Assembly Bill 1425/Senate Bill 3233, which was signed into law on January 15, modifies the requirements for furnishing performance and maintenance guarantees under the Municipal Land Use Law and modifies the current limitations on the collection of inspection fees.

Under the law, a municipality will only be able to require developers to post performance guarantees to cover improvements being dedicated to a public entity.

This law favors developers. It reduces the bonding cost because it narrows the categories of items that are eligible to be bonded.

It eliminates the following types of improvements from the list of improvements that may be subject to a performance guarantee under current law: culverts, storm sewers, erosion control and sedimentation control devices, other on site improvements and landscaping. This provision further reduces bonding costs.

The law further provides that provides a municipality may require a performance guarantee for privately owned perimeter buffer landscaping.

The law alters the requirement for maintenance guarantees. A municipality may only require a maintenance guarantee to be posted for the limited bonded improvements and specific private storm water management improvements.

The law authorizes municipalities to require two additional types of guarantees:

1. A temporary certificate of occupancy bond; and
2. A safety and stabilization bond.

The law also alters municipal inspection fees.

Under current law, a developer must reimburse a municipality for reasonable inspection fees incurred for the inspection of improvements with a cap except for extraordinary circumstances of 5% of the cost of improvements.

This law eliminates the inspection fee limitation if required inspection costs are determined to exceed the 5% amount and even authorizes those inspections to occur without the additional funds being placed in escrow.

This part of the bill will increase a developer’s cost and removes the “extraordinary circumstances” standard that needs to be met in order to for a municipality to exceed the 5% cap on inspection fees.

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