In 2004, the New Jersey Highlands Water Protection and Planning Act (the “Act”) became law. The law created two distinct regions, the Preservation Area and the Planning Area. Development in the Preservation Area was severely restricted under the Act. To address the loss of development rights in the Preservation Area, the Act also authorized a Transfer of Development Rights (“TDR”) program to be administered by the New Jersey Highlands Council (the “Council”).

The TDR program is designed to allow property owners in the Preservation Area to sell their development rights [Highlands Development Credits (“HDCs”)] to developers in the Planning Area. Developers that buy HDCs will be able to use those purchased HDCs to undertake more intensive development than would otherwise be permitted.