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GF Princeton, LLC v. Ewing Township Planning Board

A-1522-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

ZONING; LEASES — Although the Municipal Land Use Law does not expressly require notice of a subdivision or site plan application to a long term ground lease tenant that owns improvements on a property that is subject to the application, as a matter of administrative due process and basic fairness, such notice is required because of the substantiality of such a tenant’s interest in the application.

A tenant leased a portion of a property for a term of seventy-five years. The lease was subsequently amended to grant the tenant an ownership interest in the two office buildings and a parking area on the land, but not ownership of the underlying land. The landlord then contracted to sell a portion of its property contingent upon the landlord obtaining subdivision approval for construction of a hotel. Part of the property that was to be transferred included the premises leased to the tenant. The buyer and the landlord/owner filed a joint application with the municipal planning board for subdivision and site plan approval. The applicants did not give the tenant notice of the subdivision application even though the tenant’s interests were affected by the application. There was no mention made, during the course of the one-day hearing on the application, of the tenant’s leasehold interest in most of one lot or its ownership of the two buildings located on that lot. After a hearing, at which no one objected to the application, the board granted the subdivision request, subject to numerous conditions.

The tenant challenged the board’s grant. It alleging that: (a) the application contemplated using a portion of the parking lot and access road on the demised premises for the proposed hotel and that the proposed buyer did not obtain the tenant’s consent for that use; (b) an access easement between the proposed lots was located within the leased area; (c) the tenant had a sufficient property interest to be entitled to notice of the application; and (d) the grant was not supported by adequate evidence in the record and was thus arbitrary and capricious.

The lower court affirmed the board’s subdivision and site plan approval. It rejected the tenant’s claims that the subdivision and site plan approvals were invalid because its consent for the project was never obtained or, alternatively, because the applicants failed to give the tenant notice of the application. It also rejected the claim that the applicant’s failure to notify the board of the lease and the tenant’s ownership of the improvements constituted a material misrepresentation that required invalidation of the approvals. The tenant appealed.

The Appellate Division rejected the tenant’s argument that the applicants were required to obtain its consent to apply for the site plan and subdivision approvals. It concluded, however, that the approvals were nevertheless invalid because the applicants failed to give the tenant notice and therefore deprived it of an opportunity to be heard at the hearing. Thus, it vacated the approvals and related variances. As to the consent issue, the Court noted that even ninety-nine-year leases were not considered equivalent to fee simple ownership interests for purposes of subdivision and site plan applications.

Although the Court found that the Municipal Land Use Law (MLUL) does not expressly require notice of a subdivision or site plan application to be given to a party with the kind of interest that the tenant held as a result of its seventy-five year lease on its ownership of improvements on the property, it was entitled to such notice as a matter of administrative due process and basic fairness. It ruled that the close relationship between the tenant’s property rights and the buyer’s interests underscored the substantiality of the tenant’s interests in the application. Further, the Court held that the hearing before the board was the only opportunity the tenant had under the MLUL to oppose the application.

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