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PC Air Rights, L.L.C. v. Mayor and Council of the City of Hackensack

2006 WL 2035669 (N.J. Super. Law Div. 2006) (Unpublished)

ZONING; AIR SPACE —A court analyzes how zoning requirements affect air space rights, including the necessity for subdivision.

A developer contracted to purchase specifically-described air space rights (plus easements for support) located over the right of way of an operating railroad that traversed a municipality from east to west. The developer planned to use its air space rights by constructing therein a twenty-story high-rise apartment building containing approximately 200 dwelling units.

A railroad owned the ground over which the company sought to build its high-rise residential development. It used its land for a one-track railroad and for freight only transportation. The air space rights consisted of three tracts. The area around the property in question contained a mixture of residential uses of varying degrees of density.

The developer submitted several plans for use of the air space rights to the municipality, each denominated as site plan applications. At that time, the developer’s air rights were located in four zoning districts: Residential One-Family District (R-1); Residential One- and Two-Family and Garden Apartment District (R-2A); Medium-Density Multifamily Residential and Office District (R-3B); and the High-Density Multifamily Residential District (R-3). Essentially, the developer’s final proposal was to limit its high-rise apartment building in the air space rights zoned as R-3, but use the R-3B area for a parking structure. The plan appeared to leave the ground and all of the air space rights in the R-1 and R-2A zones largely undisturbed. Notwithstanding the site plan applications, the developer never was permitted to present an application for development to either the municipal planning board or to the board of adjustment. This allegedly was because the municipal building inspector/code official acted as an unauthorized gatekeeper and opined that there were fatal defects in the developer’s proposal that prevented the matter from being further pursued with a land use agency in the municipality.

The developer, feeling it was aggrieved by the official’s actions, filed an appeal to the board of adjustment seeking both an interpretation of the municipal zoning ordinance and a reversal of the determinations of that official.

After two public hearings and the testimony of several experts, and in the face of organized opposition to the proposed high-rise apartment building, the board of adjustment adopted the findings of its expert witness without explaining why it rejected the company’s positions and the positions of its experts. This resulted in affirming the decisions of the code official, except for his conclusion that a subdivision was necessary. The board of adjustment concluded that the developer could not transfer development rights from its property west of a particular street. This not only rendered a subdivision unnecessary, but also rendered the developer’s dimensional and density calculations erroneous.

Meanwhile, the municipality’s mayor and council adopted a revised comprehensive zoning ordinance. This followed the planning board’s adoption of a revised comprehensive master plan. More than forty-three months after the planning board adopted the master plan, the governing body finally enacted a zoning ordinance that it claimed was in complete fidelity with the master plan. As for the property in this case, certain parts were rezoned into a low moderate density zone (denominated as R-2 One & Two Family). Swept into this district were two tracts of air rights owned by the developer.

The developer challenged the zoning amendment that had partially rezoned the railroad’s property and the developer’s inchoate right to use the air space above that property into a zoning district that permitted only one and two-family residential dwellings. It also sought a reversal of the municipal board of adjustment’s actions in: (1) affirming certain zoning determinations of the municipality’s zoning official; and (2) declaring certain rights under a previous version of the municipality’s zoning regulations.

The Court first explained that a zoning ordinance is insulated from attack by a presumption of validity, which may be overcome by a showing that the ordinance is clearly arbitrary, capricious or unreasonable, or plainly contrary to fundamental principles of zoning or the zoning statute. Thus, the fundamental question in all zoning cases is whether the requirements of the ordinance are reasonable under the circumstances. The Court also defined “spot zoning” and “reverse spot zoning.” Spot zoning is the use of the zoning power to benefit particular private interests rather than the collective interests of the community. Reverse spot zoning is defined as a land-use decision which arbitrarily singles out a particular parcel for different, less favorable treatment than the neighboring ones. The Court explained that when an ordinance amendment changes use restrictions applicable to an area, and there had been a predominant utilization of the immediate area for the formerly permitted (and now prohibited) use, the amendment may well be invalid as arbitrary and unreasonable as applied to parcels which had not previously been so used.

Here, the Court found that the record demonstrated that no real consideration was given to how the property in question would fit into an integrated and comprehensive zone plan, but rather that the enactment was designed to affect only the use of the developer’s two neighboring properties. Thus, this constituted reverse spot zoning. The Court reasoned that although the change in zoning classification that affected the developer was part of a comprehensive reordering of the municipality’s zoning scheme, which reverberated throughout the municipality, the elimination of the high density R-3 zoning for the subject was irrational. It also found that the predominant use pattern in the immediate vicinity of the property, and for many blocks both north and south of the property, was for high density, high-rise residential use. Further, the Court found that the new low moderate density R-2 designation for the railroad right of way was not supported by any planning logic. It concluded that the developer was entitled to a judgment in its favor invalidating the designation of the right of way as R-2, and restoring the previous R-3 zone boundaries to where they previously existed.

In evaluating the developer’s substantive due process and equal protection challenges under the New Jersey and Federal Constitutions, the Court refused to find a constitutional infirmity because it was unnecessary to its decision-making. It noted its obligation to avoid constitutional issues where a case can be decided on other grounds. It then stated that it was not necessary for the disposition of the appeal that it decide the constitutional issue. Therefore the Court declined to do so.

Next, the Court addressed the developer’s claim of procedural deficiencies. It held that the municipal land use law required a zoning ordinance to be “substantially consistent” with itsland use plan element and its housing plan element. The Court explained that the concept of “substantially consistent” permitted some inconsistency, provided it did not substantially or materially undermine or distort the basic provisions and objectives of the master plan. Applying that standard, the Court found that the zoning ordinance was substantially consistent with the master plan. Along those lines, the Court also stated that the ordinance was not invalid because of a failure to provide any specific and individualized notice under the statute. Although there was a substantial lag between the adoption of the master plan and the adoption of the zoning ordinance, the Court concluded that the reason for the delay was to ensure that a full review be conducted and that the zoning regulations of the municipality be modernized. Lastly, the Court explained that while publication, in full, of a zoning ordinance or amendment thereto was no longer mandatory, the statute did require publication of a brief summary of the main objectives or provisions of the ordinance. In this case, the Court found that the notices published with respect to the zoning ordinance failed to comply with this clear statutory mandate and that the notices published did not constitute a brief summary of the main objectives or provisions of proposed amendment. Moreover, the Court found that it was not sufficient to alert a reasonably intelligent reader as to the nature and import of the substantial changes in the zone plan proposed by the municipality. Consequently, the Court held that the zoning ordinance was passed in violation of the publication provisions set forth in the statute, and therefore, it was void and invalid.

The developer sought remedies from the municipality for violations of the New Jersey Civil Rights Act. This statute enables any person who has been deprived of any substantive rights, privileges or immunities secured by the constitution or laws of this state to bring a civil action for damages and for injunctive or other appropriate relief. Specifically, the developer claimed that its substantive due process rights were violated by the municipality’s intentional interference with its right to develop its air space rights. The Court held that, generally, unless fundamental rights were involved, a state statute does not violate substantive due process if the statute reasonably relates to a legitimate legislative purpose and is not arbitrary or discriminatory. Rather, it is for the most egregious governmental abuses. Here, the Court reasoned that the novelty of the developery’s air space rights, the surprise to governmental officials that a high rise dwelling might be built over an operating railroad, and the timing of the need for a comprehensive review of the municipality’s zoning regulations fully explained the motivation of the governing body. Additionally, the Court found that none of the discernible purposes of its actions could be said to be conscience-shocking or egregious.

Next, the Court addressed the developer’s claim of inverse condemnation. It explained that property owners must be paid just compensation for governmental takings. If a regulation does not deny all economically beneficial use, then the determination whether the regulation otherwise constitutes a compensable taking is governed by the standards for evaluating regulatory takings claims, the most important of which are the economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations [and] the character of the governmental action. The Court noted that the developer had not argued that the rezoning had the effect of physically invading its inchoate property rights. The developer also recognized that the rezoning would not deprive it of all economically beneficial use of the property, but contended that for all practical purposes, the property’s value was destroyed. The Court took note that no evidence had been presented concerning the developer’s distinct investment-backed expectations and no evidence was presented to compare the presumed loss in value to the property that was caused by the zoning ordinance. Accordingly, the Court dismissed the inverse condemnation claim.

Lastly, the developer challenged three of the board of adjustment’s findings that had sustained the code official’s nine determinations. The three contentions in dispute were whether the developer’s proposed development created a subdivision, whether the front of the proposed building was on a particular street, and whether the site could not include two lots separated by a public street. As to the first contention, the Court noted that none of the parties considered whether the conveyance of air space rights and their separation from the ground required a subdivision. The Court held that, in light of the legislative treatment of air space rights as an interest in land, subdivision approval might be necessary in order to properly create air space rights and memorialize them in a recordable deed. However, the question of whether a subdivision was necessary was neither briefed nor argued by the parties. Consequently, the Court declined to render an advisory opinion declaring the need for such a subdivision.

Linked to the subdivision question was the question whether the company’s air space rights in the first tract, separated from the second tract and the third tract by a public street, could be combined with second tract and the third tract for calculating the bulk and dimensional variances for the entire development. In that regard, the Court reasoned that the assemblage of air space rights across a public street could not be built upon as a unit. Thus, it concluded that the first tract could not be included in the variance calculations for the development of the second tract and the third tract.

As to the frontage issue, the board of adjustment relied upon the primary ordinance’s definition of “primary street” is to compel a particular lot boundary as the front lot line of the proposed development. In the end, however, the Court concluded that the municipality’s governing body, unlike many other governing bodies, permitted developers to designate its own front yard on corner lots, rather than dictating a particular configuration. Accordingly, the Court permitted the applicant to designate which street was to be utilized as the front.

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