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New Law Sets 3-Year Limit on Construction Permits; Allows Revocation of Permits for, and Demolition of, Unfinished Projects



February 5, 2002

A hastily enacted law provides that a municipal building or construction department may revoke or cancel a construction permit, as well as demolish the unfinished improvements, in the event the project is not completed by the third anniversary of the date of permit issuance. For those construction permits granted prior to the effective date of the law, the time frame for completion would be extended to the third anniversary of the legislation’s effective date (which would be January 14, 2005).

At the end of the applicable third anniversary, a permittee would be authorized to apply for a one-year extension, approval of which may not be unreasonably withheld by the enforcing agency. A permittee could appeal denial of an extension request to the county construction board of appeals. Under prior law, the only time limitation within N.J.S.A. 52-27D-131 was that a construction permit for which no construction has occurred above the foundation walls expired within one year from the date of issuance. However, municipalities often extended the permit as long as there had been some amount of additional construction completed.

Legislative History

This law has had an interesting legislative history. It had been introduced in January of 2000. No activity had occurred on the legislation until the Assembly passed floor amendments on June 21, 2001, to extend the proposed permit period from two to three years, to include the one-year extension and appeal mechanisms, to hold public entities harmless and to exempt projects under the control of a mortgagee in possession. Another period of inactivity followed, until the Legislature decided to act swiftly in approving the measure. On December 17, 2001, the law passed the Assembly by a vote of 76-1, and on January 7, 2002, passed the Senate by a vote of 37-0. P.L. 2001, c. 457 was approved on January 14, 2002, and amends N.J.S.A. 52:27D-131. This was a clear action by the Legislature to rush the adoption of the law before the 209th legislative session ended.

Potential Effects of New Law

The most significant consequence of the new law is the potential that a partially-completed project can be demolished by the municipality if not completed prior to the permit’s expiration. To add insult to injury, the cost of demolition then becomes a lien on the property, thereby shifting the cost to the owner.

This legislation will also have the effect of creating an additional approval process for construction permits where projects take more than three years to complete. It is true that the law requires that a municipality may not unreasonably withhold an extension. However, at the very least, a developer must be mindful of this deadline, and be sure to continue to make progress with construction. The law requires the developer to submit a request for an extension from the municipality but imposes no affirmative duty on the part of the municipality to inform a developer of an upcoming deadline.

In addition, the law is unclear with respect to whether a developer is entitled to only a single extension, or whether multiple extensions are possible. Under one reading of the law, projects that are not completed after three years would be eligible for multiple extensions, essentially rendering the extension process would be an annual event. However, under an equally if not more compelling interpretation of the law, a developer may be eligible for one a single one-year extension. If this interpretation is followed, all projects, no matter how long they may take to construct, would have to be completed within four years of obtaining a building permit.

Exceptions to General Rule

It should be noted that there are exceptions to the general three-year rule. The three-year limit does not apply to permits obtained to construct improvements to the interior of a residential property in which the permittee is currently residing that are not visible from the outside of the residential property. Also excepted are permits for any building of which the exterior and all required site improvements have been fully constructed, and permits for a project while that project is under the control of a mortgagee in possession. Therefore, if a project is under the control of a mortgagee in possession, the completion of some work above the foundation walls within one year would be the only requirement. In the other two exception situations, there would be no such time limitation, since the requirement that there be construction above the foundation walls would not apply to buildings that are undergoing interior construction only.