Construction Permitting Reforms Aim High but May Fall Short of Developers’ Expectations

Published on: October 22, 2006

The development community greeted the permitting reform bill that Gov. Mitt Romney signed into law a few weeks ago with relief and high hopes that it will eliminate many of the costly and time consuming legal logjams in which Massachusetts real estate projects regularly become ensnared. But a realistic review of the law and its likely effects suggests that developers would be well-advised to curb their enthusiasm and scale back their hopes for sweeping changes in the permitting appeals process.

Those hopes are pegged primarily to five provisions of the bill:

  • The creation of a special session of the Land Court to hear most appeals involving real estate projects.
  • The imposition of time limits within which appeals must be heard and decisions rendered.
  • The addition of an “at risk” procedure allowing developers to proceed with a development after an appeal of a special permit has been filed.
  • A revision of Chapter 43D, allowing communities to accelerate the permitting process for “priority” development sites.
  • Restrictions on Chapter 91 environmental challenges.

Too Much Risk

The “at risk” provision, which has gotten most of the attention thus far, is likely to have the smallest impact on the appeals process. Under the old rules, if abutters appealed the grant of a special permit, developers could not start work or continue work that had already begun until the appeal was resolved by the courts. The new statute allows builders to proceed “at risk” while the appeal is pending. This provision applies only to appeals of special permits; it does not include variance appeals. Even so, supporters think it will speed the progress of many projects that would otherwise be stalled for months, if not years. But that seems unlikely, because the “risk” in the at risk provision is considerable — the possibility that a court will ultimately rule in favor of the abutters, forcing the developer to alter the project and possibly to tear it down.

It is hard to imagine that this is a risk many developers will want to take; certainly it is not something that I would lightly recommend to any of our developer clients. But even if there are builders whose risk tolerances are high enough — and whose blood pressures are low enough — to accept that considerable down side, it is unlikely the lenders financing their projects would allow them to do so. And it is even more unlikely that anyone would purchase an at risk property while litigation is pending.

For developers who are a) undeterred by the risks and b) financing their own projects, there are other reasons for not exercising the “at risk” option. Abutters who challenge a development do not usually expect to block it permanently; more commonly their goal is to extract concessions — either in the form of financial contributions or project alterations — from the developer, which is usually how these cases tend to resolve themselves. But developers who proceed after an appeal has been filed are signaling that they are not willing to compromise, thus eliminating any incentive the abutters might have to drop their appeal.

Abutters have nothing to lose and everything to gain by continuing the litigation, while developers have everything to lose should a court ultimately rule against them. Developers who decide to build through a pending appeal may actually lose or at least weaken their negotiating leverage, potentially prolonging the litigation and increasing their legal costs.

Potential for Relief

Other provisions of the permitting reform law don’t have these considerable risks, and some have the potential at least to bring a measure of the relief developers seek. Most promising is the accelerated timetable for processing permitting appeals. The new law creates a special session of the Land Court to hear all eligible appeals, defined as those involving 25 or more residential units, or the construction or alteration of buildings containing 25,000 sq. ft. of floor space or more. The idea is to target the larger projects that are most often caught up in protracted litigation.

Under the new law, either party can move to transfer an appeal brought in Superior Court to the Land Court’s permitting session, where it will be assigned to a single judge from beginning to end. This change alone could be helpful, eliminating the time required for the succession of judges who rotate through Superior Court sessions to get up to speed on complicated cases.

Judges in the permitting session will assign cases, based on their complexity, to 6-, 9-, or 12-month tracks – the time within which they must be heard. The judges will also be required to render final decisions on permitting appeals within two, three, or four months following the submission of a motion for summary judgment or the end of a trial.

Additionally, the new law expands the Land Court’s jurisdiction to hear certain tort related claims and counterclaims, which frequently accompany permitting disputes. This change could be significant, as savvy lawyers, with tougher zoning cases, would often add tort claims or counterclaims in an effort to have the cases removed to the Superior Court, where they might drag on longer or be heard by judges with less land use experience.

But again, the expectations may exceed the results, because the new law contains similar loopholes, among them: A provision specifying that any zoning case in which a party asserts a legitimate claim to a jury trial will be transferred to Superior Court. So attorneys who want to get their cases out of the Land Court may still have a mechanism for doing so.

Helpful Deadlines — Perhaps

This is not to suggest that the Land Court changes have no merit. Given that development delays can be not only costly but fatal, there is no question that the new requirements for scheduling and deciding cases could be helpful, spelling the difference in some cases between capitalizing on a strong market and missing it entirely. If this new system works, it could definitely make a difference.

But that “if” must be written in capital letters. Imposing time limits on judges is one thing; enforcing them is another. And there are serious questions about whether the Land Court’s dedicated permitting session will have the capacity to handle the case load that is likely to come its way.

Priority Sites

The advantages of the 43D changes are less ambiguous. The new law allows cities and towns to offer a streamlined permitting process to developers of “priority sites” the communities would like to see developed. Under this process, developers would identify all the permits they need and submit them to the local permitting authority in a single package; the community would commit to review the package and issue a final decision covering all the permits within 180 days. This streamlined approval process (applicable to sites zoned for commercial or industrial developments containing a minimum of 50,000 sq. ft. of floor area) is designed to give communities a tool they can use to expand their commercial tax base and to develop underutilized sites.

Hardly a Blip

The 43D changes may not be widely used, but they will probably be effective where applied. The changes in the Chapter 91 environmental appeals process, on the other hand, aren’t likely to have much effect at all. This provision of the permitting reform law will require that at least 5 of the 10 individuals named as plaintiffs in a 10-taxpayer suit challenging developments on environmental grounds, must be residents of the community in which the development is planned. The goal is to prevent environmental groups, which typically initiate lawsuits of this kind, from drawing all the plaintiffs from within the ranks of their organizations. As a practical matter, though, it won’t be all that difficult for these groups to find five residents willing to sign on as plaintiffs. In terms of the likely impact on the permitting process, this provision isn’t likely to register much of a blip.

While the permitting law as a whole may create something more than a blip on the development landscape, the effects will probably be a lot closer to a tremor than an earthquake – noticeable on the ground but unlikely to move the earth. Developers who are anticipating dramatic relief from the permitting headaches that have plagued them will almost certainly be disappointed. On the other hand, they will see at least some improvements on the margins of the appeals process, and any improvements, however marginal, will be welcome.