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Robert J. Pacilli Homes, LLC v. Township of Harrison

A-2975-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

DEVELOPERS — When the New Jersey Supreme Court invalidated ordinances that allow developers to pay a fee in lieu of setting aside land for recreational uses, its effect was retroactive such that developers who had deposited such money with municipalities became entitled to refunds.

Decades ago, a municipality established a set of recreational and open space requirements requiring all developers of multi-unit single family homes to set aside a percentage of the total area of their subdivisions for recreational uses. Later, the municipality amended the ordinance to allow those developers to pay a fee in lieu of setting aside the land. The municipality’s planning board was vested with the authority to set appropriate fee, but the ordinance further established a minimum fee per residential unit. If a developer elected to pay a fee, it had to be paid prior to the issuance of a building permit for any unit. The fee was to be deposited into a trust fund to offset the cost of parks and recreation facilities and to acquire real estate to develop additional parks and recreation facilities.

A developer paid fees in lieu of constructing on-site public recreational facilities. It did not object to paying the fee, and did not pay the fee under protest or challenge the ordinance until after the Appellate Division issued a decision holding that the Municipal Land Use Law (MLUL), did not permit a municipality to adopt an ordinance requiring a residential builder to make payments to fund public recreational facilities in lieu of constructing such facilities or setting aside land for that purpose. The municipality suspended collection of the fees shortly after the New Jersey Supreme Court ruled likewise on the issue.

The developer sued, and during the trial both parties agreed that the Supreme Court opinion governed, and that the ordinance was invalid. Therefore, the only issue was whether the Supreme Court’s ruling should be applied prospectively or retroactively. The lower court held that the rule announced was a new rule of law and should be applied prospectively only. Therefore, it denied the developer’s request for a refund of the fees it paid to the municipality pursuant to the challenged ordinance. The developer appealed the determination that the rule should be applied prospectively, arguing that the rule was not a new rule of law but simply applied an established rule to a specific type of fee.

In the appeal, the Appellate Division noted that retroactivity is determined by looking to the purpose of the rule and whether retroactive application would further the rule; the degree of reliance placed on the prior rule or practice; and the effect retroactive application would have on the public. Here, the Court found that the rule announced was not a new one; it was not novel, but rather an application of existing precedent to a specific fee. Thus, the Supreme Court’s decision could not be considered a sudden and unanticipated change in long-standing practice. However, the Court found that the lower court properly dismissed the developer’s claim anyway because the developer had failed to protest the fee in a timely manner.

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