A1425

An Act concerning performance and maintenance guarantees under the "Municipal Land Use Law" and amending P.L.1975, c.291.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 41 of P.L.1975, c.291 (C.40:55D-53) is amended to read as follows:

41. Guarantees required; surety; release. a. Before [recording] filing of final subdivision plats or recording of minor subdivision deeds or as a condition of final site plan approval or as a condition to the issuance of a zoning permit pursuant to subsection d. of section 52 of P.L.1975, c.291 (C.40:55D-65), the [approving authority] municipality may require and shall accept in accordance with the standards adopted by ordinance and regulations adopted pursuant to section 1 of P.L.1999, c.68 (C.40:55D-53a) for the purpose of assuring the installation and maintenance of certain on-tract improvements, the furnishing of a performance guarantee, and provision for a maintenance guarantee in accordance with paragraphs (1) and (2) of this subsection. If a municipality has adopted an ordinance requiring a successor developer to furnish a replacement performance guarantee, as a condition to the approval of a permit update under the State Uniform Construction Code, for the purpose of updating the name and address of the owner of property on a construction permit, the governing body may require and shall accept in accordance with the standards adopted by ordinance and regulations adopted pursuant to section 1 of P.L.1999, c.68 (C.40:55D-53a) for the purpose of assuring the installation and maintenance of on-tract improvements, the furnishing of a performance guarantee, and provision for a maintenance guarantee, in accordance with paragraphs (1) and (2) of this subsection.

(1) (a) [The furnishing of] If required, 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 the approval or developer’s agreement, ordinance, or regulation to be dedicated to the public entity, and that have not yet been installed, which cost shall be determined by the municipal engineer, according to the method of calculation set forth in section 15 of P.L.1991, c.256 (C.40:55D-53.4), for the following improvements [which the approving authority may deem necessary or appropriate including] as shown on the approved plans or plat: streets, [grading,] pavement, gutters, curbs, sidewalks, street lighting, [shade] street trees, surveyor's monuments, as shown on the final map and required by "the map filing law," P.L.1960, c.141 (C.46:23-9.9 et seq.; repealed by section 2 of P.L.2011, c.217) or N.J.S.46:26B-1 through N.J.S.46:26B-8, water mains, [culverts, storm sewers,] sanitary sewers [or other means of sewage disposal], community septic systems, drainage structures, [erosion control and sedimentation control devices,] public improvements of open space, and [, in the case of site plans only, other on-site improvements and landscaping] any grading necessitated by the preceding improvements.

The municipal engineer shall prepare an itemized cost estimate of the improvements covered by the performance guarantee, which itemized cost estimate shall be appended to each performance guarantee posted by the obligor.

(b) A municipality may also require a performance guarantee to include, within an approved phase or section of a development:

(i) privately-owned perimeter buffer landscaping;

(ii) privately-owned stormwater management facilities to be connected to a public drainage system; and

(iii) top course paving on privately-owned streets as necessary to provide access to the nearest public street as shown on an approved plat or plan, at the time the developer requests the first certificate of occupancy in the phase or section wherein the private street is located.

At the developer’s option, a separate performance guarantee may be posted for the privately-owned perimeter buffer landscaping, privately-owned stormwater management facilities to be connected to a public drainage system, and, at the time the first certificate of occupancy is requested, the top course paving on privately-owned streets.

(c) In the event that the developer shall seek a temporary certificate of occupancy for a development, unit, building, or phase of development, as a condition of the issuance thereof, the developer shall, if required by an ordinance adopted by the municipality, furnish a separate performance guarantee, referred to herein as a “temporary certificate of occupancy bond,” in favor of the municipality in an amount equal to 100% of the cost of installation of only those improvements or items which remain to be completed or installed under the terms of the temporary certificate of occupancy and which are required to be installed or completed as a condition precedent to the issuance of the permanent certificate of occupancy for the development, unit, building or phase of development. Upon posting of a “temporary certificate of occupancy bond,” all sums remaining under a performance guaranty, required pursuant to subparagraph (a) of this paragraph, which relate to the development, unit, building, or phase of development for which the temporary certificate of occupancy is sought, shall be released. At no time may a municipality hold more than one performance guarantee of any type with respect to the same improvement or item.

(d) In addition to a performance guarantee required pursuant to subparagraph (a) of this paragraph, a developer shall, if required by an ordinance adopted by the municipality, furnish to the municipality a separate guarantee, referred to herein as a “safety and stabilization bond,” in favor of the municipality, to 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, only in the circumstance that:

(i) an approved development has been commenced (as evidenced by the issuance of construction permits and site disturbance) and all work on the development has ceased for a period of at least 90 days for reasons other than force majeure, and

(ii) work has not recommenced within 30 days following the provision of written notice by the municipality to the developer of the municipality’s intent to claim payment under the bond. A municipality shall not provide notice of its intent to claim payment under a “safety and stabilization bond” until a period of at least 90 days has elapsed during which all work on the development has ceased for reasons other than force majeure. A municipality shall provide written notice to a developer by certified mail or other form of delivery providing evidence of receipt.

The amount of a “safety and stabilization bond” shall be calculated as a percentage of the bonded improvement costs of the development or phase of development as follows:

five percent of the first $100,000 of bonded improvement costs;

two and a half percent of bonded improvement costs in excess of $100,000 up to $1,000,000; and

one percent of bonded improvement costs in excess of $1,000,000.

(2) [Provision for] If required, the developer shall post with the municipality, upon the release of the performance guarantee, a maintenance guarantee [to be posted with the governing body] for [a period not to exceed two years after final acceptance of] the [improvement] improvements, in an amount not to exceed 15% of the cost of the [improvement] installation of improvements, which cost shall be determined [by the municipal engineer] according to the method of calculation set forth in section 15 of P.L.1991, c.256 (C.40:55D-53.4). The term of the maintenance guarantee shall be for a period not to exceed two years and shall automatically expire at the end of the established term.

(3) In the event that other governmental agencies or public utilities automatically will own the utilities to be installed or the improvements are covered by a performance or maintenance guarantee to another governmental agency, no performance or maintenance guarantee, as the case may be, shall be required by the municipality for such utilities or improvements.

b. The time allowed for installation of the improvements for which the performance guarantee has been provided may be extended by the governing body by resolution. As a condition or as part of any such extension, the amount of any performance guarantee shall be increased or reduced, as the case may be, to an amount not to exceed 120% of the cost of the installation, which cost shall be determined by the municipal engineer according to the method of calculation set forth in section 15 of P.L.1991, c.256 (C.40:55D-53.4) as of the time of the passage of the resolution.

c. If the required improvements are not completed or corrected in accordance with the performance guarantee, the obligor and surety, if any, shall be liable thereon to the municipality for the reasonable cost of the improvements not completed or corrected and the municipality may either prior to or after the receipt of the proceeds thereof complete such improvements. Such completion or correction of improvements shall be subject to the public bidding requirements of the "Local Public Contracts Law," P.L.1971, c.198 (C.40A:11-1 et seq.).

d. (1) Upon substantial completion of all required street improvements (except for the top course) and appurtenant utility improvements, and the connection of same to the public system, the obligor may request of the governing body in writing, by certified mail addressed in care of the municipal clerk, that the municipal engineer prepare, in accordance with the itemized cost estimate prepared by the municipal engineer and appended to the performance guarantee pursuant to subsection a. of this section, a list of all uncompleted or unsatisfactory completed improvements. If such a request is made, the obligor shall send a copy of the request to the municipal engineer. The request shall indicate which improvements have been completed and which improvements remain uncompleted in the judgment of the obligor. Thereupon the municipal engineer shall inspect all improvements covered by obligor's request and shall file a detailed list and report, in writing, with the governing body, and shall simultaneously send a copy thereof to the obligor not later than 45 days after receipt of the obligor's request.

(2) The list prepared by the municipal engineer shall state, in detail, with respect to each improvement determined to be incomplete or unsatisfactory, the nature and extent of the incompleteness of each incomplete improvement or the nature and extent of, and remedy for, the unsatisfactory state of each completed improvement determined to be unsatisfactory. The report prepared by the municipal engineer shall identify each improvement determined to be complete and satisfactory together with a recommendation as to the amount of reduction to be made in the performance guarantee relating to the completed and satisfactory improvement, in accordance with the itemized cost estimate prepared by the municipal engineer and appended to the performance guarantee pursuant to subsection a. of this section.

e. (1) The governing body, by resolution, shall either approve the improvements determined to be complete and satisfactory by the municipal engineer, or reject any or all of these improvements upon the establishment in the resolution of cause for rejection, and shall approve and authorize the amount of reduction to be made in the performance guarantee and the “safety and stabilization bond” relating to the improvements accepted, in accordance with the itemized cost estimate prepared by the municipal engineer and appended to the performance guarantee pursuant to subsection a. of this section. This resolution shall be adopted not later than 45 days after receipt of the list and report prepared by the municipal engineer. Upon adoption of the resolution by the governing body, the obligor shall be released from all liability pursuant to its performance guarantee and “safety and stabilization bond,” with respect to those approved improvements, except for that portion adequately sufficient to secure completion or correction of the improvements not yet approved; provided that 30% of the amount of the total performance guarantee and “safety and stabilization bond” posted may be retained to ensure completion and acceptability of all improvements.

For the purpose of releasing the obligor from liability pursuant to its performance guarantee and “safety and stabilization bond,” the amount of the performance guarantee and “safety and stabilization bond” attributable to each approved improvement shall be reduced by the total amount for each such improvement, in accordance with the itemized cost estimate prepared by the municipal engineer and appended to the performance guarantee pursuant to subsection a. of this section, including any contingency factor applied to the cost of installation. If the sum of the approved improvements would exceed 70 percent of the total amount of the performance guarantee, then the municipality may retain 30 percent of the amount of the total performance guarantee and “safety and stabilization bond” to ensure completion and acceptability of all improvements, as provided above.

(2) If the municipal engineer fails to send or provide the list and report as requested by the obligor pursuant to subsection d. of this section within 45 days from receipt of the request, the obligor may apply to the court in a summary manner for an order compelling the municipal engineer to provide the list and report within a stated time and the cost of applying to the court, including reasonable attorney's fees, may be awarded to the prevailing party.

If the governing body fails to approve or reject the improvements determined by the municipal engineer to be complete and satisfactory or reduce the performance guarantee for the complete and satisfactory improvements within 45 days from the receipt of the municipal engineer's list and report, the obligor may apply to the court in a summary manner for an order compelling, within a stated time, approval of the complete and satisfactory improvements and approval of a reduction in the performance guarantee for the approvable complete and satisfactory improvements in accordance with the itemized cost estimate prepared by the municipal engineer and appended to the performance guarantee pursuant to subsection a. of this section; and the cost of applying to the court, including reasonable attorney's fees, may be awarded to the prevailing party.

(3) In the event that the obligor has made a cash deposit with the municipality or approving authority as part of the performance guarantee, then any partial reduction granted in the performance guarantee pursuant to this subsection shall be applied to the cash deposit in the same proportion as the original cash deposit bears to the full amount of the performance guarantee.

f. If any portion of the required improvements is rejected, the approving authority may require the obligor to complete or correct such improvements and, upon completion or correction, the same procedure of notification, as set forth in this section shall be followed.

g. Nothing herein, however, shall be construed to limit the right of the obligor to contest by legal proceedings any determination of the governing body or the municipal engineer.

h. The obligor shall reimburse the municipality for all reasonable inspection fees paid to the municipal engineer for the foregoing inspection of improvements; provided that the municipality may require of the developer a deposit for the inspection fees in an amount not to exceed, except for extraordinary circumstances, the greater of $500 or 5% of the cost of improvements, which cost shall be determined pursuant to section 15 of P.L.1991, c.256 (C.40:55D-53.4). For those developments for which the inspection fees are less than $10,000, fees may, at the option of the developer, be paid in two installments. The initial amount deposited by a developer shall be 50% of the inspection fees. When the balance on deposit drops to 10% of the inspection fees because the amount deposited by the developer has been reduced by the amount paid to the municipal engineer for inspection, the developer shall deposit the remaining 50% of the inspection fees. For those developments for which the inspection fees are $10,000 or greater, fees may, at the option of the developer, be paid in four installments. The initial amount deposited by a developer shall be 25% of the inspection fees. When the balance on deposit drops to 10% of the inspection fees because the amount deposited by the developer has been reduced by the amount paid to the municipal engineer for inspection, the developer shall make additional deposits of 25% of the inspection fees. The municipal engineer shall not perform any inspection if sufficient funds to pay for those inspections are not on deposit.

i. In the event that final approval is by stages or sections of development pursuant to subsection a. of section 29 of P.L.1975, c.291 (C.40:55D-38), the provisions of this section shall be applied by stage or section.

j. To the extent that any of the improvements have been dedicated to the municipality on the subdivision plat or site plan, the municipal governing body shall be deemed, upon the release of any performance guarantee required pursuant to subsection a. of this section, to accept dedication for public use of streets or roads and any other improvements made thereon according to site plans and subdivision plats approved by the approving authority, provided that such improvements have been inspected and have received final approval by the municipal engineer.

(cf: P.L.2013, c.123, s.3)

2. This act shall take effect immediately.

STATEMENT

This bill would modify the requirements for furnishing performance and maintenance guarantees under the "Municipal Land Use Law.” Performance and maintenance guarantees ensure that improvements required to be made by a developer under a development approval are completed and maintained.

Under current law, performance guarantees may be required to ensure the completion of certain types of improvements and may include improvements that are not being dedicated to a public entity. The bill provides that guarantees would only cover improvements that are being dedicated to a public entity.

Current law lists types of improvements that may be subject to a performance guarantee requirement. The bill eliminates the following types of improvements from the list: culverts, storm sewers, erosion control and sedimentation control devices, other on-site improvements, and landscaping. The bill allows a municipality to require a performance guarantee for privately-owned perimeter buffer landscaping and stormwater management facilities if the facilities are being connected to a public drainage system. The bill allows a developer to opt to post a separate performance guarantee for these items.

The bill modifies some of the types of improvements that may currently be subject to a performance guarantee requirement. The bill eliminates reference to “means of sewage disposal” (other than sanitary sewers) from the current list of improvements, but adds “community septic systems” to the list. The bill provides that grading costs can be part of a performance bond only if grading is a necessary part of an improvement that is subject to a performance guarantee requirement.

The bill authorizes municipalities to require two additional types of guarantees: a “temporary certificate of occupancy bond,” and a “safety and stabilization bond.”

Under the bill, if a developer seeks a temporary certificate of occupancy for a development, unit, building, or phase of development, a municipality may require the developer to furnish a “temporary certificate of occupancy bond” in favor of the municipality in an amount equal to 100% of the cost of installation of improvements which remain to be completed and which are required to be completed prior to the issuance of the permanent certificate of occupancy. Upon posting a “temporary certificate of occupancy bond,” all sums remaining under a performance guaranty would be released because the new bond would adequately ensure completion of the improvements.

In addition, the bill authorizes a municipality to require a developer to furnish a “safety and stabilization bond,” which would provide the municipality a source of funding to return property to a safe and stable condition or to implement measures to protect the public from access to an unsafe or unstable condition in case the developer commences construction but then ceases all work on the development for more than 90 consecutive days.