In economic hard times, this combination of poor marketconditions coupled with state regulatory pressures wreak havoc onthe circumstances of developers and further extend the recoverytime after a recession. Recognizing this "vicious cycle of default"and finding that a national recession has drastically affected NewJersey's economy, particularly the banking, real estate andconstruction sectors, the Assembly and Senate passed the PermitExtension Act of 2008 on June 23, 2008. The Act, which Gov. JonCorzine is expected to sign into law, will suspend the expirationof most permits in existence during the extension period fromJanuary 1, 2007 through July 1, 2010, including, among others,Wetlands permits, New Jersey Meadowlands permits, and preliminaryand final approvals granted by municipalities under the MunicipalLand Use Law.

|

As originally drafted, the Act only excluded permits involvingthe federal government and municipal approvals for residentialdevelopments where the land has been subsequently re-zoned foreither industrial or commercial uses. In response to strenuouslobbying from environmental groups, additional categories ofpermits have been excluded from the protection of the Act,including permits in defined environmentally sensitive areas,permits issued by the Department of Transportation in areas otherthan rights-of-way, permits issued under the Flood Area HazardControl Act and some permits issued under the Coastal Area FacilityReview Act.

|

The permit extensions work like this: Let's say a builder hadpreliminary site plan approval to construct a housing developmentbut, because of the recession, wasn't able to get the project goingbefore the approval expired on March 1, 2007. Under the PermitExtension Act, the running of the permit period stops as of Jan.1,2007 – actually resurrecting this expired permit for the extensionperiod, until July 1, 2010. At the end of the extension period, thepermit period begins to run again from where it was suspended as ofJan. 1, 2007, for the two remaining months, making the newexpiration date Sept. 1, 2010. The Act only allows covered permitsto extend for six months beyond July 1, 2010, so all suspendedpermits will expire by Jan. 1, 2011.

|

[IMGCAP(2)]While this Act gives builders and developers whocould not start construction prior to the expiration of theirpermits some breathing room, it's a marked compromise from the billthat was originally proposed. As originally written, the Act wouldhave suspended the running time of permits from Jan. 1, 2006through Jan. 1, 2012, would have allowed two additional yearsbeyond the extension period and did not exclude as manypermits.

|

The 2008 Act replicates much of the Permit Extension Act of1992. According to the Assembly Housing and Local GovernmentCommittee Statement, the 1992 Act was passed during a time when the"same external factors" as exist currently were present. The 1992Act extended all permits to a fixed point in time, Dec. 31, 1996.In contrast, the 2008 Act, as originally introduced, suspended thepermits, effectively stopping the clock on Jan. 1, 2006 and notrestarting it until 2012, giving developers even more breathingroom and avoiding the sudden expiration of all of the extendedpermits on the same date. The compromise measure passed by theAssembly and Senate, even though worded differently than the 1992Act, and giving a six month buffer, essentially has the sameresult: all extended permits expire by a fixed point in the future– Jan. 1, 2011.

|

Since its introduction, environmental groups criticized the Actas a giveaway to developers. In reality, nothing but a little extratime is being given to developers. The Act only extends the periodof existing permits and approvals for projects that have been fullyreviewed by every relevant agency and level of government and havesatisfied all regulatory requirements, including environmentalregulations. The Act as introduced quoted verbatim from the 1992Act, recognizing that "obtaining extensions of approvals by stategovernment is frequently impossible, always difficult, and alwaysexpensive and no policy reason is served by the expiration of thesepermits, which were approved only after exhaustive review of theapplication."

|

In this time of economic stress, it makes sense to allowdevelopers extra time to start and complete their projects. Noenvironmental regulation is relaxed, modified or abandoned as aresult of this Act. No evidence exists that the similar extensionspermitted by the 1992 Act had any of the consequences complainedabout by environmental groups and there is no reason to believethat the 2008 would have any different consequences.

|

Perhaps most significantly, the Act will preserve the potentialfor the timely reinitiation of construction projects once thecurrent economic downturn has passed. But for the Act, essentiallyall currently approved projects will have expired by the time therecession ends. Consequently, when the national economy rebounds,New Jersey's economy would have to suffer through the additionalgap of two to three years required to secure a new round ofapprovals.

|

The Act received strong support in both the Assembly and theSenate. After its proposal as A-2867 by more than half of themembers of the Assembly on May 22, 2008, the Assembly Housing andLocal Government Committee and the Senate Economic and GrowthCommittee gave the Act unanimous support. On June 23, 2008 the Actwas passed by a vote of 70 to nine, one not voting in the Assemblyand by a vote of 30 to three, with seven not voting in the Senate.The bill is currently awaiting Gov. Corzine's signature.

|

Richard S. Goldman is a partner in the Princetonoffice of Drinker Biddle & Reath LLP. Cynthia De Lisi isan associate with Drinker Biddle's Real Estate Practice Group inthe Princeton office. They can be reached at [email protected] and[email protected]respectively.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.