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Elon Associates, L.L.C., v. Borough of Englishtown

A-0960-06T3 and A-2991-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

AFFORDABLE HOUSING — Where a change in circumstances make the terms of an affordable housing settlement agreement between a municipality and a developer inordinately expensive and impractical, there is a potential basis for the municipality to gain relief, especially if abiding by the settlement agreement would have a materially adverse impact on the municipality’s residents.

A municipality was planning new housing developments to comply with a court ordered ruling on affordable housing. In accordance with the ruling, the municipality entered into a settlement agreement with a developer that was to build a new housing community. The agreement included a provision requiring the municipality to purchase water from a certain private water company to ensure that the community received a continuous supply of water. The agreement also required the municipality to seek an additional supply of water from the state, and included a provision that until such state assistance was received, the developer’s new community would have first priority of service from the private water company. A second developer entered into a separate settlement agreement with the municipality under the same ruling. It received permission to use the municipality’s existing water supply to serve its new development. It turned out that the second developer’s project required almost the entire supply of water.

The New Jersey Department of Environmental Protection (NJDEP) refused to approve the agreement between the municipality and the first developer because, to be considered reliable, the supply from the private water company needed to be contracted for a ten-year period. A court order compelled the municipality to enter into a ten year contract with the private water company to build. The water company said that for it to enter into a ten year supply agreement, the municipality had to purchase one hundred thousand gallons per day. The municipality immediately contacted the lower court to voice concern over this condition. According to the municipality, that amount far exceeded its needs and that it would have been forced to close down its own water supply to accommodate the requirement. The municipality asserted that such an agreement would have jeopardized the health, welfare, and safety of its residents. At a conference between the parties and the lower court, the lower court directed the municipality to enter into the agreement with the private water company for the purchase of one hundred thousand gallons of water per day.

The municipality appealed, and the Appellate Division ruled that the private water company’s requirement of one hundred thousand gallons of water per day was a change in circumstances. It pointed out that during negotiations with the municipality, the private water company indicated that it only would require that fifty thousand gallons of water per day be purchased. The Court found that this change in circumstances presented a potential basis for the municipality to gain relief from the lower court’s order, noting the concerns raised by the municipality about the potential impact on its residents. The Court reversed the lower court’s order on the grounds that the lower court did not pursue an evidentiary hearing once it was informed of the change in circumstances. As a result, the matter was remanded for a determination made in light of the change in circumstances.

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