Articles Posted in Construction Law

Towns Assess Impact Fees on Developers  to Fund Infrastructure

If you are buying a home in a new development, your purchase price may reflect fees paid by the developer to fund the paving of the street in front of your house, and other municipal services. The developer may be able to contest such fees, saving you money. Many towns are assessing impact fees on developers to mitigate the additional costs associated with development, considering options for funding new roads, water and sewer facilities, street lighting, schools, and other support structures.  Impact fees are typically imposed upon developers or builders at the time the municipality issues a building permit. The fees are then used to finance needed capital improvements and the expansion of existing facilities. In Massachusetts, Home Rule authority under the state constitution as well as state statutes provide the basis for cities and towns to assess fees in connection with the provision of municipal services. Impact fees to pay for such civic enhancements have been held constitutionally valid.

Courts Scrutinize Who Benefits from Impact Fees

Pursuant to Emerson College v. City of Boston, Massachusetts courts apply an impact fee analysis that limits the ability of municipalities to allocate the public infrastructure costs associated with new residential development. In that case, on appeal from a property owner’s protest at being charged a fee by the City of Boston for enhanced fire protection, the Supreme Judicial Court of Massachusetts struck down the impact fee, ruling that it was not voluntary and provided no particularized benefit to the payer of the fee. In the 20 years since Emerson College, Massachusetts courts have continued to strike down these fees.

In the case of Greater Franklin Developers Association v. Town of Franklin, the Appeals Court considered the developers’ challenge to a “school impact fee” charged to them when they applied for permits to start construction on a new residential project. The Town of Franklin asked the court to find that the need for additional classroom space was directly related to projected growth. The court declined to do so, finding instead that the Town’s argument failed the Emerson College test, since the “benefit of expanded school facilities is not particularized to the fee payers” but enhances “the entire community.”

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The Massachusetts construction industry has been rocked by a new law, passed by the legislature as Senate Bill 2271.

The law reduces the amount of money property owners and developers can withhold from general contractors who in turn withhold from subcontractors working on their building projects, a practice called “retainage.”

Owners and developers claim to need the leverage that retainage gives them over subcontractors especially toward the end of a project to ensure that the subs will stay on the job and finish their work, especially if problems arise.

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