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Herten, Burstein, Sheridan, Cevasco,
Bottinelli, Litt, Toskos & Harz, LLC
REPORT FROM COUNSEL
SUMMER ISSUE,
2008
NEWS FROM HERTENBURSTEIN.COM
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Consistent with Herten Burstein's
commitment to participate in programs which are designed to
improve the knowledge and skills of the legal profession and the
public in New Jersey, on March 29, 2008, Jason T. Shafron and
Nilufer O. DeScherer were speakers at the Annual Municipal Land
Use Symposium sponsored by the Bergen County Bar Association and
the Bergen County Bar Foundation. Jason Shafron presented the
most recent land use cases in a lecture "Hot Topics in New
Jersey Land Use." Nilufer DeScherer spoke about the Municipal
Master Plan as part of the basic course in land use law, which
is required attendance by government land use officials.
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On May 15, 2008, a number of
attorneys from the firm participated in the Bergen County Bar
Association's presentation by its General Equity division. The
well-attended presentation, entitled "The Foreclosure Fight"
provided the bar with an overview of how to assist clients in
navigating the growing number of foreclosure actions that are
being filed as a result of the recent credit crisis and downturn
in the housing market. Among the presenters from the firm were
Retired Judge Gerald C. Escala, Thomas J. Herten,
Michael I. Lubin, Scott D. Jacobson and Daniel Y. Gielchinsky.
Judge Escala and Tom Herten discussed
clients in distress who sought out their attorneys' advice when they
fell behind on the mortgage payments of the investment property they
had purchased with a sub-prime mortgage and were now facing
foreclosure. Scott Jacobson gave an overview of the predatory
lending practices that have led to many situations involving
borrowers who were lulled into using financing instruments they did
not understand to purchase real estate, and how those predatory
lending practices can become the basis for a lawsuit against the
lender. Michael Lubin argued a simulated application to the Court
that would occur if a mortgagee attempted to stay an impending
Sherriff's sale. Daniel Gielchinsky concluded the lecture with an
overview of how to attempt to workout a borrower's debt with a
lender, and when to consider filing for bankruptcy.
The attorneys at Herten Burstein are
well-versed in real estate, foreclosure and bankruptcy law, and are
able to assist our clients with a variety of related issues.
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Michael I. Lubin
has been selected to organize and mentor a team of students to
conduct a mock trial for the Hon. Morris Pashman American Inns
of Court, Bergen County Chapter. The Inns of Court is a program
modeled after the British system wherein experienced trial
attorneys, designated as "masters" and "barristers", help to
train newly admitted attorneys in the skills of trial advocacy.
Our firm has played an active role in the program, since its
establishment several years ago. In addition to Mr. Lubin,
Thomas J. Herten also serves as a master and Daniel Y.
Gielchinsky serves as a barrister in the program. Tom also
serves on the executive committee of the Inn as its treasurer.
The student trial, which was conducted on May 21, 2008, presents
a wrongful death case including a survivorship claim.
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Gianfranco A. Pietrafesa
edited the business litigation edition of New Jersey
Lawyer Magazine, published by the New Jersey State Bar
Association. Franco also served as the moderator of the annual
Business Law Symposium, sponsored by the New Jersey Institute
for Continuing Legal Education and the New Jersey State Bar
Association Business Law Section, where he serves as a member of
its board of directors. Finally, Franco won re-election to the
Hawthorne Board of Education and was elected as the Board's vice
president.
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This summer, we will have six
summer associates at the firm. They are:
David Altieri, from
New York Law School; Roozbeh Ashtyani, from Brooklyn Law School;
Allyson Kasetta and Kristen Miller, from Rutgers University; Michael
Levenson, from Albany Law School, and Carly Skarbnik from Seton Hall
University.
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We are pleased to announce that
Scott D. Jacobson, Esq., Michael I. Lubin, Esq., Nilufer O.
DeScherer, Esq. and Daniel Y. Gielchinsky, Esq. have become
Members of the Firm. Scott D. Jacobson, who joined the firm in
2003 as Counsel to the Firm, continues his practice in chancery,
complex commercial and employment litigation. Michael I. Lubin,
who joined the firm in 2006 as Counsel to the Firm, continues
his practice in chancery, civil and commercial litigation and
land use matters. Nilufer O. DeScherer, who joined the firm in
2003 as an Associate, continues her practice in commercial real
estate, banking, municipal and land use matters. Daniel Y.
Gielchinsky, who joined the firm in 2005 as an Associate,
continues his practice in chancery, bankruptcy and commercial
litigation, as well as land use matters.
We are also pleased to announce that
Louis C. Tomasella, Esq. and Cynthia
Brooks, Esq. have become Counsel to the Firm. Louis C.
Tomasella continues his practice in estate planning and
administration and transactional matters. Cynthia Brooks continues
her practice in commercial real estate and banking law.
Finally, we are pleased to announce
that retired Superior Court Judge, the Honorable Gerald C. Escala,
J.S.C. has become Special Counsel to the Firm. Retired Judge Escala
has been instrumental in developing the Firm's growing services in
alternate dispute resolution such as mediation, arbitration and
complex litigation management.
Please join us all in congratulating
our attorneys for their achievements and future successes at the
Firm.
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Jason T. Shafron
was successful in obtaining a trial verdict in Superior Court,
Law Division, in favor of a developer for whom the firm had
obtained variances to build a 7-story multi-unit condominium
complex in Ridgefield, New Jersey. As reported in The Record, in
a 27 page written opinion issued on April 29, 2008, the Court
upheld the granting of the variances by the Zoning Board.
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Andrew T. Fede,
as the Borough attorney for Norwood, obtained a Superior Court,
Chancery Division judgment vesting Norwood with title to an
historic abandoned burial ground, pursuant to a little-known
statute. This judgment allows Norwood and its historical society
and committee to restore and maintain the property, which, as
reported in The Record, was once part of a farm that was owned
by one of the early Dutch families that settled the area. Mr.
Fede obtained a Superior Court, Law Division decision voiding a
joint planning/zoning board resolution denying our firm's client
a variance. The court reversed the board because it failed to
consider a 1995 variance that was granted in favor of a prior
owner of the property. He was also successful in obtaining a
Superior Court, Appellate Division decision reversing a trial
judge's decision affirming another zoning board resolution
because the board and the trial judge decided in error that our
firm's client could not include two tax lots on one site plan.
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Thomas J. Herten
and Andrew T. Fede obtained an arbitration
decision voiding a mayor and council's resolution terminating
our client's tax abatement agreement. The arbitrator found that
our client did not breach the agreement, and that the
municipality failed to treat the taxpayer fairly when it
attempted to void the agreement. He reinstated the agreement and
the agreement's tax benefits, saving the taxpayer many hundreds
of thousands of dollars in taxes.
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Our Real Estate and
Banking Departments are in the process of closing or
have closed this year a number of out-of-state acquisitions and
sales for our commercial real estate clients, aggregating over
$20,000,000, some of which were part of Section 1031 tax-free
exchanges.
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The firm was pleased that Thomas
J. Herten, Steven B. Harz, Arnold D. Litt, Terry Paul Bottinelli
and Michael I. Lubin were designated
as 2008 Super Lawyers. Tom Herten, Steven Harz and Arnold Litt
were also designated New Jersey Top Attorneys for 2008.
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As co-chair of its capital
campaign, Jason T. Shafron announced that Reed
Academy has now raised over $3,000,000 for the building of their
new school in Oakland, New Jersey.
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In other non-profit activities,
Arnold D. Litt continues to serve as a Board
member of Friendship House in Hackensack.
N.J. SUPREME COURT RULING FAVORS DEVELOPERS
By Nilufer O. DeScherer
In March 2008, in Toll Brothers Inc.
and Laurel Creek, L.P. v. Board of Chosen Freeholders of the County
of Burlington, the Supreme Court of New Jersey found that
municipalities and counties cannot require a developer to pay for
the cost of off-site improvements merely because such obligations
are set forth in an executed developer's agreement. The Court stated
that a developer's agreement that includes an obligation to pay for
the cost of off-site public improvements that are beyond what would
be needed in connection with the specific project that the developer
proposes to develop are at odds with the Municipal Land Use Law. New
Jersey courts have taken the position for years that a local land
use board could not require a developer to pay for more than its
pro-rata share of off-site improvements as a condition of approval.
This recent New Jersey Supreme Court opinion makes it clear that
even where a developer, or successor in interest to the original
developer, signs an agreement to undertake certain off-site
improvement costs, if the scope of the developer's project changes
is reduced, the developer is no longer contractually obligated to
pay for the same amount.
Toll Brothers involved a dispute as to
whether a developer was still required to pay for major road
improvements that it had agreed to pay for before its project was
drastically scaled back. The developer's obligation to pay for the
road improvement on a county road had been memorialized in an
executed developer's agreement. Burlington County argued that the
developer was still bound by the terms of an executed developer's
agreement despite a downsizing of the project. The developer, Toll
Brothers Inc., objected. It argued that due to the change in the
nature and scope of the developer's project, for which the developer
was seeking an amended site plan approval, its obligation to pay or
be responsible for certain off-tract improvements needed to be
revised and recalculated.
Focusing on the text of the New Jersey
Municipal Land Use Law, N.J.S.A. 40:55-1 et seq. ("MLUL), and the
principles of fairness in imposing responsibility for off-tract
obligations, the Court ruled in favor of the developer. The Court
explained that requiring developers to pay anything more than a
pro-rata share would be contrary the Municipal Land Use Law's
"nexus" requirement, which requires a "causal nexus between the
conditions imposed [on the developer] and the needs created by the
development" to justify an exaction. The Court held that where the
nature and scope of a project had changed, the developer could not
be required to perform certain terms of the executed agreement which
were not longer related to the amended project, pointing out that a
developer's agreement is not an "independent contractual source of
obligation," but rather it "exist[s] solely as a tool for the
implementation of the resolution establishing the conditions."
While not germane to its analysis of
the facts of the dispute before it, the Court further stated that
allowing voluntary payments by developers for off-tract improvements
would amount to a "pay-to-play" system "where developers are
rewarded for their philanthropic gifts." The impact on future
relations between public entities and developers of this statement
by the Court cannot be known at this time, and will likely be
discussed by the government and developer community for some time to
come.
In the meantime, what is clear by the
Toll Brothers decision is that: (1) the terms of a developer's
agreement that require anything more than a pro-rata share of
off-site improvements are unenforceable; and (2) a change in the
nature and scope of a project coupled with an amended land use
approval to reflect this change requires modification of the terms
of an already executed developer's agreement, entitling the
developer to recalculation of its pro-rata share.
In essence, when analyzing the
enforceability of a developer's agreement, a basic principle of
contract law which presumes that two parties have knowingly and
freely negotiated the terms of a contract, and are therefore bound
by its terms, is trumped when such terms are inconsistent with the
MLUL and the body of case law interpreting the MLUL. This is a
central message of the Supreme Court in Toll Brothers.
For more information on this
case or other land use issues, contact Nilufer DeScherer.
COAH ADOPTS NEW THIRD ROUND REGULATIONS
By Nilufer O. DeScherer
Following a 60-day comment period
which included five public hearings held throughout the State, the
New Jersey Council on Affordable Housing ("COAH") voted to adopt a
revised set of third round rules, with minor clarifications, on May
6, 2008. These adopted rules are scheduled to be published in the
New Jersey Register on the date they become effective, June 2, 2008.
The adopted rules can also be reviewed on COAH's website at
www.state.nj.us/dca/coah/june08 rules.shtml#adoption.
On May 6, 2008, COAH also proposed
amendments to the newly adopted third round rules. A summary of
these proposed amendments can be reviewed on the COAH website as
well. Notable proposed changes include (1) updated household and
employment growth projections based on new DEP rules, municipal
zoning data and actual growth through 2006 for each municipality;
(2) revised vacant land analysis, which incorporates recently
released DEP and Highlands special data; (3) addition of a
one-for-one bonus for each affordable housing unit approved for
municipalities that approved affordable housing projects between
December 20, 2004 and June 2, 2008; (4) allowance for municipalities
to subtract demolitions of non-residential buildings from the
calculation of new growth in the municipality; and (5) reduction of
the number of jobs generated by warehouse construction from 1.5 to 1
job per 1,000 square feet.
The deadline for submitting to COAH
written public comments on these proposed amendments is August 15,
2008. If you would like more information on the impact of the
proposed amendments on municipalities and the development community
in New Jersey, please contact Nilufer O. DeScherer.
LAWYER'S APPROVAL FOR ACCEPTANCE OF OFFER
When the owners of a party store
received an offer to purchase not the entire property, but only
their liquor license and fixtures, they accepted the offer, but on
the condition that their attorney approve the deal. Before the
attorney's review of the first offer, the owners received a better
offer from another potential buyer, this time for the entire
property, including the license, the fixtures, the real property,
and the business itself.
The second offer was for about five
times as much money as the first offer. The owners also accepted
this offer, but again conditioned acceptance on approval by their
attorney. The owners' attorney then reviewed both offers at the same
time and, not surprisingly, approved the second, more favorable one.
The disappointed party that had made
the first offer sued the owners to enforce what it regarded as a
completed contract for the sale of the license and fixtures. It
contended that the sellers had waived the requirement of attorney
approval by their bad faith in simultaneously submitting to the
attorney two competing purchase agreements, both of which
conditioned acceptance on approval by the attorney. The disappointed
party further argued that, by procuring the second offer and
prospective agreement, the sellers had wrongly hindered the
fulfillment of the only condition remaining to be fulfilled on the
first agreement--attorney approval.
A court disagreed that there was any
bad faith and upheld the contract formed when the second offer was
accepted and approved by the sellers' attorney. While the plaintiff
had been the first to make an offer of any kind, nothing in its
potential contract prohibited the sellers from considering other
offers. Nor were the sellers obliged to take the property off the
market pending review of the first offer by legal counsel.
Consideration and eventual full acceptance of the second offer was
not legally impermissible where the first offer had been only
conditionally accepted.
There was no limit on what aspects of
the first agreement were subject to the attorney's approval. He was
free to disapprove it, as he did, simply because there had been a
better competing offer made by a competing prospective buyer.
Moreover, the sellers had not interfered with their attorney's
actions, such as by instructing him to disapprove the first offer.
In short, the sellers had not acted in bad faith. They were guilty
of nothing more than shrewd business moves during what the court
described as a period of "dickering" that preceded the formation of
an enforceable contract.
For more information on this
case or any other commercial litigation issue, please contact Scott
D. Jacobson or Jason T. Shafron.
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