Providence Business News, September 13, 2010
The General Assembly has taken action to preserve one of the most valuable benefits of real estate ownership�permits to develop or alter the property�in response to the housing collapse and the banking crisis, which put these permits at risk of expiring before they could be used.
It has done so not just once, but twice in recent months, and its second effort was an improvement over its first, which was pretty good in and of itself.
Although this legislation first passed late last year, many people are apparently still unaware of this significant benefit, given the low key manner in which it was done.
That legislation provided that permits which were in effect on November 9, 2009, the date of the legislation�s passage, would not expire until June 30, 2011, extending the life of many permits ranging from environmental permits to zoning and subdivision approvals.
That was good legislation, but in June of this year the General Assembly did even better. First, it included more permits that would be protected from expiring. It did this by including not just permits in effect on November 9, 2009 but it added for protection permits issued between November 9, 2009 and June 30, 2011.
Secondly, it provided a greater extension for expiring permits. The first legislation extended all permits expiring after November 9, 2009 until June 30, 2011.
The most recent legislation provided that the expiration date for permits in effect on November 9, 2009 �will be recalculated as of July 1, 2011 by adding thereto the number of days between November 9, 2009 and the day on which the permit or approval would otherwise have expired�.
As for permits issued between November 10, 2009 and June 30, 2011, the expiration dates �will be recalculated as of July 1, 2011 by adding thereto the number of days between the day the permit or approval was issued and the day the Permit or approval otherwise would have expired.�
The rationale of the General Assembly was both perceptive and dead on target. The legislation first enacted notes that given current economic conditions, there is little or no demand for new construction and that the banking crisis has made it difficult for developers to obtain financing for new projects.
The legislation goes on to note that developers have spent considerable money for these permits, which are likely to expire by their terms before the economy improves and the banking crises eases. Accordingly, the solution is to extend the term of the permits until a time when it is hoped conditions will have improved.
The General Assembly correctly realized that permits can be very costly to obtain, involving substantial engineering, legal and expert witness fees. Time is also an issue; it can take well over a year to permit a large project.
Not only are the permits often costly and time-consuming to obtain, but permits to change the use of land can often represent the greatest value in the development process. Many developers have said that the value of the change of use in a property, as for example, from an agricultural use to a residential use, can represent the largest component of value in the development project. Permits allow that change of a legally permitted use.
Permits are therefore valuable. But expired permits are worthless, and seeking new permits either may be impossible, or too costly.
Permits extended include permits pertaining to the development of property issued by the Department of Environmental Management and the Coastal Resources Management Council, and permits issued by cities and towns under subdivision ordinances and zoning ordinances.
The extension of permits also benefits ordinary homeowners, not just professional developers. For example, a homeowner who obtained a zoning variance to construct a new garage but then couldn�t get the financing to build the garage would benefit from extension of its permit. Hopefully, before the permit expires more lenders will be more willing to lend for such projects.
Given the interest of the General Assembly in this issue, if the economy does not improve as hoped, perhaps another across the board permit extension will be in order.
But let’s hope that will not be necessary!
Mr. Boehnert is a Providence attorney engaged in the practice of real estate and environmental law. He writes a blog on real estate and environmental law issues at rhodeislandpropertylaw.com.