In 2009, the General Assembly passed legislation giving developers more time to finish projects before the state and local permits they had obtained expired. In January, the state’s second highest court applied this law to force an eastern N.C. sewer system to continue an agreement it claimed had expired three years ago, so that a townhome project could be completed.

The state Court of Appeals ruled that there’s a public interest in making sure that development projects are completed after they have been approved and work has begun. Local governments cannot force developers to pay additional fees and go through redundant reviews if developers have been unable to finish a project as scheduled.

Town and Country Developers at Wilmington Inc. wanted to build an 88-unit townhome subdivision in Brunswick County. To do so it, it had to jump through a number of hoops. To get funding, it obtained a loan from Regions Bank. Town and Country also had to obtain a sewer connection. To do so, on Jan. 23, 2006, it applied for service with the Southeast Brunswick Sanitary District.

The sanitary district required that Town and Country pay a $264,000 impact fee as a condition of the application. It also required that Town and Country had three years “to complete the project as described in [the] application or the allocation for service capacity [would] expire and any proceeds [Town and Country had] paid for this allocation approval [would] be non-refundable.”

Town and Country defaulted on its loan in mid-2008 and the bank foreclosed.

Before going belly up, Town and Country had completed work on the sewer system for the subdivision, which received state Division of Water Quality certification. It also was able to finish a few townhomes, for which it was able to obtain certificates of occupancy from the county.

The Southeast Brunswick Sanitary District provides service to these residences.

Cambridge Southport LLC bought the subdivision from Regions Bank on Dec. 31, 2009, and intended to complete the remaining units. Much to its surprise, after it completed additional units, it was unable to obtain certificates of occupancy for them. The sanitary district, which had to sign off before a certificate of occupancy could be issued, refused to do so, contending that the wastewater allocation for the project had expired Jan. 23, 2009 — three years after initial approval.

The sewer district would have no problem giving Cambridge Southport a new allocation for the remaining townhomes. To do so, however, the sewer district demanded a $648,000 fee; the $264,000 that Town and Country had paid was not credited toward that amount.

Cambridge Southport went to court, contending the sewer authority was violating a 2009 law extending the time developers have to complete projects. After a Superior Court judge ruled in favor of the developer, the sanitary district brought the matter before the Court of Appeals.

On appeal, the sewer district argued that the law extending permit approvals does not apply to it, as it had signed a contract for service with Town and Country rather than Cambridge Southport.

A unanimous appeals court did not agree.

Judge Linda McGee offered several reasons why the court reached this conclusion. The stated purpose of the act, she noted, was to encourage the completion of projects, including subdivisions, by pushing back the expiration date of state and local government approvals. The law states that it “shall be liberally construed to effectuate the purposes of this act” and states that it applies to sewer projects and sewer system allocations.

She also said that the sewer system’s argument would allow local governments in control of wastewater capacity allocation and treatment to thwart the purpose of the law.

By claiming the law did not apply, the Southeast Brunswick Sanitary District was preventing other development approvals that clearly were covered by the act. Without sewer authorization, certificates of occupancy could not be issued, the townhomes could not be occupied, and there was there was no point in doing further work to complete the subdivision.

The case is Cambridge Southport, LLC v. Southeast Brunswick Sanitary District, (11-438).