Winter 2004

Practicing Planner

Copyright by American Planning Association

New Jersey Court Requires Good Faith Negotiations Prior to Bringing Mt. Laurel Litigation

By Chanin French

New Jersey's Mt. Laurel decisions, which recognize that every municipality in the state has a constitutional obligation to provide its fair share of affordable housing, have been the subject of intense litigation since they were first decided in the late 1970s and mid-1980s. These legal challenges have come from all sides of the housing issue, but they provide much-needed guidance in the application of this deceptively simple legal doctrine.

A recent decision in one of New Jersey's lower courts, KTK Trust v. Borough of Rumson, ¹ attempts to resolve the question of whether developers, acting as plaintiffs seeking to enforce Mt. Laurel, must first show a readiness and ability to provide the much-needed housing prior to bringing suit. The court held in KTK Trust that developers must prepare affordable housing development plans and make good faith efforts to present those plans to municipalities before attempting to show that municipalities have failed to meet their housing obligations under Mt. Laurel.

On the surface, the KTK Trust decision may appear to make enforcement of the Mt. Laurel doctrine more difficult. In practice, however, it makes significant headway in closing an unintended loophole that has often forced noncompliant municipalities to pay developer plaintiffs for affordable housing that is never built. The purpose of the good faith requirement, first articulated in Mt. Laurel II but inconsistently enforced, is to ensure that developers invest in the creation of a viable housing plan before bringing suit and to save municipalities needless litigation costs in cases where they are responsive to the proposed housing plans. By forcing developers to make good faith efforts to present their building plans to the municipalities first, the KTK Trust decision increases the overall likelihood that affordable housing will be built.

The three cases comprising the Mt. Laurel doctrine ² articulate New Jersey's strong commitment both to reversing longstanding trends of exclusionary zoning and codified NIMBYism and to providing a realistic inventory of affordable housing for its low- to moderate-income residents. Granted, the Mt. Laurel cases have not solved New Jersey's affordable housing shortage and, in condoning "Regional Contribution Agreements," the courts have allowed municipalities and developers to "buy out" of their obligations by paying other municipalities like Camden and Newark to make up the difference, resulting in the stigmatization of the state's inner cities.

For all of this criticism, the overall impact of the Mt. Laurel cases has been a positive one. The Mt. Laurel decisions have resulted in the provision of significant amounts of affordable housing, the passage of the state's Fair Housing Act (FHA), which codified the fair share requirements, and the creation of the Council on Affordable Housing (COAH) which promulgates fair share regulations and evaluates affordable housing plans submitted by municipalities.

Thirty years after Mt. Laurel I, the Mt. Laurel doctrine still governs the issue of affordable housing in cases where municipalities have not established affordable housing plans as set forth and defined by the FHA. Under the act, municipalities that create and submit affordable housing plans to COAH are granted immunity from Mt. Laurel litigation once those plans are approved and are governed instead by the provisions of the FHA; thus, parties seeking to challenge a municipality's compliance under the Mt. Laurel doctrine must bring that challenge in the forum provided by COAH. Alternatively, municipalities without COAH-approved housing plans remain vulnerable to Mt. Laurel litigation. Notwithstanding this provision, more than a third of the state's 567 municipalities have not submitted an affordable housing plan to COAH. ³ Those municipalities that have not submitted such plans either believe they already comply with their fair share obligations or have simply elected to take their chances in court.

Although the true parties with interest in bringing Mt. Laurel litigation against noncompliant municipalities are lower- and middle-income persons in need of affordable housing who have an actual stake in whether a municipality meets its constitutional obligation, the courts have recognized that these persons often may lack the means to bring an enforcement suit against a noncompliant municipality. ⁴ As a way of remedying this situation and ensuring that articulated housing goals are more than mere words, the Mt. Laurel cases afford property developers standing to bring suit not in their own interests, but rather as representatives of lower-income persons whose constitutional rights have been violated by exclusionary zoning practices.

Mindful of the potential for abuse of this "builder's remedy," the state supreme court in Mt. Laurel II specifically cautioned that care must be taken to make certain that Mt. Laurel litigation is not used as a "bargaining chip" in circumstances where approval for a developer's non- Mt. Laurel projects are not forthcoming. ⁵ In other words, the courts foresaw that certain unscrupulous developers, unable to secure city approvals for various proposed projects, might use the threat of a Mt. Laurel suit as a bargaining chip in securing the elusive approvals, with no real plan to build or intention of actually building affordable housing.

The courts have understood from the Mt. Laurel decisions that certain threshold requirements must be met in order to justify a builder's remedy award. In Mt. Laurel II, the court held that where a developer establishes a municipality's noncompliance and proposes a project providing a substantial amount of lower-income housing in that municipality, a builder's remedy should be granted unless the municipality establishes that because of environmental or other substantial planning concerns the plaintiff's proposed project is clearly contrary to sound land-use planning. In Toll Brothers Inc. v. Township of West Windsor, ⁶ a case decided in 2002, the state supreme court recognized "good faith" as an additional, implied criterion in bringing a Mt. Laurel lawsuit. In Toll Brothers, the court found the developer's efforts to communicate with the municipality, and the fact that it presented the planning board with its conceptual housing plan prior to bringing suit, as evidence of good faith pre-suit negotiations.

In KTK Trust, the court, in reliance on Toll Brothers, held that a developer who seeks a builder's remedy has an obligation to engage in good faith negotiations with a municipality prior to bringing a Mt. Laurel suit against a municipality. In the lower court case, the developer plaintiff argued that any developer able to establish a municipality's noncompliance under Mt. Laurel is entitled to bring a builder's remedy lawsuit, regardless of the developer's good faith or failure to make an attempt to obtain pre-complaint relief. The court in KTK Trust disagreed and concluded that the requirement of good faith pre-suit negotiations between the parties best effectuates the goals set forth in Mt. Laurel to provide for affordable housing in an expedient and cost effective manner.

The lower court in KTK Trust reasoned that such good-faith negotiations would result in one of two actions by the municipality. First, the developer would present a plan for affordable housing that a municipality would find workable and both parties — the developer and the municipality — would negotiate to ensure that the plan would be implemented. That result would save taxpayers the cost of unnecessary litigation, and developers would benefit by avoiding the delays associated with a lawsuit. Second, the developer might meet with delay and resistance on the part of the municipality. In that case, the developer would be within his or her right to file a builder's remedy lawsuit to enforce the municipality's obligations under Mt. Laurel. In either scenario, the court determined that there can be no harm to the builder in requiring good faith, pre-suit negotiations and the overwhelming benefits of such negotiations would serve to minimize what has become a "race to litigate" these suits before municipalities submit their housing plans for COAH approval, a move that would immunize municipalities from Mt. Laurel litigation and preclude developers from seeking a builder's remedy from the courts.

With all of the litigation, it is essential that New Jersey's courts recognize that the primary intent and purpose of the Mt. Laurel decisions was not to penalize noncompliant municipalities. Rather, it was to ensure that decent, affordable housing is made available for New Jersey's lower-income residents. Developers who successfully establish a municipality's failure to provide its fair share of affordable housing should commit to working with the municipality toward remedying the situation. Otherwise, municipalities will suffer the costs and only the developers, and not New Jersey's residents, will reap the benefits.

Chanin French is an associate at the law firm of Gibbons, Del Deo, Dolan, Griffinger & Vecchione P.C. with offices in Newark and New York City. In addition to Mt. Laurel litigation, her practice focuses on land-use and environmental issues such as natural resource damages, eminent domain, and zoning due diligence. She is a 2003 recipient of the APA New York Metro Chapter's Robert Weinberg Award. She received a B.A. from Swarthmore College, a master's degree in urban planning from Hunter College, CUNY, and a J.D. from Brooklyn Law School. cfrench@gibbonslaw.com.

Notes

1 K.T.K. Trust et al., v. Borough of Rumson, et al. , Docket No. MON-L-000885-03, July 16, 2004.

2. Southern Burlington County NAACP v. Mount Laurel Township. , 67 N.J. 151 (1975) [Mt. Laurel I]; Southern Burlington County NAACP v. Mount Laurel Township. (Mt. Laurel II) , 92 N.J. 158 (1983) [Mt. Laurel II]; Hills Development Co. v. Township of Bernards , 103 N.J. 1 (1986) [Mt. Laurel III].

3. See COAH's Municipal Status Report at www.state.nj.us/dca/coah/ for a complete listing of municipalities under COAH's jurisdiction.

4. Morris County Fair Housing Council v. Boonton Township., 209 N.J. Super. 393, 441 (Law Div. 1985)

5. Mt. Laurel II , 92 N.J. at 280.

6. Toll Brothers, Inc. v. Township of West Windsor, 173 N.J. 502 (2002).