In the recent unpublished Appellate case of Dumont v. Borough of Dumont, A-4309-15T3 (App. Div. Unpub. 2017) an issue arose when a governing body and a local school board disagreed about reversion clauses associated with gifted land. This case concerned whether and to what extent a “reverter clause” should be enforced.
In 1962 the Dumont Board of Education conveyed certain property to Dumont Borough (Boroughs and Boards of Education are separate government entities) to be used for specific purposes. Specifically, the Borough agreed to utilize the land and property (which included a schoolhouse no longer used by the Board of Ed) for “municipal purposes.” The Borough granted a right of first refusal to the Board of Education. The somewhat complex contract between the entities also contained a “reverter clause” stating that should the Borough of Dumont fail to utilize the land for municipal purposes in the future, then the land and all improvements should be transferred back to the Board of Education without any further consideration. The Appellate decision further states that the Borough of Dumont utilized this space as a borough hall and to house its police department until 2014, at which time the County Health Department determined that the buildings were no longer habitable owing to mold issues. It should be noted that although the building was closed, trailers were brought to the property to house police department personnel.
Between 2014 and 2016 the Borough and a developer negotiated regarding affordable housing in the municipality and discussions were advanced regarding using some of the subject land for inclusion as a site for such housing. These negotiations culminated in February of 2016, when the Borough adopted a Resolution designating the property as “An area in need of redevelopment pursuant to N.J.S.A. 40A:12A-6,” and in the next month when the Borough further passed a Resolution approving the terms of settlement between the developer and the Borough.
At this time the Dumont Board of Education filed a complaint arguing that such settlement triggered the reversion clause and right of first refusal language contained in the 1962 Agreement between the BOE and the Borough.
The Procedural History
The Trial Court held that neither the reverter clause nor the right of first refusal from the 1962 agreement would be triggered as the Borough would continue to utilize a portion of the land for police office space and as the affordable housing on site would inure to the Borough’s “municipal purpose”–which does appear to be a quite vague term. These issues were rendered somewhat moot by a later agreement between Borough and developer to move the site of the affordable housing units and for the Borough to merely utilize the space for its police department.
The Appellate Court’s unpublished opinion notes that “A case is moot if the disputed issue has been resolved, at least with respect to the parties who instituted the litigation.” The Board did, however, request that the Appellate Court provide an advisory opinion delineating the parties’ future rights and responsibilities under the 1962 Agreement. Not surprisingly, the Court held that it is generally not in the “advisory opinion” business and noted that it cannot “willy-nilly…decide issues unnecessary to the outcome of the case.”
Merely reviewing the Appellate Decision, it’s unclear what the impetus was for the Borough and the developer (not named to the suit) to modify their affordable housing plans. Given the vague term under the 1962 agreement of “municipal purpose” it is likely that the Court would have found the land would not revert merely because of the affordable housing agreement. That said, the right of first refusal argument may have carried more weight in such an arrangement. It’s unclear whether the Borough decided to change its plans to render this issue moot or not. Given the age of the Agreement (1962) and its vague terms it would appear to be a difficult contract to enforce at this point in time for the Board of Education.