Courts Are Open For Developer Seeking Release of Performance Bonds

February 20, 2013 | No Comments
Posted by Paul Schneider

Developers in New Jersey often find it difficult to secure release of performance guarantees.  Increasingly developers seeking release of a performance guarantee are met with a never-ending round of punch lists and delays.  The Municipal Land Use Law (MLUL) requires that punch lists be limited to the improvements specifically covered by the performance guarantee.  Yet towns often refuse to release performance bonds when faced with homeowner complaints notwithstanding that those complaints are unrelated to the bonded improvements.  While the MLUL provides strict statutory deadlines for a governing body to act upon a request for release of performance guarantees, and allows the award of attorney’s fees to the developer when a municipality fails to act in a timely manner, trial courts are often reluctant to hold a town’s feet to the fire.

Fortunately, a recent decision of the Appellate Division of  the Superior Court makes clear that developers can get relief through the courts when a town fails to abide by the law.  In CJS Investments, Inc. v. Township of Robbinsville, the developer requested release of performance guarantees and the municipal engineer issued a report concluding the developer had satisfactorily completed all of the guaranteed improvements  Yet some of the homeowners in the development had complaints about matters unrelated to the bonded improvements and the Township Council failed to act, contending that the engineer’s report was not sufficiently detailed. The developer sued and the trial court determined that under such circumstances, the MLUL requires that the court order the Township Council to release the performance guarantees.  The court also awarded the developer attorney’s fees.

In upholding the trial court’s decision, the Appellate Division determined that where the engineer approved all of the improvements and recommended release of the performance guarantees in their entirety, such a report is sufficient to trigger the mandatory time limits for the governing body to act spelled out in the statute.  When faced with a recalcitrant municipality, developers may secure relief through the courts.

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