Arocho v. N.J. Dep't of Cmty. Affairs
| Decision Date | 09 January 2020 |
| Docket Number | DOCKET NO. A-4639-17T2 |
| Parties | ANA AROCHO, NORMAN HARRIS, NANCY LOPEZ, and JESSICA ROMERO, Petitioners-Appellants, v. NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS, Respondent-Respondent. |
| Court | New Jersey Superior Court — Appellate Division |
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
Before Judges Koblitz, Whipple and Mawla.
On appeal from the New Jersey Department of Community Affairs.
Olga D. Pomar argued the cause for appellants (South Jersey Legal Services, Inc., attorneys; Olga D. Pomar, on the briefs).
Dominic Larue Giova, Deputy Attorney General, argued the cause for respondent (Gurbir S. Grewal, Attorney General, attorney; Donna Arons, Assistant Attorney General, of counsel; Dominic Larue Giova, on the brief).
Petitioners Ana Arocho, Norman Harris, Nancy Lopez and Jessica Romero (the residents) are low-income homeowners who agreed to receive replacement homes in exchange for the houses they owned in the Mount Holly Township Gardens neighborhood. The replacement homes are funded by the federal Home Investment Partnerships Act (HOME), 42 U.S.C. §§ 12721 to -12756, and the funds are administered to the township by the New Jersey Department of Community Affairs (DCA).
In 2013, the residents and township entered into a settlement agreement as a result of a previous civil action.1 The DCA and the developer of the replacement homes, TRFDP Mount Holly Urban Renewal, LLC, are not parties to this agreement. The DCA later entered into a "Grant/Loan Agreement" (grant agreement) with the developer. The residents and township are not parties to the grant agreement, which includes different deed restrictions than thesettlement agreement. When the residents learned of the grant agreement terms, they sought to modify them. After the DCA agreed to reduce the affordability period from thirty to fifteen years, the residents signed the deeds for their homes, but reserved their right to seek relief to resolve the remaining deed restriction issues.
The residents appeal the May 4, 2018 decision of the DCA granting their request to reduce the restriction period but denying further requests to alter the grant agreement. The residents ask this court to order the DCA to modify the deed restrictions according to their requests, or alternatively to remand the matter to the Office of Administrative Law (OAL) for a hearing as a contested case. We remand to the OAL to develop a factual background and make a considered decision in light of pertinent regulations.
In November 2013, the residents entered into a settlement agreement with the township as a result of a previous civil action. The settlement agreement allowed any homeowner in the Gardens who wanted to remain in the community after it was redeveloped to turn over their current home to the township and receive an affordable replacement home. Under the settlement agreement, residents seeking a replacement home agreed to resale restrictions for a periodof fifteen years, limiting resale to households earning less than eighty percent of the area median income (AMI).
Also during that time, the developer contracted with the township to develop forty-four new homes (redevelopment agreement). The redevelopment agreement required the developer to "secure all subsidy and debt financing" such as "HOME and CHOICE2 or any other public or private subsidy funds."
In 2015, the DCA and the developer entered into the grant agreement, awarding over $1.3 million dollars to the developer for the construction of six replacement homes in the Gardens. The grant agreement provides that the units "shall remain affordable, in accordance with HOME requirements, for a period of no less than" thirty years and "be reserved for households with a gross household income . . . that does not exceed [fifty] percent" of the AMI. The grant agreement listed the sales price of each unit as $52,500.
The grant agreement's section entitled "HOME PROGRAM PROVISIONS" sets forth the HOME program requirements the grantee is bound by in addition to the federal affordability requirements under the United StatesDepartment of Housing and Urban Development (HUD) regulations, Home Investment Partnerships Program, 24 C.F.R. Part 92 (2019). Furthermore, the grant agreement states that The grant agreement requires the developer to ensure that appropriate mortgage and deed restrictions, consistent with Uniform Housing Affordability Controls (UHAC), N.J.A.C. 5:80-26.1 to -26.26, are duly recorded. In August 2016, the grant agreement was amended to reflect additionally obtained funding.
In December 2016, the developer executed a deed of easement with restrictive covenants. The deed states that the developer received HOME funding awarded by the DCA pursuant to the HOME statute and 24 C.F.R. Part 92. The developer also executed a mortgage note, promising to pay the DCA for the total amount of funding awarded to them. In May 2017, the developer entered into an agreement with NJHMFA, making HAS the administrative agent for the project (administrative agent agreement). Under the administrative agent agreement, the developer agreed it would comply with the HOME statute and the Fair Housing Act, N.J.S.A. 52:27D-301 to -329.9.
In June 2017, the residents, the developer, and the DCA began communications regarding the restrictions provided in the grant agreement. Residents' counsel wrote to the developer, objecting to the restrictions limiting resale to homes earning fifty percent below the AMI for a thirty-year term as contrary to the terms of the settlement agreement. The residents explained that these terms created a disparity between the Gardens homeowners assigned to HOME units and other Gardens residents whose replacement homes were funded through other subsidy programs subject to less onerous restrictions. The residents asked the developer to seek a modification of the deed restrictions from the DCA, requesting the same terms as in the settlement agreement: "[fifteen] year restrictions with resale at [eighty percent] AMI."
In March 2018, residents' counsel wrote to the DCA objecting to the $52,500 initial purchase price upon which the resale price would be based, noting the price "is inconsistent with HOME requirements and would deprive the homeowners of a fair return on their investments." The following month, the DCA verbally informed counsel it would shorten the term of the deed restrictions from thirty years to fifteen years, but denied further modifications. Later that month, the residents requested an expedited hearing in the OAL as a contested case in accordance with N.J.S.A. 52:14B-2.
On May 1, 2018, HUD issued a letter stating it had received the residents' complaint and forwarded it to the State of New Jersey for a response. Three days later, the DCA issued a final determination denying the residents' requests to modify the restrictions beyond its previous reduction of the affordability period:
The length of the restriction will now, as you know, be [fifteen] years, during which time period the unit(s) can only be subsequently priced and resold to a household that is income eligible at less than [fifty percent] AMI. In addition, there will be a recapture at the first non-exempt sale of the property.
The DCA stated that these terms were in compliance with the terms of the grant agreement between the DCA and developer, as well as with UHAC. The DCA denied the request to deem the case "contested" and refer it to the OAL for a hearing. Upon a follow-up inquiry made on May 8, 2018, HUD stated that only the grantee, here the State, could request a waiver of any HOME program requirements.3
In August 2018, the residents took title and possession of their HOME units. The deed provides that the sale and use of the property is governed by UHAC, there is a "Control Period" of fifteen years, and during that period the property can be conveyed only to an eligible household at a "Maximum Resale Price" approved by NJHMFA. The "Buyer Statement" provides that the units are categorized as fifty percent AMI units. The residents executed a recapture mortgage note requiring them to pay $177,500 to the DCA:
Upon the first non-exempt sale of the [p]roperty after the date of this [n]ote, the [o]wner, or the heir, successor or assignee of the [o]wner then selling the [p]roperty, shall pay the sum of $177,500.00 amount determined pursuant to N.J.A.C. 5:80-26.5(c)[] to the State of New Jersey, acting by and through its Housing and Mortgage Finance Agency.
The buyer statement notes the grantee did not waive the right to appeal or otherwise challenge the validity of the deed restrictions.
"Although not bound by an agency's determination on a question of law, our courts give 'great deference' to an agency's 'interpretation of statutes within its scope of authority and its adoption of rules implementing' the laws for which it is responsible." In re N.J.A.C. 7:1B-1.1, 431 N.J. Super. 100, 114-15 (App. Div. 2013) (citation omitted) (quoting N.J. Ass'n of Sch. Adm'rs v. Schundler,211 N.J. 535, 549 (2012)). "This deference comes from the understanding that a state agency brings experience and specialized knowledge to its task of administering and regulating a legislative enactment within its field of expertise." Id. at 115 (quoting In re Election Law Enf't Comm'n Advisory Op. No. 01-2008, 201 N.J. 254, 262 (2010)). "An administrative agency's final quasi-judicial decision will be sustained unless there is a clear showing that it is arbitrary, capricious, or unreasonable, or that...
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