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GC Landmarks, LLC v. Zoning Board of Adjustment of the Township of Hillsborough

A-1724-07T1 (N.J. Super. App. Div. 2009) (Unpublished)

ZONING; HARDSHIP — When an applicant attempts to satisfy the requirement that it offer to sell an undersized lot in lieu of requesting variances, the appropriate valuation for such a lot is its fair market value based upon the assumption that a variance has been granted to the lot and that it is buildable.

A contract purchaser of an undersized lot in a residential zone sought a variance under subdivisions c(1) and (2) of the applicable statute to construct a single-family dwelling. The lot was undersized because of a taking by the New Jersey Department of Transportation. The applicant argued that shouldn’t be required to make an offer to sell its property to adjoining owners, as the board suggested, since such offers only were relevant, but not dispositive. Nevertheless, it made an offer to the contiguous property owner to sell the property based upon an appraisal (which was higher than the contract price). The adjoining property owner rejected the offer, claiming that the appraiser’s value of the property was based on the erroneous assumption that the property was buildable. The board denied the application because it failed to make a good faith offer to sell the property to an adjacent land owner. It also found there were other “clearly permissible” uses given the location and size of the property [even though a variance would have been required for the mixed-use building that it thought was more appropriate for the site]. Finally, it stated that one of the principal reasons it denied the application was the proposal’s failure to promote the purpose of a proposed zoning district for the area. The contract purchaser challenged the board’s ruling.

The lower court affirmed the board’s decision. It held that the applicant failed to satisfy the positive criteria for a c(2) variance because there was no proof that a bigger home would benefit the surrounding community and present a better zoning alternative. It also found that the applicant failed to satisfy the positive and negative criteria for a c(1) variance because the applicant failed to demonstrate that the property could not be used in some other beneficial way, such as a mixed-use building. The Court also ruled there was little evidence of a good faith effort to reach a reasonable selling price for the property. The applicant appealed.

The Appellate Division reversed, holding that the board improperly rejected the appraisal and improperly considered an alternative use for the property. It also held that a fair market value offer was simply a factor to be considered and was not a dispositive factor as the lower court had held. It concluded that an adjoining property owner who refuses to make a reasonable offer can not block an otherwise meritorious application. According to the Court, the appropriate valuation for an undersized lot is its fair market value based upon the assumption that a variance has been granted to the lot and that it is buildable. The board had rejected this approach when it made its determination that the property owner’s appraisal was not made in good faith even though the appraisal was higher than the contract price. The board noted that if a property was valued as presently zoned, then local neighbors and boards would have undue power and discretion over the value of the property. Based on these factors, it held that the board exceeded its discretion when it found that the applicant had failed to make a good faith offer to the contiguous property owner and improperly rejected the applicant’s determination as to fair market value. While a court rarely disturbs a board’s rejection of expert testimony, since this particular rejection was based on a faulty theory of value, the Court did not defer to the board’s finding. Moreover, it was disturbed that the contiguous property owner also wrongly objected to a valuation that assumed a variance had been granted. The Court decided that the record demonstrated that the property owner suffered undue hardship because a taking rendered the lot nonconforming, the owner attempted to make the lot conforming, and the contiguous property owner refused to make a reasonable offer. It found that this undersized lot was undersized, and without a variance for lot size it would be zoned into idleness, which was precisely the type of hardship that the positive criteria of the c(1) variance was meant to address. The Court also ruled that the board erred in denying an application for a permitted use just because it was out of step with a proposed zoning amendment. Thus, it concluded that the board did not evaluate the application based upon the zoning in effect at the time of its decision and ignored the fact that the house was a permitted use and held this was an unreasonable municipal action.

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