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Borough of Paramus v. Shamrock Creek, L.L.C.

A-6267-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

MOUNT LAUREL; DEVELOPMENT AGREEMENTS — There are public policy considerations to bar enforcement of an unrecorded development agreement with respect to development.

A municipality settled a Mount Laurel affordable housing dispute with the former owner of a property. The settlement agreement contained a restriction barring residential development on the property. The agreement was never recorded. The property was then sold and the new owner sought to develop the property as residences. The municipality sued to enforce the restriction. The new owners argued that since they were innocent purchasers without notice of the restriction, they should not be bound by it.

The lower court found that the new owners bought the property after diligent inquiry and without notice of the restrictions, and therefore were not bound by the restrictions. The lower court also reasoned that the municipality had another effective method to restrict development of the property. It noted that, instead of recording the restriction, the municipality adopted a zoning ordinance limiting the total number of housing units that could be built in a Mount Laurel zone, which included the owners’ property. Therefore, the owners were required to apply for “d” variances and other approvals in order to build housing units on the property. Based on these factors, the lower court concluded that the municipality had sufficient means to protect its interest without enforcing the unrecorded settlement agreement.

On appeal, the Appellate Division affirmed. The Court pointed to the public policy considerations that bar enforcement of an unrecorded agreement restricting development. It noted that if a court enforces unrecorded restrictions on development, a municipality could play fast and loose with the COAH process for affordable housing by not recording a development restriction, representing the land as developable for affordable housing purposes, and then seeking to enforce the restriction when a developer attempts to build housing on the property.


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