Change in Municipal Land Use Law in New Jersey

On February 20, 2018 Kang Haggerty LLC published a memorandum on the New Municipal Land Use Law.

On January 15, 2018, New Jersey Governor Chris Christie signed into law Senate Bill No. 3233, effective immediately, which reforms requirements under N.J.S.A. 40:55D-1 et seq., also referred to as the Municipal Land Use Law (MLUL). The amendments under the MLUL modify the requirements for performance and maintenance guarantees required for developers. Under the new, more developer-friendly law, “the developer shall furnish a performance guarantee in favor of the municipality in an amount not to exceed 120% of the cost of installation of only those improvements required by an approval or developer’s agreement, ordinance, or regulation to be dedicated to a public entity, and that have not yet been installed.”

In the past, the municipality had expansive authority to require performance guarantees for improvements deemed “necessary or appropriate.” N.J.S.A. 40:55D-53. Additionally, the list of improvements subject to performance guarantees from developers (and in favor of the municipality) are now limited to the following: streets, pavement, gutters, curbs, sidewalks, street lighting, street trees, surveyor’s monuments, water mains, community septic systems, drainage structures, public improvements of open space, and any grading necessitated by the preceding improvements.

Furthermore, the new law authorizes two additional types of guarantees: a temporary certificate of occupancy guarantee and a safety and stabilization guarantee. For developers who seek a temporary certificate of occupancy for a development, unit, building or phase of development, the municipality can require the developer to furnish a temporary certificate of occupancy guarantee in favor of the municipality in an amount equal to 120% of the cost of installation of improvements that remain and are necessary prior to issuance of a permanent certificate of occupancy. At no time, however, may a municipality hold more than one guarantee or bond of any type concerning the same line item. The temporary certificate of occupancy guarantee must be released by the zoning officer, municipal engineer, or other municipal official designated by ordinance upon issuance of a permanent certificate of occupancy for the development, unit, lot, building, or phase as to which the temporary certificate of occupancy relates.

A safety and stabilization guarantee may be furnished, at the developer’s option, either as a separate guarantee or as a line item of the performance guarantee and “shall be available to the municipality solely for the purpose of returning property that has been disturbed to a safe and stable condition or otherwise implementing measures to protect the public from access to an unsafe or unstable condition.” The amount of the safety and stabilization guarantee is determined based on the cost of the bonded improvements, and the municipality shall release the guarantee upon the municipal engineer’s determination that the development of the project site has reached a point that the improvements installed are adequate to avoid any potential threat to public safety. Separate safety and stabilization guarantees shall be released by a municipality to a developer upon the developer’s furnishing of a performance guarantee which includes a line item for safety and stabilization in the amount required under the statute.

Under N.J.S.A. 40:55D-53(a)(2), municipalities could require maintenance guarantees for “a period not to exceed two years after final acceptance of the improvement in an amount not to exceed 15 percent of the cost of the improvement.” Under the new law, municipalities only require developers to post maintenance guarantees for improvements that are the subject of the performance guarantee and that are being released, as well as for certain private stormwater management improvements. Also, the term of the maintenance guarantee now cannot exceed two years and automatically expires at the end of the established term.

Finally, the new law allows the municipality to require a developer to post money in escrow for inspections and to add funds if the amount in escrow is insufficient. Before the new law, municipal engineers were prohibited from performing inspections if there were insufficient funds to pay for the inspection. To require the payment of more funds to the escrow, the municipality must deliver to the developer “a written inspection escrow deposit request, signed by the municipal engineer, which: informs the developer of the need for additional inspections, details the items or undertakings that require inspection, estimates the time required for those inspections, and estimates the cost of performing those inspections.”

Please contact your attorney if you have any questions or if you are unsure how the MLUL will impact your New Jersey projects.

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