Eminent Domain Reform Advances In The Garden State

by: Peter J. Gallagher

New Jersey is one step closer to updating its eminent domain laws for the first time since the U.S. Supreme Court handed downs its landmark Kelo v. City of New London decision in 2005. On March 4, 2013, the Senate Community and Urban Affairs Committee voted unanimously to approve a bill (S-2447) that would, according to a press release from Senate Democrats, “create a two-track system for redevelopment, establishing separate requirements for redevelopment projects that would involve condemnation and for those that would not.” The two tracks would protect homeowners whose properties might otherwise be subject to condemnation, while also creating a more streamlined process for municipalities undertaking redevelopment projects that do not involve condemnation.

According to the press release:

The legislation would require municipalities to advise property owners within a proposed redevelopment area of the municipality’s intent to use or not use eminent domain to facilitate a redevelopment plan at the outset of the redevelopment study as well as to provide specific notice of such designation. Unless a municipality notifies owners of property located in a proposed redevelopment area that the designation will allow the municipality to take property located in the area by eminent domain – or that the proposed area is a Condemnation Redevelopment Area – the “Local Redevelopment Housing Law” would not authorize the use of eminent domain.

The bill would also authorize municipalities that intend to implement redevelopment initiatives without using eminent domain to do so but to still take advantage of the other tools available under the LRHL that encourage and facilitate economic development activities, create job opportunities, increase commerce, and enhance ratable values within their communities during these difficult economic times. This process would require designating the proposed area as a Non-Condemnation Redevelopment Area.

Having made it out of the Senate Community and Urban Affairs Committee, the bill now heads to the Senate Budget and Appropriations Committee. Stay tuned for more updates.

New Jersey Urban Transit Hub Tax Credits – Going, Going, Gone?

by: Katharine A. Muscalino

The Urban Transit Hub Tax Credit program was introduced in 2008 to provide financial incentive to developers, property owners, and tenants to make substantial capital investments in Urban Transit Hubs. Originally endowed with $1.5 billion, the program has evolved considerably since its inception and is nearing exhaustion.

Of the $1.5 billion dedicated to the Urban Transit Hub Tax Credit program, $250 million has been earmarked for residential projects. As of February 14, 2012, New Jersey’s Economic Development Authority (“EDA”) has already allocated $219.6 million to individual residential applicants, and just extended an additional $17.7 million to Pennrose, a developer proposing to demolish Trenton’s Miller Homes public housing project with low-rise residences. Because so few tax credits remain for residential projects, the EDA has announced it is no longer accepting applications for residential Urban Transit Hut Tax Credits. The remaining unassigned residential tax credits will be allocated to previously approved “ready-to-go” residential projects that have applied for amendments to their Urban Transit Hub Tax Credit applications to increase their credits to up to 35% of their project financing. The Pennrose project, originally approved for tax credits equaling 25% of its project financing and now approved for credits for 35% financing, is one such “ready-to-go” project whose tax credits have been increased by the EDA.

Of the $1.3 billion of tax credits that have not been set aside for residential projects, $100 million has been dedicated to Offshore Wind projects by the Offshore Wine Economic Development Act (expiring January 2013) and $200 million has been set aside for the Grow NJ program (expiring July 2014). An additional $696.5 million has been allocated to individual commercial projects, leaving just $253.5 million available for commercial projects in Urban Transit Hubs. Developers, owners, and tenants of commercial property in an Urban Transit Hub should submit their tax credit applications as soon as possible to insure they don’t miss out.

Residential projects in the Urban Transit Hubs need not abandon hope altogether yet. The EDA has directed that in September 2012, the agency will undertake an evaluation of the commercial projects in its “pipeline,” meaning those that have already submitted an application and are waiting to be approved, as well as the progress of approved projects. Depending on its conclusions following this review, the EDA may recommend that any remaining commercial allocations, as well as the $100 million earmarked for the Offshore Wind project, be reallocated to new residential projects in Urban Transit Hubs and to Grow NJ projects. The EDA will make its final determination as to the reallocation of the Offshore Wind $100 million following the program’s January 2013 sunset, and may introduce a competitive process for the award of any remaining tax credits.

Planning Board Can’t Deny Variance Based on Anticipated Inability of Applicant to Satisfy Site Plan Criteria

by: Katharine A. Muscalino

The Bay Head Planning Board initially approved a bulk variance application submitted by a property owner who had inherited an irregular lot with just ten feet of frontage, where fifty feet was required. Finding that denying a bulk variance for the frontage requirement would result in an undue hardship, and that the Applicant had adequately addressed concerns about emergency access to the Property resulting from the lot frontage variance, the Board approved the application with a 5-4 vote. Per the approval, the Applicant was required to submit a drainage plan for the Borough Engineer’s approval at the time of site plan application.

Upon an objector’s prerogative writ suit, the parties discovered that a board member had voted on the bulk variance without attending all of the meetings or reviewing all of the transcripts. The bulk variance application was remanded for a new vote, following a review of the transcripts by all of the board members. The Board then voted to deny the bulk variance, with a 4-5 vote. In its resolution, the Board explained that it denied application because the applicant had failed to provide “affirmative testimony… by any competent engineer… on how the applicant would address the well known drainage issues which plagued the proposed lot and more assuredly concerned the adjoining property owners.”

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Surprise! You Don’t Have To Pay As Much As You Thought On That Mortgage

by: Peter J. Gallagher

Last week, Bank of America agreed to a multi-billion dollar settlement with upset investors who had purchased securities comprised of subprime mortgages originated by Countrywide Financial (which Bank of America acquired in 2008) and serviced by Bank of America ("Bank Of America Settles Claims Stemming From Mortgage Crisis"). Among other things, the investors claim that that Countrywide "created securities from mortgages originated with little, if any, proof of assets or income," and that Bank of America then "failed to heed pleas for help from homeowners teetering on the brink of foreclosure." While the settlement still needs to be approved by a judge, and has already run into some opposition ("Investors Challenge Bank Of America Settlement" and "Bank Of America's Proposed Mortgage Debt Settlement Criticized"), it was generally seen as the first major concession by a bank in connection with its role in the mortgage meltdown

On the heels of this settlement comes news that Bank of America (along with JPMorgan and a few other lenders) is also taking a more proactive approach with homeowners who are not even in default. As the New York Times reports in its article, "Big Banks Easing Terms On Loans Deemed As Risks," the banks are "quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk." The article tells the story of Rula Diosmas, a Florida (of course) woman who had $150,000 shaved off of the mortgage of her Miami condominium by JPMorgan even though she did not request a modification and was not in default. The bank explained its reasoning as follows:

Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.

. . .

Option ARM loans like Ms. Giosmas’s gave borrowers the option of skipping the principal payment and some of the interest payment for an introductory period of several years. The unpaid balances would be added to the body of the loan.

. . .

“By proactively contacting pay option ARM customers and discussing other products with better options for long-term, affordable payments, we hope to prevent customers from reaching a point where they struggle to make their payments,” Mr. Frahm [a spokesman for Bank of America] said.

The banks' efforts have not come without some critism, however, including the claim that the banks are behaving in "contradictory and often maddening ways" — showing concern for those who might get in trouble while at the same time being punished by regulators for doing a poor job modifying mortgages that are already in default.

Is Your Driveway A Principal Use?

by: Greg Ricciardi

According to the New Jersey Supreme Court, in certain circumstances the answer is yes. On June 16, 2011, the Court held that a driveway is a principal use where, pursuant to local zoning, the driveway does not meet the definition of an accessory use. Moreover, depending on the circumstances, you may need difficult to obtain and costly variances to get your driveway approved. How could this happen?

The answer lies in the curious case of Nuckey v. Borough of Little Ferry Planning Bd. These are the facts. A developer owns multiple lots and wants to build a hotel. One of the lots has no highway access. To remedy this issue, the developer proposes to build a driveway on an adjacent lot that would continue across the corner of another lot owned by the same principals as the developer. This proposed driveway would provide the needed highway access for the hotel. Sounds like a simple accessory use right? Herein lies the rub.

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