SERVITUDES: RESTRICTIONS ON THE USE OF LAND

by Fredric L. Shenkman, Esq., LL.M.

This article is intended as an introduction to  the law of servitudes.  It is  a starting point for a detailed analysis of the subject; it is useful for those not familiar with servitudes and those refreshing themselves on the subject.

DEFINITION OF A SERVITUDE: A servitude is a legal device that creates a right or an obligation in land; it can also be an interest in land.  Put differently, a servitude is an interest in another’s possessory estate in land, entitling the holder of the servitude to make some use of another’s property.  Borough of Princeton v. Board of Chosen Freeholders of County of Mercer, 333 N.J. Super. 310 (App. Div. 2000), cert. granted, 165 N.J. 676 (2000), affirmed and remanded, 169 N.J. 135 (2000).  Simply, a servitude is the right to use or enjoy someone else’s land or restrict the use of land.

A servitude often “runs with the land,” meaning that the rights and obligations imposed by the servitude pass to successive owners of the lands in question.  A servitude that runs with the land is called a “benefit.” The land benefitting from the servitude is called the “dominant” estate. The land which is burdened by the servitude is called the “servient” estate.

A servitude can take a number of forms including an easement, a profit à prendre, a license, or a covenant. An easement is a non-possessory right to enter and use the land of another.  It obligates the owner of the servient estate not to interfere with the uses contemplated by the easement.            The owner of a servient estate cannot unreasonably interfere with the dominant holder’s rights or change the character of the servitude making the use of the easement more difficult or burdensome.   Tide-Water Pipe Co. v. Blair Holding. 42 N.J. 591 (1964).

Easements can be “appurtenant” or “in gross.”  Appurtenant easements are as described above: there is a dominant estate and a servient estate; the rights or obligations are tied to ownership or occupancy of the land.  An easement in gross does not have a dominant estate that benefits from the easement; the benefit or burden of the easement is not tied to ownership or occupancy of the land.  For example, a utility easement permitting gas lines on the property of another does not generally serve the benefit of a particular piece of land, thus, there is no dominant estate.   Tewksbury Tp. v. Jersey Central Power & Light Co., 159 N.J. Super 44 (App. Div. 1978), affirmed, 79 N.J. 398 (1979). The burden of an easement is always appurtenant; the benefit may be appurtenant or in gross.   See Rosen v. Keeler, 411 N.J. Super. 439 (App. Div. 2010).  Easements in gross are always non-possessory. Village of Ridgewood v. Bolger Foundation, 202 N.J. Super 474 (App. Div. 1985), cert. granted, 102 N.J. 343 (1985), reversed, 104 N.J. 337 (1985).

A profit à prendre (“profit”) is an easement that confers the right to enter and remove timber, minerals, oil, gas, game or other substances from land owned by another.  Profits have recently been in the news due to extraction of gas by “fracking.”

A license is an authority to enter another’s land without possessing any interest in the land; it is usually revocable at will. An example would be allowing a piece of equipment to cross land for use on construction on a different piece of land.

A covenant is a servitude  if the benefit or the burden runs with the land; the converse being that if a covenant doesn’t run with the land it isn’t a servitude.   An “affirmative covenant” requires a covenanter to do something.  Affirmative covenants call for the payment of money, the supply of goods or services, or the performance of some other act, either on or off the land owned or occupied by the covenanter.

A “negative covenant” requires the covenanter to refrain from doing something.  A “restrictive covenant” is a negative covenant that limits permissible uses of land.   An example of a negative covenant that is not a servitude is an owner of a shopping center entering into a lease with a pizza parlor; a negative covenant in the lease prevents the owner from leasing any other location in the shopping center to another pizza parlor. Another example of a negative covenant, one that is a servitude, is a restriction on land from ever being for a particular purpose i.e. a restriction in a deed that prevents the land  from ever being used for industrial purposes.

A more infamous example of a restrictive covenant is  one that prevents the sale of land to a person of color; colloquially, this type of covenant is referred to as a “racial covenant.” Unlike the ordinary restrictive covenant, a racial covenant does not seek to limit the use of property; it seeks to limit who can own  property. Although racial covenants have been unenforceable for decades (Shelly v. Kraemer, 334 U.S. 1 (1948)), they still appear frequently in chains of title.

CREATION OF A SERVITUDE: A servitude is created if the owner of the servient estate enters into an agreement creating a servitude or there is a conveyance intended to create a servitude.  It is important to note the implications of the Statute of Frauds (N.J.S.A. 25:1-1, et seq.) on the creation of servitudes.  N.J.S.A. 25:1-10 defines an “interest in real estate” as including a profit and an easement. An “interest in real estate” is generally not effective unless in writing, N.J.S.A. 25:1-11.

Due to an amendment to the Statute of Frauds, interests in real estate can be created without a writing if: (1) the description of the real estate is sufficient to identify it and the nature of the interest being created; and (2) the existence of the agreement and the identity of the parties can be ascertained by “clear and convincing” evidence.  The standard of proof in most civil cases is “preponderance” of the evidence.  “Clear and convincing” is a higher standard than “preponderance of the evidence” but less than the criminal standard of “beyond a reasonable doubt.”   See N.J.S.A. 25:1-13(b). However, an unwritten agreement concerning real estate is not effective against a bona fide purchaser for value or against lienholders without some type of notice. N.J.S.A. 25:1-14.

There are certain  servitudes that were never required to be in writing pursuant to the Statute of Frauds, N.J.S.A. 25:1-11(d). These include servitudes by: estoppel; implication; necessity;  and prescription.   Mandia v. Applegate, 310 N.J. Super. 435 (App. Div. 1998).

A servitude by estoppel is created if an injustice can only by avoided by preventing the owner of the servient estate from denying the existence of a servitude.  This occurs in two situations: (1) when the servient estate permitted the use of the land under circumstances where it was reasonably foreseeable that the user of the servitude would substantially change position believing that the servitude would not be revoked and that the user did change its position in reliance on that belief; and (2) where the owner of the servient estate represented that the land was burdened by a servitude when it was reasonably foreseeable that the person to whom the representation was made substantially changed position based upon reliance on the representation.

An example of servitude by estoppel involving the first situation would be: the owner of a house asks the abutting farm owner to use a small portion of the farm to accept storm water run-off from the house. There is nothing in writing.  However, the farm owner permits  a piece of the farm to be used for storm water runoff for ten years.  At the end of ten years, the farm owner abruptly builds a wall that prevents the farm  from being used for runoff. The homeowner has no other viable alternative to the farm accepting the run off.  In this situation, a court could impose a servitude by estoppel.

An example of a servitude by estoppel involving the second situation is as follows: a developer of a housing complex indicated in sales brochures that a piece of land in the development would be used in perpetuity as open space.  Set-back restrictions were imposed on homeowners to insure the continued viability of the land as open space.  The open space was never restricted in writing.  Fifteen years later the developer tries to sell the open space for commercial purposes.  This is another situation where the courts could impose a servitude by estoppel to prevent the land from being used other than for open space.

A servitude by implication is created where it may be implied from the circumstances surrounding the conveyance of an interest in land and  the beneficiary of the servitude can be implied by the facts and circumstances of the transaction.  An owner of a farm, subject to a restriction that part of the farm will continue to be operated as a farm,  sells an unrestricted portion of the farm to Jones.  It can be implied that Jones is the beneficiary of a restriction to use the unsold portion of the land as a farm.

A concept related to a servitude by implication is a quasi-easement.  An owner of property cannot have an easement over his or her own land.  Leasehold Estates, Inc. v. Fulbro Holding Co., 47 N.J. Super. 534 (App. Div. 1957), cert. granted 25 N.J. 538 (1958 ). However, when there is joint ownership of two abutting parcels with, as an example, a driveway over one parcel to access the other parcel,  same is a quasi-easement. If the owner  sells the parcel which benefits from the driveway, the quasi-easement is converted to an easement by implication or necessity.  See Mandia v. Applegate, supra.  The parcel served by the driveway being the dominant estate and the parcel  over which the driveway runs being the servient estate.

A servitude by necessity is created by a conveyance that would otherwise deprive the grantee of the land reasonable enjoyment of the land.   An owner of two abutting pieces of property conveys a portion to Jones.  The piece owned by Jones would be inaccessible but for the ability to traverse the parcel not sold, hence, Jones has a servitude other the abutting piece of property for access.

A servitude by prescription is simply a servitude created by means of adverse possession. Adverse possession is the acquisition of title to land or an easement from the legal owner due to possession.  Patton  v.  North  Jersey Dist. Water Supply Com’n , 93 N.J. 180 (1983).

TERMINATION OF SERVITUDES: Servitudes can be terminated by expiration, release, abandonment, merger, estoppel, prescription and changed circumstances, along with other events.

Servitudes can terminate by their own terms: an easement allowing passage for construction equipment ends, by its terms, in one year. A termination of a servitude by release is when the parties agree to terminate contractually. A termination by abandonment is what its name implies, a beneficiary abandons the rights created by a servitude. A termination of a servitude by merger occurs when, for example,  joint ownership of  dominant and servient properties comes into being. A termination by estoppel occurs when the person who has the benefit of the servitude communicates, in words, writing, action, inaction or silence, that he or she intends to terminate the servitude and the burdened party changes position based on same. A termination of a servitude by prescription (N.B. discussion above) occurs when the servitude is lost due to adverse possession. A termination of a servitude because of changed conditions is when there has been a change that makes the imposition of a servitude impossible. An example of this is a piece of land is restricted such that it can only be used for residential purposes; over time,  the abutting property becomes a chemical plant; this renders the use of the land for housing impossible; as such, the servitude no longer exists due to changed circumstances.

INTERPRETATION OF SERVITUDES: A servitude, like a contract, is interpreted to give effect to the intention of the parties as evidenced by the language of the instrument of creation.  If the servitude was not created by a writing, the circumstances surrounding its creation should be examined to ascertain the purpose for which it was created.

In that servitudes are often imprecise,  there are rules of interpretation  if the history surrounding the creation of the servitude is not helpful.  If a servitude by necessity does not have a term, it will be understood to last as long as necessary to satisfy the conditions that caused its creation.  A servitude that is personal lasts only as long as the life of the person benefiting from the servitude.  A conservation servitude is deemed to be perpetual.

If the location and dimensions of the servitude are not defined by a writing, they are determined as follows: (1) the owner of the servient estate has the right, within a reasonable time, to specify a location that is reasonably suited to carry out the purpose of the servitude; (2) the dimensions are those reasonably necessary for the enjoyment of the servitude; (3) the owner of the servient estate is entitled to make reasonable changes in the location or dimensions of the easement, at the servient owner’s expense, to permit normal use and development of the servient estate unless the changes will lessen the utility of the easement, increase the burdens on the owner of the dominant estate, or frustrate  the purpose for which the easement was created.

The unpublished case of Atlantic City Electric v. Evergreen Environmental, Chancery Division-General Equity, Cape May County, Docket No. CPM-C-13-11 dealt with some of these issues.  The Chancery Division was faced with a peculiar set of facts relating to the size and use of an easement. An abandoned railroad line was acquired; the railroad  ran from the Garden State Parkway eastward to the Wildwoods.  To the north and south of the property ran transmission lines serving the Wildwoods.  The prior owner of the railroad line granted an easement so that it could be used to  service, repair and replace  the northerly and southerly transmission lines.  The land between the railroad line and the transmissions lines  was environmentally sensitive.  The new owner of the railroad line wanted to convert it into a wetlands mitigation bank. The easement instrument described the easement area only by lot and block.  The owner of the rail line argued that the easement was intended to allow reasonable access to transmission lines but it was not so expansive as to prevent other uses of the rail line.  The owner of the transmission lines argued that even though a description of the easement area was by lot and block which, admittedly, is not precise enough to describe the property by metes and bounds, it was sufficient for the court to determine that the entire property, regardless of its precise location and boundaries, was encumbered by the easement.  The trial court, on cross-motions for summary judgment, agreed that the easement burdened the entire rail line due to the easement’s description by lot and block.

CONCLUSION: Servitudes, by their nature, encumber the title and use of land. Any acquisition or financing of land requires a careful analysis of the title to land so that the purposes for which the land was acquired or financed are not frustrated.

Nick Talvacchia on Atlantic City’s “Orange Loop” and a Nationwide Trend

Our Partner Nicholas Talvacchia, Esq., @LandUseLawNJ, is quoted in this Press of Atlantic City’s article about the Orange Loop’s newest addition and a nationwide trend. #LandOnTheOL.

An excerpt: “The CRDA also gave final approval to plans for Pat Fasano’s NYOrangeDeeds LLC to build a 10-room shipping container hotel with outside entertainment space and a 10,000-square-foot retail building on the beach block of New York Avenue and St. James Place.

That complex is part of the Orange Loop project to redevelop the beach blocks of what are traditionally the orange streets on the Monopoly game board, which also includes Tennessee Avenue.

Fasano has already opened the Cajun-style Bourre restaurant, which is next to the site for the entertainment, hotel and retail complex.” Read the entire article here.

Cooper Levenson Partner Nicholas Talvacchia to speak at Greater Atlantic City Chamber Leadership Series: “Getting to know the FAA and ACY”

September 12, 2018 * 8:00AM to Noon
William J. Hughes Technical Center
Take a unique behind the scenes tour of the FAA William J. Hughes Technical Center to see and hear what makes it one of the nation’s premier aviation research, development, test and evaluation facilities.

Tentative Agenda:

8 AM to 9 AM:  Registration and continental breakfast
9 AM to 9:05 AM:  Welcome from Joseph Kelly, President of the Greater Atlantic City Chamber
9:05 AM to 9:20:  Shelley Yak, Director William J. Hughes Technical Center
9:20 AM to 9:25 AM: Nick Talvacchia, Esquire, Chairman, Cooper Levenson Land Use and Zoning  Practice Group
9:25 AM to 9:35 AM:  Lauren Moore, Executive Director, Atlantic County Economic Alliance
9:35 AM to 9:45 AM: Tim Kroll, Airport Director, South Jersey Transportation Authority
9:45 AM to 9:55 AM: Colonel Bradford Everman, 177th Fighter Wing, U.S.A.F
9:55 AM to 10:05 AM: LT Tyler Bittner, United States Coast Guard
10:05 AM to 10:15 AM: Michael LaFrance, Assistant Supervisory Air Marshal in Charge, Federal Air Marshal Service (FAMS)
10:15 AM to 10:25 AM: Mike Dawson, Business Manager, Transportation Security Laboratory (TSL) Presentation
10:25 AM to 10:30 AM: Jon Schleifer, Manager (A), Outreach and Partnerships: Closing  Comments/Prep for Tour: Jon Schleifer, FAA
10:30 AM: Load Buses and Travel to WJHTC
10:35 AM: Windshield tour begins
11:05 AM:Windshield tour concludes

Nicholas Talvacchia, Esquire Offers White Paper on Opportunity Zone Incentive

Nicholas F. Talvacchia spoke to the Atlantic Cape Chapter of the New Jersey Society of CPAs (NJCPA) on July 12 about a new federal tax incentive to foster investment and redevelopment of low income areas that are designated as Opportunity Zones. A wide variety of projects will be eligible for equity incentives through the program.

“The legislation offers three tax incentives to investors,” noted Talvacchia. “Taxable income on capital gains is deferred if invested in an Opportunity Fund. If the investment is held for at least five years, basis is increased 10% and if held for at least seven years, basis is increased by another 5%, for a total increase of 15%. Any gains over the original deferred amount at the 10-year mark are permanently excluded from taxation.”

Opportunity Zones were enacted as part of the 2017 Federal Tax Cuts & Jobs Act. There are eight opportunity zones in Atlantic County, located in Atlantic City, Egg Harbor City and Pleasantville, N.J. The educational session was part of a breakfast briefing given by Cooper Levenson, Attorneys at Law with NJCPA at the Linwood Country Club. Talvacchia is now offering a complimentary white paper that explains Opportunity Zones in greater detail. For a copy, contact whitepaper@cooperlevenson.com.

Grow New Jersey Incentives Program

Grow NJ Program

Grow NJ is a job creation and retention incentive program that provides tax credits.  The tax credits are paid on a per job (new and/or retained) basis and are paid for up to 10 years per job, but the jobs must be maintained for 150% of the period the credits were paid. The project must be located in a Qualified Incentive Area, which includes: (1) an urban transit hub municipality; (2) a distressed municipality; (3) a Garden State Growth Zone (“GSGZ”); (4) a project in a priority area; (5) an Aviation District; (6) Planning Areas 1, 2 or 3 pursuant to the State Planning Act; (7) certain portions of Meadowlands, Pinelands and Highlands; (8) certain portions of Planning Areas 4A, 4B and 5; and (9) the “sports complex” under the jurisdiction of the New Jersey Sports and Exposition Authority.

Project Type Base Amount Per New or Retained FT Job, Per Year Gross Amount Cap Per New or Retained FT Job, Per Year Annual Maximum Cap to be Applied by the Business Annually
Urban Transit Hub Municipality (include only Camden, East Orange, Elizabeth, Hobken, Jersey City,
Newark, New Brunswick, Paterson and Trenton)
$5,000 $12,000 $10,000,000
Distressed Municipality $4,000 $11,000 $8,000,000
Priority Area $3,000 $10,500 $4,000,000 * Not more than 90% of business withholdings
Other Eligible Area (Includes portion of the qualified incentive area that are not located within a distressed muncipality, or priority area) $5,000 $6,000 $2,500,000 * Not more than 90% of business withholdings
Disaster Recovery Project $2,000 $2,000 Not aplicable.

Several municipalities, including Atlantic City, Camden, Trenton, Passaic, and Paterson, are designated as GSGZs  allowing for enhanced tax credit incentives for both existing (retained) full-time jobs and new full-time positions.  A GSGZ project is eligible for $5,000 in base credits for each new or retained full-time job, per year with a gross annual cap (per new or retained full time job per year) of $15,000 and an annual maximum cap (to be applied by the business annually) of $30,000,000.

Projects are also eligible for one or more of the following bonus credits:

Deep poverty pocket $1,500  per job, per year
Located in a municipality with a 2007 MRI Index greater than 465 $1,000  per job, per year
Transit oriented development $2,000 per job, per year
Located within a half-mile of any new light rail station $1,000  per job, per year
At least 251 new and retained full-time jobs are located in a GSGZ $500 per job, per year (minimum)
The business is in a targeted industry: transportation, manufacturing, defense, energy, logistics, life sciences, technology, health, and finance business $500  per job, per year
Any of jobs exceed annual average salary for GSGZ

(Atlantic City – $42,560; Camden –  $28,784)

$1,500  per job, per year
Exceeds LEED “Silver” rating or completes substantial environmental remediation $250  per job, per year
Projects generating onsite solar energy of at least 1/2 of the project’s overall energy needs $250  per job, per year

To qualify for the Grow NJ program, the applicant must:

  • Show the proposed project is located in a Qualified Incentive Area.
  • Demonstrate the award of the tax credit is a “material factor” in the company’s decision to create or retain the minimum number of full-time jobs in the State of New Jersey.
    • GSGZ Material Factor Test: The award of the tax credit is a “material factor” in the company’s decision to make a capital investment and locate in a GSGZ.
  • Show that the Material Factor Test applies (for newly created jobs).
  • Show the Material Factor Test applies and generally show that the jobs are at risk of leaving New Jersey (for retained jobs).
  • Provide information regarding out-of-State alternatives considered by the business.
  • Create or retain the minimum number of jobs shown on the table below.
  • Meet the minimum capital investment requirement shown on the table below.
  • Pass the Net Benefit Test demonstrating the capital investment and the resultant creation or retention of eligible jobs will yield a net positive benefit of at least 110% (100% in Camden) of the requested tax credit amount.

Generally, final point-of-sale retail businesses are not eligible except if the retail facility is at least 150,000 square feet, of which at least 50% is occupied by either a full service supermarket or grocery store, and the facility is located in a GSGZ or the Atlantic City Tourism District.

Only W-2 jobs (not 1099) jobs are eligible. Grow NJ program does not apply to 1099 employees.

In most cases, prevailing wage is required for all construction or renovation work and also subject to affirmative action requirements.  Green Building standards also apply.

The project must meet or exceed the minimum employment requirements for full-time jobs.  Full-time is defined as 35 or more hours weekly.  These minimum standards include:

GSGZ*
Industry New Jobs Retained Jobs New Jobs Retained Jobs
Tech start-ups and manufacturing businesses 10 25 8 19
Other targeted Industries 25 35 19 27
All other businesses/industries 35 50 27 38

* Minimum employment numbers are reduced by 1/4 for GSGZ projects and in eight South Jersey counties: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean and Salem.

The applicant is responsible for a minimum capital investment:

GSGZ*
Project Type Cost per Square Foot Cost per Square Foot*
Industrial, Warehousing, Logistics and R&D – Rehabilitation Projects $20 $13.43
Industrial, Warehousing, Logistics and R&D – New Construction Projects $60 $40
Other – Rehabilitation Projects $40 $26.67
Other – New Construction Projects $120 $80

* Minimum capital investment amounts are lowered by 1/3 for GSGZ projects and in eight South Jersey counties: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean and Salem.

Economic Redevelopment and Growth (ERG) Grant

ERG is a State incentive program providing annual grants equal to certain incremental taxes generated from a commercial project which allows developers to address financing gaps for proposed commercial projects.

Commercial projects are eligible for an incentive grant reimbursement of up to 20% of total project costs, with additional grant funding possible based on project type and/or location, such as a GSGZ.

The redevelopment project must be in a qualifying economic redevelopment and growth incentive area which includes:

  • Planning Areas 1 and 2 pursuant to the State Planning Act and centers designated under the State Development and Redevelopment Plan;
  • Certain portions of Meadowlands, Pinelands and Highlands;
  • Certain land within the Hackensack Meadowlands District;
  • GSGZs;
  • Federally-owned land approved for closure by the federal Base Realignment Closing Commission; and
  • Certain portions of Planning Areas 4A, 4B and 5 if the site is located within: (1) a designated center under the State Development and Redevelopment Plan; (2) a designated growth center; (3) an area in need of redevelopment or in need of rehabilitation; (4) a previously-existing structure and the project otherwise complies with all applicable permits and approvals; (5) certain portions of the Highlands; or (6) a tourism district.

The project can be eligible for up to 20% of total project costs and may qualify for the following additional incentives:

  • A project located in a GSGZ is eligible for 20% additional funding (i.e., a total maximum of up to 40%)
  • A project is eligible for up to an additional 10% (i.e., a total maximum of up to 30%) if the project is one or more of project types or located in one or more of the following locations:
    • A distressed municipality lacking adequate access to nutritious food, (if the project proposes a grocery store) or health care services (if the project proposes a health care and health services center)
    • Transit project
    • Located in a highlands development credit receiving area or redevelopment area
    • Disaster recovery project
    • Aviation project
    • Tourism destination project
    • Substantial rehabilitation or renovation of an existing structure(s)

Eligibility Requirements

  • Construction cannot commence at the site of a proposed redevelopment project prior to submitting an application. The project can be completed in phases.
  • A project financing gap must exist. In practice this means the project must have a below market IRR.
  • All projects must meet Green Building Requirements.
  • Construction contracts must use prevailing wage labor rates and meet affirmative action requirements.
  • There are no minimum total project cost requirements for commercial projects.
  • The developer must apply for a redevelopment incentive grant with the New Jersey Economic Development Authority (NJEDA).
  • Pursuant to a net benefit analysis, the overall public assistance provided to the project will result in net benefits to the state. The project must result in a net positive economic benefit to the State (for a State ERG) or the municipality (for a Local ERG) of at least 110% or greater than the grant award.
  • The project is not subject to minimum total project cost requirements.
  • The developer must have an equity participation of at least 20% of the total project cost.

Grant Award

  • Paid to the developer as annual redevelopment incentive grants.
  • The annual percentage amount of reimbursement cannot exceed 75% of the annual incremental state revenues (or 85% of the project’s annual incremental revenues in a GSGZ).
  • Paid to developer following completion.
  • Reimbursement is available for up to 20 years.

Eligible Costs

  • Incentive grants are based upon certain incremental state taxes generated from the project, including, but not limited to: the Corporation Business Tax Act; tax derived from net profits from business; distributive share of partnership income, or a pro rata share of S corporation income under the New Jersey Gross Income Act; tax derived from a business at the site of a redevelopment project that is required to collect the tax pursuant to the Sales and Use Tax Act; tax imposed from the purchase of materials used for remediation, construction of new structures, or the construction of new residences at the site of a redevelopment project; and the hotel and motel occupancy fee.
  • Developer can also obtain Local ERG incentive grants from certain municipal taxes generated by the project.

Tax Abatements

Municipalities may grant tax exemptions/abatements to promote the construction and rehabilitation of residential, commercial and industrial structures.  Abatements are only available if the municipality has determined the property to be an “area in need of rehabilitation” for five-year tax abatements or an “area in need of redevelopment” for long-term tax abatements

5-Year Tax Abatements

Developers may qualify for this abatement on rehabilitation or new construction improvements. In lieu of taxes on full assessed value, the developer can chose to pay:

  • 2% of the project’s annual costs for 5 years;
  • 15% of the project’s gross revenues; or
  • 20% phase-in over 5 years.

The developer must provide the following information:

  • A general description of a project for which exemption and abatement is sought;
  • A legal description of all real estate necessary for the project;
  • Plans, drawings and other documents as may be required by the governing body to demonstrate the structure and design of the project;
  • A description of the number, classes and type of employees to be employed at the project site within two years of completion of the project;
  • A statement of the reasons for seeking tax exemption and abatement on the project, and a description of the benefits to be realized by the applicant if a tax agreement is granted;
  • Estimates of the cost of completing such project;
  • A statement showing (1) the real property taxes currently being assessed at the project site; (2) estimated tax payments that would be made annually by the applicant on the project during the period of the agreement, and (3) estimated tax payments that would be made by the applicant on the project during the first full year following the termination of the tax agreement; and
  • A description of any lease agreements between the applicant and proposed tenants of the project, and a history and description of the tenants’ businesses.

Long-Term Tax Abatements

Developers may also qualify for long-term tax abatements, up to 30 years under some circumstances, and instead make payments in lieu of taxes (PILOT).

Requirements:

  • Project site must be designated as an “Area in Need of Redevelopment”
  • In order to determine a project site to be an “Area in Need of Redevelopment,” the municipality has determined that:
    • all or a portion of the project will result in the redevelopment of the municipality; and
    • the financial agreement with the developer is a necessary or important inducement to the undertaking of the project or the redevelopment of the municipality that makes this financing feasible.
  • An entity will be named as the “redeveloper” for the Project by the municipality.
  • Adoption of an ordinance to approve a PILOT.
  • The developer and the municipality negotiate a financial agreement.

Redevelopment Area Bonds (RABs)

For redevelopment projects experiencing difficulties with traditional funding sources (e.g., equity and conventional debt), RABs allow a municipality to securitize the stream of “payments in lieu of taxes” (PILOT) through a redevelopment agreement with the developer. All or a portion of the PILOT can be pledged to the repayment of the RABs. RABs can be used to help with infrastructure improvements or for the project itself.

Housing Trends Among Millennials: Back to Suburbia

Are you interested in over 80 million of the most highly educated and diverse Americans moving to your town? Then set your sights on millennials. Also known as Generation Y, millennials are those born between 1980 and 2000 and are the largest generation in U.S. history. Across the country, these young adults are reshaping the real estate landscape in search of one-of-a-kind residential communities with premier amenities, but at affordable prices.

Historically, millennials have shown greater interest in large city centers comprised of luxury apartments, food trucks, convenient transit access and trendy bar scenes. Imagine New York’s SoHo, Hoboken, New Jersey, and Washington, D.C. However, only 17% of millennials purchased homes in urban or city centers in 2015, according to an annual survey by the National Association of Realtors (NAR). “It is just too expensive to buy in a city where the mortgage for a small condo costs as much as a 3,500-square-foot home elsewhere,” explains Ernestine Patron, a 31-year-old South Jersey millennial.

So, what is trending for the first-time buyer millennial? The suburbs.

Millennials are increasingly relocating to (less expensive) suburbia to buy real estate. Last year, the median income of a millennial homebuyer was $77,400, and he or she purchased a 1,720-square foot home for approximately $187,400. According to the NAR study, “the millennial generation’s desire to own a home of their own as the primary reason for their purchase” has increased to 48% (from 39% in 2014). Marriage and children are also important factors in the trend toward suburban lifestyles for millennials, who now have a median age of 30 years old. In addition, millennial families overwhelmingly favor single-family homes. National Association of Home Builders reports that 75% of prospective millennial homebuyers prefer detached single-family homes rather than townhomes (11%) or multifamily condos/apartments (4%).

While studies have predicted these trends for years, real estate developers are slow to capitalize on the suburban-bound millennial movement. According to Lawrence Yun, Chief Economist for NAR, “even if an urban setting is where they’d like to buy their first home, the need for more space at an affordable price is for the most part pushing their search further out.” Unfortunately, most suburban communities do not afford millennials the amenities they desire. As a result, many are forced to purchase older homes in the closest suburb to their favorite trendy city; meanwhile, these millennials can own real estate at a fraction of the cost. “There is a missed opportunity to bring walking trails, daycare centers and coffee shops into new, suburban communities – neighborhoods specially designed with us in mind,” explains Ernestine. “As first-time homebuyers, we really do not have many options.”

Yolanda is a millennial attorney and member of Cooper Levenson’s Land Use Department where she works on various land use issues, including commercial development, redevelopment, real estate, affordable housing and litigation. She focuses her writing on real estate development and economic trends pertaining to millennials in an editorial series titled, “The Millennials Are Here!” Yolanda’s blogs have been studied in college writing courses throughout the country and her work has been featured in a national publication.

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Yolanda Melville Joins Cooper Levenson

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Atlantic City, N.J. March 29, 2016 – Attorney Yolanda N. Melville has joined the Land Use, Zoning and Planning Practice Group at Cooper Levenson. Based in the firm’s Atlantic City office, Melville will work on various land issues, including commercial development, redevelopment, real estate, affordable housing and litigation.

“Yolanda brings wide-ranging experience in the housing sector, from defending the rights of victims of predatory lending practices to foreclosure and Fair Housing issues,” said Kenneth J. Calemmo, chief operating officer of Cooper Levenson. “Her energy, passion and dedication will be a great asset to the Land Use team.”

Melville previously worked as an associate attorney at Bisgaier Hoff, LLC, a civil litigation law firm in Haddonfield, N.J. She also served as Democracy Counsel for the Brennan Center for Justice in New York City, and as a clerk for the Honorable Susan F. Maven in the Superior Court of New Jersey, Appellate Division.

During law school, Melville assisted critical-need clients with housing investigations, Fair Housing Act violations and predatory lending practices within the D.C. metropolitan area. She coordinated the “Take Back Your Home” Project, which provided counseling and mediation information to homeowners facing foreclosure. In 2011, Yolanda was selected as a Kellogg’s Law Fellow for the NAACP Office of the General Counsel, where she worked on housing-related and other national civil rights issues.

Melville is a board member for Family Promise of Atlantic County, a member of the National Association for the Advancement of Colored People (NAACP), and recently a judge for the Atlantic County Moot Court Competition. She resides in Galloway, N.J.

Cooper Levenson is a full service law firm since 1957, with 67 attorneys and New Jersey offices in Atlantic City and Cherry Hill. The firm has regional offices in Bear, Del., and Las Vegas, Nev. For more information, visit www.cooperlevenson.com.

Urban Land Institute Panel to Discuss Future of Atlantic City Jan. 14th – Cooper Levenson’s Talvacchia Featured as Panelist

A panel of Urban Land Institute (ULI) experts will convene to discuss the future of Atlantic City at Strategies for a World-Class Resort City, on Wednesday, January 14, 2015, from 8 a.m. to 10:30 a.m. at the Atlantic City Convention Center, One Convention Blvd., Room 302, Atlantic City, N.J.

Nicholas F. Talvacchia, partner and chairman of the Land Use Practice Group at Cooper Levenson, will be among those serving on the panel. The lead speaker will be Tom Murphy, ULI Senior Resident Fellow and former Pittsburgh, Pa. mayor. In addition to Talvacchia, the panel will include speakers The Hon. Donald A. Guardian, Mayor, City of Atlantic City; John Palmieri, Executive Director, New Jersey Casino Reinvestment Development Authority; Wasseem Boraie, Managing Member, South Inlet Partners Urban Renewal, developing the new Boraie residential complex; Victor Nappen, Chair, Greater Atlantic City Chamber of Commerce; and Michael Busler, Ph.D., Professor of Finance, The Richard Stockton College of New Jersey.

This panel of experts convened last spring to recommend a new mixed-use neighborhood in the South Inlet in the Lighthouse District and a focus on jobs in education, medical services and the new creative economy. With enhanced State incentives and tax abatement revisions, Stockton College’s acquisition of the former Showboat casino, the expansion of AtlantiCare with Geisinger Medical Center, and additional opportunities in the Marina, The Walk and Gardner’s Basin, the ingredients are in place for a revitalized Atlantic City.

Talvacchia brings to the panel an in-depth knowledge of land use and zoning, redevelopment, environmental law and development tax incentives. He has extensive experience in the approval, financing and construction of residential and commercial development projects throughout New Jersey, and has represented national companies in obtaining approvals for residential, retail, restaurant and telecommunications projects.

For more information or to register for the event, visit http://philadelphia.uli.org/event/strategies-world-class-resort-city/

Talvacchia Discusses Redevelopment in ‘Atlantic City Beyond Casinos’

Atlantic City’s redevelopment beyond casinos will be the focus of a panel at the 2015 Annual Redevelopment Law Institute at the New Jersey Bar Association Law Center, One Constitution Square, New Brunswick, N.J. on Friday Jan. 30, 2015. Cooper Levenson’s Nicholas F. Talvacchia will be a featured presenter at the panel, titled “Atlantic City Redevelopment – What Can We Expect Beyond Casinos?” The panel session is scheduled from 10:30 a.m. to 11:45 a.m.

The session is part of the day-long New Jersey Institute of Continuing Legal Education for those practitioners, developers, and members of government whose work focuses on redevelopment. The seminar affords an opportunity to delve deeply into some of the issues being addressed while advising clients undertaking redevelopment projects. The program is for attorneys with a basic understanding of the Local Redevelopment and Housing Law and redevelopment generally. An overview of the program agenda:

• Transit Oriented Development – large scale development around train stations, focusing on Journal Square Jersey City – David Kahan, Esq.; David Donnelly

• Atlantic City Redevelopment – What Can We Expect Beyond Casinos – Chris Paladino, Esq., Executive Director, New Brunswick Development Corporation, Craig Domalewski, Esq.; Nicholas Talvacchia, Esq.

• Lender Protections/Redevelopment Agreements – Laurie Meyers, Esq.

• NJ DCA Requirements for Transition Aid Municipalities Undertaking Redevelopment – Steven H. Sholk, Esq.; Thomas Neff

• Updates on Relevant Legislation – Robert Rothberg, Esq.

• Litigation developments impacting redevelopment, including cases regarding condemnation – Lawrence Shapiro, Esq.

Talvacchia is partner and chairman of the Land Use Practice Group at Cooper Levenson, has represented applicants before CRDA, and brings to the panel an in-depth knowledge of land use and zoning, redevelopment, environmental law and development tax incentives. He has extensive experience in the approval, financing and construction of residential and commercial development projects throughout New Jersey, and has represented national companies in obtaining approvals for residential, retail, restaurant and telecommunications projects.

Register through the NJICLE site or by calling 732-214-8500.

Cooper Levenson is a full service law firm since 1957, with 75 attorneys and New Jersey offices in Atlantic City and Cherry Hill. The firm has regional offices in Bear, Del., Harrisburg, Pa., and Las Vegas. For more information, visit www.cooperlevenson.com.