As one of his last acts in office, Governor Chris Christie signed into law Assembly Bill 1425/Senate Bill 3233, which reforms the performance and maintenance guarantee provisions of the Municipal Land Use Law (MLUL). The new law brings significant changes that will affect developers, particularly with regard to the scope of improvements that must be covered through a performance guarantee. It also alters the amount of municipal inspection fees that a developer must reimburse to the municipality. The amendments include the following:
- Scope of Performance Guarantees: Under the new law, municipalities are prohibited from subjecting on-site site plan improvements and landscaping to a performance guarantee. Going forward, municipalities can only require developers to post performance guarantees to cover improvements that are dedicated to a public entity, such as streets, pavements, curbs, sidewalks and street lighting.
- Temporary Certificate of Occupancy Performance Guarantees: Municipalities may now require developers seeking a temporary certificate of occupancy to establish a separate “temporary certificate of occupancy guarantee” in an amount equal to 120% of the cost of installation of the remaining improvements as a condition to getting a permanent certificate of occupancy.
- Safety and Stabilization Performance Guarantees: Municipalities may require developers to establish a “safety and stabilization guarantee” to ensure funding in the event that all work on a development ceases for 60 consecutive days or more and creates a public safety issue.
- Maintenance Guarantees: Under the new law, municipalities may only require maintenance guarantees for improvements covered by performance guarantees that are being released, as well as certain stormwater management improvements.
- Reimbursement of Municipal Inspection Fees: The law also alters developers’ obligations to reimburse municipalities for the inspection of improvements. It authorizes municipalities to require developers to post reasonable inspection fees. Reimbursement costs of inspections of bonded improvements may not exceed the greater of $500 or 5% of the cost of such improvements. Reimbursement costs of inspections of private site improvements that are not subject to a performance guarantee may not exceed 5% of the cost of such improvements. However, the law provides some flexibility to these caps by allowing municipalities to require developers to deposit more funding if there are insufficient funds to cover the cost of inspections.