In its recent opinion deciding the case of Shipyard Associates vs. the City of Hoboken, the Fund for a Better Waterfront, and the Hudson Tea Buildings Condominium Association, the New Jersey Supreme Court examined two discreet issues.  First, whether an ordinance regulating development seaward of the mean high tide was adopted by the municipality under its inherent police power or was a zoning ordinance subject to the New Jersey Municipal Land Use Law (MLUL).  Second, the Court considered whether the period of protection afforded to final approvals by the MLUL from new zoning requirements applies to zoning requirements relating to health and public safety.

On the first issue, the Court concluded, based on the particulars of the ordinance in question, that the ordinance was a zoning ordinance.  On the second issue, the Court construed the MLUL to mean that a final approval is not subject, during the protection period, to new zoning requirements even if they relate to health and public safety.

The Supreme Court’s opinion was the culmination of a long-running dispute between the developer (Shipyard) and the City of Hoboken (and others) regarding a waterfront development project.  The Planning Board granted final site plan approval for a project which included several high-rise apartment buildings and tennis courts on a platform extending into the Hudson River.  Shipyard built most of the project in accordance with the final approval but filed an application in 2011 to amend the site plan approval to replace the tennis facilities with two additional residential buildings.  The City took several actions to oppose the changes and the Planning Board, because of the City’s actions, voted to deny the application without a hearing.  The lower courts, in decisions that were not the subject of the appeal to the Supreme Court, ultimately determined that the amended site plan Shipyard sought had received final approval in July 2012.  In late 2013, the City adopted two new ordinances, effective in January 2014.  The ordinances, if applicable to the project, would effectively negate the amendment to the site plan that had received final approval less than two years earlier.

Section 59(a) of the MLUL provides the holder of a final approval with vested rights for two years against any changes in zoning requirements, even changes based on ordinances that affect health and public safety.  Specifically, it says, “[t]he zoning requirements applicable to the preliminary approval first granted and all other rights conferred upon the developer pursuant to [Section 49 of the MLUL], whether conditionally or otherwise, shall not be changed for a period of two years after the date on which the resolution of final approval is adopted ….”

One of the ordinances was designated as a zoning ordinance but the City argued that one of the ordinances, Z-263, was adopted under its police powers and was not a zoning ordinance, because it was a response to Superstorm Sandy and sought to protect health and safety from flooding.  Therefore, according to the City, it was not a “zoning requirement” against which Section 59(a) of the MLUL gives vested rights.  The Supreme Court, based on the particular attributes of the ordinance, distinguished it from other municipal laws that were judicially deemed to have been enacted under a municipality’s police power even though they touch on land use (such as ordinances regulating tree removal and restricting indoor smoking) and held that Z-263 was a zoning initiative that fundamentally changed the zoning of the property in question.

The City also argued that even if ordinance Z-263 is a zoning ordinance, Section 59(a) of the MLUL should be construed to include an implicit exception to permit changes to zoning requirements that relate to health and safety.  In support of this position, the City pointed to language elsewhere in the MLUL, notably in Sections 49 and 10.5, that except zoning changes relating to heath and safety from rights protected against zoning changes generally.  Section 49 provides a three year period of protection to preliminary approvals from zoning changes, but says, in part, “nothing herein shall be construed to prevent the municipality from modifying by ordinance such general terms and conditions of preliminary approval as relate to public health and safety ….”  Section 10.5 provides that a development application is subject to the zoning laws in effect at the time that it is filed (the so-called “time of application” rule) and that subsequent development regulations “except those relating to health and public safety” are not applicable to the application.

The Supreme Court held that under the plain language of the statute, there is no exception under Section 59(a) that allows a final approval to be affected during the vested period by new zoning regulations even if they do relate to health and public safety.  Moreover, the Court reasoned that the Legislature, in explicitly providing the noted health and public safety exceptions elsewhere in the MLUL, intended to provide a developer with an increasing level of protection against changes to the zoning regulations through the application process, culminating in absolute protection upon final approval.

The Supreme Court’s opinion in Shipyard is significant to the land use bar on two levels.  The analysis of whether Z-263 was zoning versus of police power ordinance is fact-based but, coming from the Supreme Court, highly instructive.  The holding that there is no implied heath and public safety exception to the vested rights applicable to final approvals under Section 59(a) of the MLUL definitively decides a question that had been open to debate.