Divan Builders v. Planning Bd. Tp. of Wayne
66 N.J. 582, 334 A.2d 30, 1975 N.J. LEXIS 240 (1975)
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Rule of Law:
A municipality is authorized by the Municipal Planning Act to require a developer to pay a proportionate share of the cost of necessary off-site improvements as a condition of subdivision approval, provided the developer's share bears a rational nexus to the needs created by and benefits conferred upon the subdivision.
Facts:
- Divan Builders, Inc. (Divan) applied for subdivision approval to construct 31 single-family homes in Wayne Township.
- Divan's plan involved draining a pond and constructing a conduit, which would increase water runoff into an existing downstream drainage facility.
- After Divan received preliminary approval, Wayne Township passed an ordinance allowing it to require developers to pay for off-site improvements made necessary by their subdivisions, with costs allocated based on benefits conferred.
- The Wayne Planning Board granted Divan final approval on the condition that Divan contribute $20,000 toward improving the downstream drainage conditions.
- The total estimated cost of the off-site drainage project was $250,000, and it was designed to serve the entire drainage basin, benefiting other properties in addition to Divan's.
- Divan paid the $20,000.
- Subsequently, Wayne Township passed a bond ordinance authorizing the construction of the drainage project as a 'general improvement,' to be funded primarily by municipal bonds rather than special assessments on benefited properties.
Procedural Posture:
- Divan Builders, Inc. sued the Wayne Planning Board in the New Jersey Superior Court, Law Division (trial court) to recover the $20,000 payment.
- The trial court granted summary judgment in favor of Divan Builders, Inc.
- The Wayne Planning Board (as appellant) appealed to the New Jersey Superior Court, Appellate Division (intermediate appellate court).
- The Appellate Division affirmed the trial court's judgment in favor of Divan Builders, Inc. (as appellee).
- The Wayne Planning Board (as petitioner) successfully petitioned the Supreme Court of New Jersey (highest court) for certification.
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Issue:
Does the Municipal Planning Act authorize a municipality to enact an ordinance that conditions subdivision approval on a developer's installation of, or contribution to the cost of, off-site improvements?
Opinions:
Majority - Pashman, J.
Yes. The Municipal Planning Act implicitly authorizes a municipality to condition subdivision approval on a developer's contribution to necessary off-site improvements. The New Jersey Constitution and the Planning Act itself mandate a liberal construction of municipal powers to facilitate sound and orderly growth. The express statutory power to require on-site improvements, such as drainage structures, necessarily implies the power to require off-site improvements when a subdivision's effects extend beyond its own borders. The legislative intent is to have developers bear the legitimate expenses of subdivision, which logically includes the costs of mitigating off-site impacts. Prior case law, particularly Longridge Builders, Inc. v. Princeton Planning Board, suggested that such requirements would be permissible if an ordinance contained suitable standards for fairly allocating costs. Therefore, a developer can be compelled to bear the portion of the cost that has a rational nexus to the needs created by and benefits conferred upon the subdivision, but cannot be saddled with the full cost where other properties also benefit.
Analysis:
This decision formally establishes the authority of New Jersey municipalities to impose the cost of necessary off-site improvements on developers, resolving a question previously left open by the court. It creates the 'rational nexus' test as the constitutional and statutory limit on such exactions, balancing municipal interests in managing growth with developers' rights to be free from paying for general public benefits. This framework prevents municipalities from unfairly saddling a single developer with the entire cost of an improvement that benefits a wider area. The case provides a crucial legal foundation for modern development impact fees and ensures that new growth helps pay for the infrastructure it necessitates.
