On January 15, during his last day in office, Gov. Chris Christie signed into law Assembly Bill 1425/Senate Bill 3233, which implements major reforms to the requirements for the posting of performance and maintenance guarantees under the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 et seq. The new law is effective immediately. Municipalities are now constrained from requiring performance and maintenance guarantees for private improvements in a development.

Municipalities are first required to enact an ordinance in order for performance guarantees to be posted by developers for only the following limited site improvements:

* Publicly Dedicated Improvements. Under the new law, only publicly dedicated streets, pavement, gutters, curbs, sidewalks, street lighting, street trees, surveyor monuments, water mains, sanitary sewers, community septic systems (not private septic systems), drainage structures, public improvements of open space, and any grading necessitated by any of the foregoing public improvements can be included within the amount of the performance guarantee;

* Perimeter Landscape Buffers. In addition to publicly dedicated improvements, municipalities can only require that perimeter landscape buffers be bonded, not landscaping that is located within the interior of the site that is privately owned and maintained.

* Safety/Stabilization Costs. This is commonly known as a site "restoration" guarantee, which can be posted as a separate guarantee or as a line item within the performance guarantee itself. The purpose of this guarantee is to provide the municipality with a source of funds to protect the public from access to an unsafe or unstable condition onsite. The amount of this guarantee is $5,000 when the bonded improvements are $100,000 or less. If the bonded improvements are over $100,000, then the amount is $5,000 for the first $100,000 and 2.5% of the bonded improvement costs in excess of $100,000 up to $1 million, plus 1% of the bonded improvement costs in excess of $1 million. This guarantee, if not included within the overall performance guarantee, must be released by the municipality once the developer posts its performance guarantee. Additionally, the municipality can only "call" the safety/stabilization cost guarantee after site work has stopped for a period of 60 days or longer and the municipality has sent a default notice via certified mail to the developer.

Developers also have the option of posting a Temporary Certificate of Occupancy (or "TCO") guarantee allowing them to get a TCO for the project. Upon posting a TCO guarantee, the municipality is required to release the existing performance guarantee or safety/stabilization cost guarantee and the TCO guarantee would bond just the improvements (detailed above) that have not yet been completed until a permanent certificate of occupancy is obtained.

Maintenance guarantees now must equal no more than 15% of the costs of both the improvements now covered under the performance guarantee being released as well as the cost of private storm water management facilities (including basins, in-flow and water quality structures within the basins, and the outflow pipes and structures.). Maintenance guarantees must now be automatically released by the municipality after 2 years.

The inspection fees paid to the municipal engineer for site inspections are still 5% of the costs of both the publicly dedicated site improvements that are the subject of the performance guarantee and the private site improvements that are now not subject to the performance guarantee. The important change here is now the site inspections cannot automatically stop once the escrow is depleted. The municipality has to now send an escrow replenishment request to the developer first via certified mail outlining why they need the additional escrow.

For further information about these important changes to the bonding requirements contained in the Municipal Land Use Law, please contact either Steve Nehmad, Esquire or Keith A. Davis, Esquire at (609) 927-1177.