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Toll Bros, Inc. v. Township of Readington

555 F.3d 131 (3rd Cir. 2009)

ZONING; OPTIONS; STANDINGS — An option held by a contract purchaser is a valuable property right and an alleged loss of value, traceable to a municipality’s action in rezoning, meets the constitutional standing requirement for an injury-in-fact.

A developer entered into an option contract for the purchase of a property, part of which was to be developed for office use and part of which was to be developed for single-family dwellings that were to be limited to one unit per three acres. After the developer submitted its proposal for the development of the office space, the municipality rezoned the area into an agricultural-residential zone, permitting only farms, open space, parks, and single family dwellings limited to one unit per six acres. The developer objected, but continued to make payments to the property owner in keeping with the option contract and soon after brought an action in the New Jersey Supreme Court against the municipality, the planning board, and certain municipal officials for violations of land use statutes and violations of the takings clause, equal protection, and due process under the state constitution. The developer also brought similar civil rights claims in the United State District Court along with claims regarding fair housing violations and criminal racketeering. The developer asserted that the municipality was attempting to prevent any profitable development of the property in order that the value be driven down so that the municipality could purchase the property at a reduced price. The developer also argued that the municipality’s actions constituted discrimination against families with children.

While the state action was pending, the United States District Court dismissed the developer’s claims on the grounds that, as an owner of an unexercised option, it did not have standing to bring suit and that the developer lacked standing as a third-party to bring an action on behalf of families with children. On appeal, the United States Court of Appeals held that the option held by the developer was a valuable property right and that the alleged loss of value, traceable to the municipality’s action in rezoning the area, met the constitutional standing requirement for an injury-in-fact. Additionally, it found that the harm caused to the developer was redressable even if development of the property was not entirely certain. On those grounds, the Court of Appeals vacated the United States District Court’s dismissal of the developer’s claims against the municipality and allowed it to proceed with its action.

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