Mike is an attorney in Obermayer’s Business & Finance Department. He focuses his practice on banking, public finance, real estate transactions (including commercial sales and leasing), corporate matters, and private securities. Clients...Read More by Author
No Subdivision, No Problem New Jersey’s Best Kept Development Secret, Create a Condominium
As our economy’s uptick continues to favor buyers, developers often find large parcels of contiguous property spanning across acres of land for sale. Less experienced developers lacking knowledge and capital shy away from good investment and/or business opportunities because they are unsure of how to navigate complicated land use laws, regulations and ordinances promulgated by state and local governmental authorities. For those who lack experience, the subdivision process can be extremely complicated (and expensive), and includes multiple complex stages, expenses and deadlines, including lengthy applications for permits and approvals and scrutiny at public hearings.
For New Jersey developers and prospective developers there is another option to escape New Jersey’s intricate subdivision laws and requirements: the creation and establishment of a condominium. The New Jersey Condominium Act (the “NJCA”) outlines New Jersey’s regulations for the creation and establishment of a condominium. The NJCA does not require any subdivision or planning approval as a condition precedent to the recording of a master deed unless subdivision or planning approval would be required for the use or development of the lands described in the master deed if the lands were not being converted to a condominium. New Jersey’s courts have affirmed this on multiple occasions.
An example of a company’s successful reliance on the NJCA occurred in the Twp. of Upper v. Oak Ridge Corp., where the plaintiff township asserted that the defendant’s conversion of a campground to a condominium property required subdivision approval. During the trial the court focused on the campground’s use prior to the condominium conversion and determined that its use was valid under the applicable zoning ordinances. Since the campground’s use prior to the condominium conversion was a valid use, the court held that the defendant properly converted the campground to a condominium and that the conversion did not need subdivision approval prior to the master deed filing. More importantly, the court acknowledged the NJCA is a “look-alike rule” requiring the “condominium property to be treated as the thing it most resembles, without discrimination” due to its conversion to a condominium.
Additionally, in Maplewood Village Tenants Asso. V. Maplewood Village, the plaintiff contended that the defendant owner of an apartment complex was required to seek subdivision approval of Maplewood Township to convert existing apartments into condominiums. As in the Oak Ridge Corp. case above, the court focused on the property’s use prior to the condominium conversion. In this case, the apartments conformed to the township’s zoning ordinances prior to the condominium conversion, and the completion of the conversion represented nothing more than a change in the form of ownership of the units. The use of the land was unchanged, and the court denied the plaintiff’s assertion that the defendant needed subdivision approval prior to the conversion of the apartments to condominiums. The court’s opinion orated that subdivision approval cannot be used to discriminate against a condominium form of ownership and that the proper concern and focus of zoning regulations should be the use rather than the form of ownership.
As a result, developers should not be discouraged over the prospect of completing a timely, complicated and expensive subdivision when they have an opportunity to purchase a large parcel of contiguous land. Instead, developers should consider converting the property, in its current use, to a condominium based on the NJCA and current case law in New Jersey. Converting the property in its current state would not require subdivision approval prior to the filing of the master deed because the use of the parcels would remain unchanged and zoning is permitted as of right if the use remains the same. However, in the future, if the developer were to develop the land, it would not be exempt from full land development approvals other than subdivision.
Please note that this is general information regarding the creation of a condominium under the NJCA. If you are interested in converting your property to a condominium, it is important to reach out to a member of our team so we can provide more specific advice based on the facts and circumstances relating to your property.