By: Michael J. Lipari, Esq.

Today, Acting Governor Kim Guadagno signed a bill into law that extends a prior moratorium on the 2.5 percent non-residential development fee. This law (Legislative Bill S-2974) extends the moratorium for an additional two years, which should provide relief to commercial real estate developers.

Background on the 2.5 Percent Fee
On July 17, 2008 legislation known as “A-500” (otherwise referred to as the “Roberts Bill”) was signed into law, creating the “Statewide Non-residential Development Fee Act,” (the “Fee Act”), which set a statewide affordable housing development fee of 2.5 percent for non-residential development. The fee was calculated on the basis of the equalized assessed value of the project. As of July 17, 2008, municipalities were permitted to retain such fees in their own housing trust funds, and spend them, provided that they were before a court or under the jurisdiction of the Council on Affordable Housing (“COAH”) seeking approval of a fair share plan and a spending plan for affordable housing development fees.

As a result of the ongoing economic crisis and collapse of the real estate market, the New Jersey Legislature passed the New Jersey Economic Stimulus Act of 2009, which was signed into law on July 28, 2009. The Stimulus Act amended the Fee Act to suspend the 2.5 percent non-residential development fee until July 1, 2010, provided that non-residential developers obtain preliminary site plan or subdivision approval by that date, and subsequently obtain building permits by no later than January 1, 2013.

Extension of the Moratorium
Since July 1, 2010, qualifying projects have been subject to the 2.5 percent fee. The signing of S-2974 amends the Stimulus Act and extends the moratorium to July 1, 2013. Thus, projects which have or receive preliminary or final site plan approval prior to July 1, 2013 are again exempt from the 2.5 percent fee provided that building permits are obtained by December 31, 2015.

This law also extends the moratorium back to July 1, 2010, allowing for the reimbursement of fees paid in the interim, unless the fees have already been spent on an affordable housing project. If the 2.5 percent fee has already been paid, the developer has 120 days to claim a refund from the municipality, provided that the money has not been spent. If the money has already been spent, the developer is not entitled to any refund.