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Leisuretowne Association, Inc. v. Township of Southampton

A-0188-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

SERVITUDES — A servitude may be modified or terminated when, due to changed circumstances, it is impossible as a practical matter to accomplish the purpose for which the servitude was created.

The owner of certain common areas and facilities within a planned residential community sued both the successor to the original builder and the municipality where the property was situated. It sought to: (a) implement performance bonds held by the municipality for recreation areas that it owned within the residential community; and (b) enforce the restrictions and covenants contained in a declaration and rider recorded by the original builder. A new builder took title to the original builder’s property subject to these restrictions and covenants. One of the declaration’s restrictions provided that a portion of property within the residential community was to be developed for residential use. The rider stated that “common property,” comprising the property subject to the declaration and rider, if not developed for residential use, would, within ten years, be conveyed to the owner of the common areas. Due to environmental issues that were discovered, the new builder did not develop its property as anticipated. Instead, it proposed to transfer the “common property,” for one dollar, to the municipality. This deprived the owner of common areas of the benefit of the declaration. It did not get ownership of the “common property.” The municipality adopted ordinances to accept the “common property” and to designate it to remain as open space in its natural state for aesthetic benefit to the community.”

The owner of the common areas sued. The lower court found no legal or equitable basis entitling that owner to a court order directing the municipality’s governing body to call the performance bonds. It based its decision on the fact that the owner of the presently existing common areas within the residential facility was not a party to the contract calling for a performance bond. It also held that the builder was not precluded from transferring the restricted property to the municipality because it interpreted the declaration and rider as making the transfer of the “common property” contingent upon the tract being developed for a non-residential use, which it was not. The owner appealed.

The Appellate Division affirmed, agreeing with the lower court that the owner of the common areas within the residential facility could not compel the municipality to implement the bond since it was not a party to the underlying agreement that required the bond. The Court also refused to require the builder to transfer the “common property,” that had been contemplated to be part of the parcel covered by the declaration and rider, to the owner of the common areas of the residential community. It noted that, due to environmental concerns, the subject parcel could not be developed into residential units. The Court then attempted to ascertain the intent of the parties in construing the restrictive covenant. Under the terms of the rider, the owner of the common areas was only entitled to receive title to the “common property.” Because the property was never developed, there was no common property to transfer. Moreover, the declaration and rider provided no authority for the transfer of all of the subject property to the owner of the common areas; those documents only contemplated the transfer of “common property.” It also rejected the argument that if the owner of the common areas within the residential facility did not receive title to the whole tract, it should at least receive title to the areas designated as “common property” in the declaration. The Court believed that such a result made “no sense since there was no common property designated within this parcel.” Finally, it noted that the builder did not violate the restrictive covenants merely by transferring title to another entity because the transfer would be subject to the terms and conditions of the declaration and rider.

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