United States: Developers Who Elect Not To Pay Comprehensive Permit Fees In Full Proceed At Their Peril

The Massachusetts Appeals Court issued an opinion on August 29, 2016, that has significant ramifications for developers seeking Comprehensive Permits for affordable housing projects under chapter 40B of the Massachusetts General Laws ("Chapter 40B"). In Zoning Board of Appeals of Hanover v. Housing Appeals Committee, 90 Mass. App. Ct. 111 (2016) ("Hanover Woods"), the Appeals Court addressed at what point a Chapter 40B application is deemed filed with a zoning board of appeals. Timing is critical because the Housing Appeals Committee ("HAC") cannot order a board of appeals to grant a Comprehensive Permit or to modify or remove conditions to the issuance of a permit if, before the receipt of the application, the municipality satisfied one or more of the Methods to Measure Progress Toward Local Affordable Housing Goals defined in 760 CMR 56.03 (the so-called "safe harbors"). One such safe harbor applies when the Department of Housing and Community Development (the "DHCD") has certified a municipality's compliance with the goals of an approved Housing Production Plan. See 760 Code Mass. Regs. §§ 56.03(1)(b) & (4).

The developer in Hanover Woods submitted an application for a 152-unit development to the Hanover Zoning Board of Appeals (the "ZBA") on October 22, 2009, but the developer only partially paid the ZBA's $250 per unit ($38,000) application fee because it believed that the fee was unreasonable. Shortly thereafter, on December 1, 2009, the DHCD certified the Town of Hanover's compliance with its Housing Production Plan, qualifying the Town for one of the safe-harbors. The ZBA informed the developer of the certification and resulting safe harbor and asserted that it would not deem the developer's application complete until the developer paid the application fee in full. The developer then paid the remainder of the fee on December 3, while reserving its right to challenge the reasonableness of the fee and asserting that its application should be deemed to have been complete when submitted on October 22.

The developer next filed an interlocutory appeal with the HAC challenging the ZBA's position. The HAC determined that the $38,000 fee was reasonable because it was consistent with Hanover's fee for a subdivision application. In the Matter of Hanover Zoning Bd. of Apps. v. Hanover Woods, LLC, HAC No. 10-02 (June 21, 2010); 760 Code Mass. Regs § 56.05(2) (allowing local filing fees "consistent with subdivision, cluster zoning, and other fees reasonably assessed by the municipality").

However, the HAC also determined that the developer's application should have been deemed filed when the ZBA first received it on October 22, before the Town had attained the safe harbor, holding that the developer's failure to pay the entire filing fee did not invalidate the application. After a few procedural twists and turns, including an increase in the number of units requested, the HAC ultimately ordered the ZBA to issue a Comprehensive Permit to the developer for a 200-unit. Hanover Woods, LLC v. Hanover Zoning Bd. of Apps., HAC No. 11-04 (Feb. 4, 2011). The Superior Court affirmed the HAC's decision and the ZBA appealed to the Appeals Court.

The Appeals Court reversed the Superior Court and HAC, ruling that that the application was not complete until the developer submitted the full filing fee. The DHCD regulations require that an application provide a "complete description of the project" containing certain specific items of information, but further provide that the "[f]ailure to submit a particular item shall not necessarily invalidate an application." 760 Code Mass. Regs. § 56.05(2). The HAC found this regulation to imply that, where a developer pays less than the full amount of the filing fee required by the ZBA and challenges its reasonableness, an application is not invalid. The Appeals Court disagreed. The Court explained that the "[f]ailure to submit a particular item [related to the description of the project] shall not necessarily invalidate an application" but that regulation "does not spatially or logically encompass the filing fee, which appears in a separate paragraph."

According to the Court, the project description and filing fees are separate aspects of the Comprehensive Permit application. The Appeals Court also reasoned that the filing of a Comprehensive Permit application begins a costly review process for a municipality such that "[i]t is unreasonable, and frustrates the purpose of the act, to require a municipality to mobilize its resources to entertain a Comprehensive Permit petition without full payment of the applicable filing fee." According to the Appeals Court: "The safest procedure is to pay the full fee while simultaneously requesting a reduction, which can be refunded if the challenge is successful," adding, "the developer who fails to pay the full filing fee with its application does so at its peril." Because the developer did not do that here, the Appeals Court remanded the matter to the ZBA to allow it to reconsider the application with the benefit of safe harbor.

The procedure for requesting a fee reduction is not well-defined. The Appeals Court found that a zoning board "is entitled to exercise reasonable discretion" in how the board entertains requests from a developer seeking a fee reduction or challenging the reasonableness of a fee, and suggests that a board "might" entertain motions for a fee reduction filed with the application package. However, the Court emphasized, "absent a settled mechanism" for settling such disputes, a developer who fails to pay the full application fee does so at its own risk.

Thus, the key takeaway from this decision is that, while zoning boards may not charge an unreasonable fee, absent a "settled mechanism" to the contrary, a zoning board may, at least in the ordinary case, refuse to take any action on an application until a developer pays the application fee in full. Accordingly, a developer wishing to ensure that its application is accepted and deemed complete before a municipality attains a safe harbor must pay the full application fee along with its application even if the developer believes the application fee is excessive or unreasonable. Developers should, of course, also ensure that they correctly calculate the amount of the fee. If a developer seeks to challenge the reasonableness of the fee, it should first request a reduction of the fee from the zoning board, and if that fails, it should challenge the fee in an appeal to the HAC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Joel D. Rothman
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