotiations at a later time. The lower court entered the judgment for the municipality.

On appeal, the Appellate Division reversed the judgment and remanded the matter for further evidentiary proceedings. The Court agreed the settlement agreement was enforceable given that the two parties freely contracted for the company to come into compliance, and the company should have known of all costs involved with that endeavor, however expensive. Nonetheless, the company had presented sufficient evidence to warrant consideration as to whether enforcement of the settlement agreement should have been barred because the municipality violated the covenant of good faith and fair dealing, which is implied in every contract. The company asserted the municipality did not act in good faith when it raised the possibility of the property acquisition at or about the same time it was taking measures to obtain the $40,000 judgment.

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