Members of New Jersey’s development community are wondering: “Is the permit extension party over?” For the last six years, approved development projects have received the protection of the New Jersey Permit Extension Act (PEA), which automatically tolled the expiration of numerous approvals in existence since January 1, 2007 through December 31, 2014. However, the automatic extension benefits of the PEA may soon end. Unless legislation is approved in the coming weeks, the PEA is set to terminate at the end of this month, placing projects which have not commenced construction at risk because their approvals may lapse at the same time or soon after.

First enacted in the fall of 2008, the PEA was in response to what the New Jersey Legislature described as a “crisis in the real estate sector” of the state economy brought on by the severe national recession. Its purpose was to toll or suspend the running of various development approvals originally through July 1, 2010. As the economic downturn lingered on, the statute was amended in 2010 to extend the tolling of approvals to December 31, 2012 and again in 2012 to extend the tolling protections for another two years until December 31, 2014.

The PEA automatically tolls or suspends the running of the period of any “approval,” as defined in the statute, which is or was in existence during the “extension period”(defined as January 1, 2007 through December 31, 2014) until the conclusion of the extension period. With some significant exceptions, the majority of municipal approvals (such as subdivision, site plan, conditional use authorizations and variances) granted under the Municipal Land Use Law qualify for the PEA’s tolling protection, as well as approvals issued by county boards, the New Jersey Department of Environmental Protection, the New Jersey Department of Transportation, county soil conservation districts, the Delaware and Raritan Canal Commission and other governmental agencies. In accordance with the tolling provisions of the PEA, no governmental approval is extended more than six months beyond the end of the extension period, or until June 30, 2015. The PEA does not shorten the duration of any approval that otherwise would apply in the absence of the PEA. Consequently, any covered approval granted or that was scheduled to expire after January 1, 2007 was automatically extended by the PEA through December 31 of this year.

In October, identical bills were introduced in both houses of the Legislature (Assembly Bill No. 3815 and Senate Bill No. 2551) which further extend the tolling period under the PEA until December 31, 2016. The same six-month limitation would still apply to the tolling effect of the PEA on any covered approval following the conclusion of the extension period (i.e., no approval would be tolled beyond June 30, 2017). As of this writing, no committee hearings have been scheduled on the bills, which raises doubt about when, or even if, any PEA extension legislation will be timely passed by the Legislature and signed by the Governor.

Given the uncertainty that the PEA will be further extended beyond 2014, what should a developer of an approved, unbuilt, project be doing? We strongly recommend that each approval of the project be carefully evaluated to determine (i) its issuance date, (ii) its new/current expiration date without the tolling under the PEA, and (iii) whether other extensions are available under applicable statutes or regulations of the approval and commence the necessary steps to obtain such extensions. The PEA provides that its tolling does not prohibit the granting of such additional extensions of approvals afforded under existing law when the PEA expires. See N.J.S.A. 40:55D-136.4a. In many cases, applications for extensions must be filed before the expiration date of an approval to be considered a valid request.

If seeking more extensions is not an option, then developers should consider either starting construction to avoid expiration of a permit or filing an application for a new permit. The latter approach raises a potential issue. A new application will be subject to compliance with any new regulations or standards adopted since the original approval was granted. This might require substantive revisions to the originally approved development plan, which in turn could affect the validity of other existing approvals.

The PEA “party” may soon be over. With prompt and diligent analysis and action, however, a developer can attempt to mitigate the post-PEA “hangover” effects on existing project approvals. Please contact the author should you have any questions about this article or for assistance in determining the status of existing approvals tolled by the PEA.