RHODE ISLAND

In late 2009, in response to a weakened real estate market and the reluctance of financial institutions to lend money for real estate development projects, the Rhode Island General Assembly (the “Legislature”) passed a bill that “tolled” the expiration of certain permits and approvals issued by local planning and zoning boards, as well as permits issued under any state statute or related regulation for the development of property, including permits issued by the Rhode Island Department of Environmental Management (“DEM”) and the Rhode Island Coastal Resources Management Council (“CRMC”) (the “Tolling Statute”). The Legislature recently amended the Tolling Statute to clarify what permits the Tolling Statute applies to and how to calculate the expiration period for such permits and approvals.1 The Tolling Statute is an important measure that requires action by property owners and developers who wish to extend the expiration date of certain land use and development related permits and approvals.

Below is a brief summary of the Tolling Statute as recently revised:

1. What does “tolling” mean?
   • In its recent amendments, the Legislature explained that “tolling” means “the suspension or temporary stopping of the running of the applicable permit or approval period.” In other words, the legislation (to be explained in greater detail below) provides a grace period for qualifying permits during which the clock stops running and the applicable expiration date is postponed. See RIGL §45-23-63.1(a); RIGL §45-24-61.1(a); RIGL §42-17.1-2.5(a); and RIGL §45- 23-6.3(a).
2. What permits or approvals qualify?
   • The Tolling Statute applies to (i) permits or approvals issued pursuant to local regulations promulgated under Rhode Island General Laws (“RIGL”) Section 45, Chapter 23 (the State Subdivision Enabling Act) – a non-exhaustive list of examples include: approval of an administrative subdivision, master plan approval, preliminary plan approval, and final plan approval; (ii) permits or approvals issued pursuant to local regulations promulgated under RIGL Section 45, Chapter 24 (the State Zoning Enabling Act), which would include, for example, dimensional variances and special use permits; and (iii) permits or approvals issued under any state statute or related regulation for the development of property, including permits and approvals issued by DEM and CRMC (See RIGL §17.1-2.5 and RIGL §46-23-6.3), such as an on-site wastewater treatment permit (DEM), a preliminary or an Assent (CRMC). However, the Tolling Statute applies only to permits or approvals that were either in effect on November 9, 2009 or issued between November 9, 2009 and June 30, 2011. The Tolling Statute does not revive permits or approvals that expired prior to November 9, 2009.
3. How does one calculate the new expiration date?
   • For a permit that was in effect on November 9, 2009, the expiration date for the permit is calculated by adding to June 30, 2011 (a date established by the Tolling Statute) the number of days between November 9, 2009 and the date on which the permit would have expired if the Tolling Statute had not been enacted.
   • Example: On September 1, 2009, XYZ, Corp. obtains a dimensional variance from the local zoning board in connection with the development of a shopping center. Pursuant to the Town’s Zoning Ordinance, a dimensional variance expires 365 days from the date on which it is granted unless the applicant exercises the permission granted or receives a building permit to do so and commences construction and diligently prosecutes the construction until completed. In this case, unless XYZ, Corp. exercises the permission granted or receives a building permit to do so and commences construction by September 1, 2010, the approval will expire. However, because the Tolling Statute applies, the expiration date is extended to April 21, 2012 (add the number of days between November 9, 2009 and September 1, 2010 (296 days) to June 30, 2011).
   • For a permit issued between November 9, 2009 and June 30, 2011, the expiration date for the permit is calculated by adding to June 30, 2011 the number of days between the date on which the permit was issued and the date on which the permit would have expired if the Tolling Statute had not been enacted.
   • Example: Let’s change the above hypothetical such that the local zoning board issues to XYZ, Corp. a dimensional variance for its project on January 15, 2010. In this case, the approval would expire (in the absence of the Tolling Statute) on January 15, 2011 (i.e. 365 days from the date on which the zoning board granted the approval). However, under the Tolling Statute, the variance approval would not expire until June 29, 2012 (add the number of days between the date on which the permit was issued and the date on which the permit ordinarily would have expired in the absence of the Tolling Statute (in this example 365) to June 30, 2011).
4. Is there a notice requirement?
   • The Tolling Statute explains that “said tolling need not be recorded in the land evidence records to be valid, however, a notice of the tolling must be posted in the municipal planning department and near the land evidence records.” Presumably, the reference to land evidence records and municipal planning department means the planning department and land evidence records of the town or city in which the real estate is located. Therefore, the statute requires a permit holder, whose permit is eligible for tolling under the Tolling Statute, to post in the planning department of the town or city in which the land is located, as well as near the land evidence records, a notice of the permit and the applicability of the Tolling Statute. Unfortunately, the Tolling Statute does not clearly explain what the required notice should say, what is meant by “near the land evidence records,” whether the posting of the notice must be approved or authorized by a municipal official, or what the consequences are of failing to post a notice under the Tolling Statute. The courts will likely address these questions as more property owners and developers seek the protections afforded by the Tolling Statute.
   • In sum, the Tolling Statute grants to property owners and developers the ability to preserve their existing permits (and any extension rights provided under applicable statutes and regulations) and obtain additional permits or approvals, without having to commence construction or meet other benchmarks for vesting that do not make sense (or are impossible) given current difficult economic conditions.

MASSACHUSETTS

In Massachusetts, the proposed Permit Extension Act of 2010 (the “Act”) is currently included in the Senate’s economic development bill. The specific provisions of the Act are found in Section 122 of Senate Bill No. 2345: An Act Relative To Business And Job Growth In The Commonwealth, sponsored by Senate President Therese Murray. The Act would assist in stimulating economic development in Massachusetts by facilitating certain shovel ready, permitted and approved development projects (residential, commercial and industrial) that have stalled for any reason, including due to the recent credit crisis.

If enacted, the Act would essentially suspend (“toll”) the permit expiration term on qualified projects that were approved as of the period beginning January 1, 2008 through January 1, 2011 by three (3) years from the original approval date. Some examples of the types of permits or approvals that would toll pursuant to the Act are any permit, order, certificate, license, certification, permission, determination, interpretation, exemption, variance, waiver, building permit, or other approval or determination of rights from any municipal, regional or state governmental entity.

Unfortunately, the House voted to eliminate the Act from its economic development bill on July 7th, but the Act is still included in the Senate’s economic development bill which must be passed by July 31st. The Act will now be considered by a conference committee paneled by Senators Karen Spilka, Benjamin Downing and Bruce Tarr and Representatives Brian Dempsey, Garrett Bradley, and Vinny deMarcedo.

Passage of the Act is a key element in the future success of many shovel ready projects throughout the Commonwealth by automatically extending permits and approvals that were in effect at anytime from January 1, 2008 – January 1, 2011 by three years. If passed, the Act would benefit the commercial real estate industry, since reapplication for permits (along with the payment of new fees) that had previously been granted can result in years of delays, render permitted projects financially infeasible, or increase the likelihood that projects will be abandoned.

If you are interested in the success of this Act, you should contact Speaker Robert DeLeo and House Way & Means Chair Charles Murphy as well as the House conferees to communicate your support for this bill, by indicating that the Permit Extension Act, Section 122 of the Senate Economic Development Bill (SB2380), should be included in the final conference committee report.

NEW HAMPSHIRE

Similarly, New Hampshire took steps last year to protect developers who received permits and approvals for projects which have stalled due to the recession. Under New Hampshire law, once approved, a project is exempt from adverse changes in local zoning and land use ordinances provided that construction is started and completed within certain specified deadlines. RSA c. 674:39 provides that approved site plans and subdivision plans are “vested” against future changes in most zoning and land use regulations provided active and substantial development begins within twelve (12) months from date of approval and the project is substantially completed within four (4) years. Recently, these time limits have caused problems in situations where approved projects have not proceeded due to lack of financing, loss of tenants, and other problems related to the economy. These stalled projects were at risk of changes in land use ordinances that could restrict, reduce or otherwise negatively impact the project. To protect the significant investment of the real estate development community in land use entitlements, the New Hampshire legislature passed Senate Bill 93 which, for certain projects, extends the above-described vesting deadlines. This new law provides that for projects approved on or after January 1, 2007 and before July 1, 2009, the twelve (12) month period is extended to thirty-six (36) months; and for projects approved on or after July 1, 2005 and before July 1, 2009, the four (4) year period is extended to six (6) years. Many, though not all, municipalities are taking the position that the new law also automatically extends the expiration dates of permits and approvals that would have otherwise expired within the thirty-six (36) month time period. For projects approved within the above-noted time periods that want to take advantage of the extended deadlines, we recommend seeking a confirmatory letter from the relevant planning board.