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Borough of Ridgefield v. KDC Development, LLC

BER-C-25-03 (N.J. Super. Ch. Div. 2004) (Unpublished)

ZONING; VARIANCES; HARDSHIP; MORTGAGEES—A developer that deviates from approved plans is not entitled to a hardship variance if the resulting construction work does not meet the local zoning requirements; a foreclosing mortgagee is not in the position of a property owner and does not have an obligation to the municipality to keep the mortgaged premises in necessary repair.

A developer sought planning board approval to construct four two-family houses. They were to have a two-tier cinder block retaining wall. They were to be six feet apart, and would measure eight feet high and be covered with stucco. The local planning board approved the application with a resolution providing for two eight-foot cinder block retaining walls with a stucco exterior and with pine trees separating the walls. The developer then signed an agreement with the municipality agreeing to comply with all of the requirements, terms, and conditions of the board’s resolution.

Despite the resolution and the agreement, the developer, without prior approval from the board, constructed a three-tier gabion retaining wall that was twenty-seven feet high. The municipality contended that its engineer repeatedly advised the developer that board approval was needed for the retaining wall. Further, the municipality alleged that the wall was both structurally unsound and an imminent hazard. Moreover, the board alleged that the structural failure had a negative impact on the dwellings. The municipal building department would not issue Certificates of Occupancy because of the developer’s deviation from the approved site plan application. In addition, the municipality contended that the developer did not install the approved water drainage system and this resulted in flooding of the neighboring properties. After completing construction, the developer applied for amended site plan. After a hearing, the board denied the application. The developer then filed suit, seeking a declaration that the denial was arbitrary and capricious. In response, the board opposed the suit and sought an order permitting it to make the repairs necessary to correct the deviation form the original approval and to have a foreclosing mortgagee pay for them.

The board contended that the developer was not entitled to a variance or site plan amendment because the need for such an action was self-created by the developer. In response, the developer asserted that since the board’s representatives knew that the developer was deviating from the plans approved by the board, the need for the variance was not self-created. Even though a board may grant a variance to relieve a developer from exceptional and undue hardship, or from peculiar and exceptional practical difficulties, the board, in this case, contended that there were no peculiar and exceptional practical difficulties prior to constructing the retaining wall. Further, there would have been none had the developer constructed in conformity with the approved plans. For those reasons, the board argued that the developer’s hardship, if any, came from the developer unilaterally modifying the site plan and making the modifications without the board’s approval. The Court agreed with the board.

As to making the repairs at the foreclosing mortgagee’s expense, the board argued that a mortgagee in possession assumes the position of owner and must keep the premises in necessary repair. It further contended that the status of the foreclosing mortgagee was identical to that of a mortgagee in possession. It asked the Court to analyze the foreclosing mortgagee’s conduct in comparison to the conduct of a commercial landlord under similar circumstances. Since neither the developer nor the mortgagee ever intended to occupy the premises, the municipality contended that actual possession was not necessary to render the mortgagee as a mortgagee in possession during the course of the litigation. Furthermore, the municipality claimed that the mortgagee’s conduct by intervening and then deposing witnesses, was tantamount to that of a commercial owner seeking to have certificates of occupancy issued so that the properties may be sold, and therefore the foreclosing mortgagee should have considered the owner. In contrast, the mortgagee asserted that its status did not provide a basis upon which to make it responsible for the developer’s obligations to the municipality.

According to the Court, after default, a mortgagee has the right of possession, subject to the mortgagor’s equity of redemption. But, the mortgagee is not the owner of the property unless it buys the property at a foreclosure sale. Therefore, the Court found that the mortgagee was not in possession of the property because the foreclosure suit had not taken place. It noted that the municipality never provided any authority for its proposition that a mortgagee could be held liable for its borrower’s construction defects. Thus, the Court denied the board’s claim as to the mortgagee.


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