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In Re Island Bay, LLC

A-3163-05T3 (N.J. Super. App. Div. 2006) (Unpublished)

CAFRA — Where a property owner receives approvals from a government agency, such as a CAFRA exemption, and where the property owner substantially relies on such approvals, the property owner may acquire vested rights that the agency cannot take away.

In 1976 the New Jersey Department of Environmental Protection (DEP) exempted a subdivision development project from the Coastal Area Facility Review Act (CAFRA). In 1988, a county Municipal Utilities Authority (MUA) notified the DEP that it planned to include the subdivision in its sewer service area. The DEP approved inclusion of the subdivision into the MUA sewer area, and issued a CAFRA permit authorizing construction of a sewer line, provided the hook-ups to the sewer line remained outside a fifty-foot wetlands buffer. In 1988, 1993, and 1998, the DEP extended its 1976 CAFRA exemption, provided the developer build only seven, not eleven houses and provided the developer execute a conservation easement in favor of the DEP for all wetlands on the lots. The developer complied with both conditions. In 2002, the municipality expressed concerns over whether the remaining undeveloped lots in the subdivision would be exempt from CAFRA and whether those homes, if built, could be tied to the existing sewer line. On July 9, 2003, the DEP wrote to the developer confirming the existence of the CAFRA exemption, extending it another 5 years, and permitting the remaining seven houses to be built to be tied to the existing sewer system. By way of a letter to the developer dated February 2, 2006, the DEP summarily rescinded its June 9, 2003 approval authorizing the houses to be tied to the sewer system. In response, the developer filed this action in the Appellate Division challenging a final action of a State agency. The DEP moved to dismiss, claiming its February 2, 2006 letter was not a final agency action.

Noting that the DEP’s February 2, 2006 letter stated that it superceded all prior letters and decisions concerning the subdivision, the Appellate Division found the letter to be a final action of a state agency. Where a property owner receives approvals from a government agency, and where the property owner substantially relies on such approvals, the property owner may acquire vested rights that the agency can not take away. Any reconsideration of an approval is fact sensitive and must occur within a reasonable time, as determined by the attendant facts and circumstances. Factors that may be considered during any reconsideration of an earlier approval may include the particular reason for the reexamination; the presence of fraud or illegality in the original approval; or any reliance or justified change in position by the parties affected by the original action. The Court noted a very significant delay of two and a half years between the date of approval and the date of recision, the fact that the developer acquiesced to each and every DEP condition of approval, and the developer’s reliance on the approval during the intervening years. Based on these facts, the Appellate Court ruled the DEP’s recision of its approval to be arbitrary and capricious. It denied the DEP’s motion to dismiss, reversed the DEP’s February 2, 2006 summary recision, and reinstated the July 9, 2003 approvals.


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