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Ramapo River Reserve Homeowners Association v. Borough of Oakland

186 N.J. 439, 896 A.2d 459 (2006)

COMMUNITY ASSOCIATIONS; DEVELOPERS AGREEMENTS; MUNICIPAL SERVICES — A municipality may delegate, to a developer, its obligations to either provide municipal services to a qualified private community or pay for such services, but only until the developer no longer controls the homeowners’ association.

A developer entered into an agreement with a municipality for the construction of a planned residential development. The planned residential development qualified as a “qualified private community” under the Municipal Services Act (MSA). According to the agreement, the developer was obligated to remove snow and debris from the development’s roads until the municipality accepted the roads by formal resolution. The developer recorded a declaration, thereby creating a homeowners’ association. One of the services to be provided by the homeowners’ association was snow and ice removal from the roadways. The homeowners’ association sued the municipality under the MSA to require the municipality to either provide snow and ice removal or to reimburse the homeowners’ association for such costs. The municipality filed a third-party complaint against the developer seeking to recover costs of the snow and ice removal.

The lower court held that the municipality violated the MSA by failing to either provide snow and ice removal or to reimburse the homeowner’s association for such costs. Neither the developer nor the municipality challenged that holding, but the municipality sought a declaration that the provision regarding street maintenance in the development agreement was enforceable. It also asked the court to declare that the developer was responsible for whatever the municipality owed the homeowners’ association and for indemnity under the development agreement for the municipality’s costs and expenses. The lower court held for the developer. Believing the developer had adjusted its sales prices or adjusted the homeowners’ association dues for the costs of snow and ice removal, the lower court feared that allowing the municipality to recover costs of snow and ice removal from the developer would result in the residents paying double for the snow and ice removal services. The Appellate Division affirmed, holding that one of the purposes of the MSA is to prevent the double payment of services by residents of qualified private communities who pay taxes and also pay for those services through homeowners’ association dues. The Appellate Division further held that municipalities can not contract away their obligation to provide snow and ice removal. The municipality appealed.

The Supreme Court reversed and remanded to the lower court for further proceedings. While agreeing with the Appellate Division that residents of qualified private communities should not pay twice for similar services offered to other residents in the municipality, the Court held that a municipality may delegate its service obligations (for a limited time) to a developer under a development agreement. Citing a gap between the time a municipality is required to provide municipal services, including snow and ice removal, and the time when property taxes catch up to pay for those costs, the Court held that, under the Municipal Land Use Law (MLUL), and within a written development agreement, a municipality can delegate its obligations to either provide municipal services or pay for their costs to a developer. However, to comport this holding with the MSA’s requirement that the municipality provide or pay for municipal services to qualified private communities, the Court limited the scope of the delegation to the specific municipal services enumerated in the MLUL. It further held that any such delegation to the developer must end once the developer no longer controls the homeowners’ association.

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