The New Jersey Appellate Division ruled this month in two companion cases, New Jersey Shore Builders Association v. Township of Jackson, A-5805-06 (June 23, 2008) and Builders’ League of South Jersey v. Egg Harbor Township, A-1563-07 (June 23, 2008), that municipalities cannot require as a condition of approval that builders and developers provide on-site recreation areas or facilities, or common open space, outside the context of planned unit developments. The Court also held that municipalities cannot require payment of monies to built such facilities off-site in lieu of providing them on-site. The Court found that ordinances requiring such conditions of development approvals were not authorized under the Municipal Land Use Law (MLUL). Through this ruling, the Court has ended a longstanding practice of municipalities to exact these types of conditions from developers, and, for developers who have in the past been made to remit payments in lieu of providing on-site recreation areas, facilities, or common open space, the decision may open a floodgate of demands for reimbursement of those payments.

Ordinances in two municipalities, Egg Harbor Township, Atlantic County and Jackson Township, Ocean County, were the subject of the attack. Both ordinances compelled developers seeking approvals to set aside a certain amount of acreage on-site for use as public open space and/or recreational facilities such as tot lots, tennis and basketball courts, and baseball, soccer and football playing fields. Both townships’ ordinances also provided for payments in lieu of providing those facilities on-site for use in constructing such facilities off-site.

The Appellate Division found that both ordinances were not permitted under the MLUL did not permit the recreational open space exactions required by the ordinances. The Court rejected the Townships’ arguments that the MLUL should be read expansively to implicitly authorize the imposition of open space and recreation exactions. The Court held instead that the MLUL contains explicit language specifically limiting municipalities’ powers in that regard. The Appellate Court held that while providing public open space and recreation facilities is an important goal of New Jersey land use law under the MLUL, it is a goal that can only be accomplished within the strict and specific limits of the MLUL. Municipalities cannot require developers to provide common open space and recreation facilities on-site as a condition of development approval, or require payments in lieu thereof, outside the context of planned unit developments.