Developers brace for end of permit extension

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The heat could soon be on some Charlotte-area developers to speed up construction on projects before the end of this year.

If they don’t, it could cost them their precious building permits, which would mean wasted time and money.

It could also result in partially built projects sitting around the Charlotte area until developers get their hands on new permits.

Last year, the North Carolina General Assembly agreed to add more time to an automatic extension for active building permits.

With the real estate market in a slump, lobbyists for the construction industry had pushed for the extension to give developers, many of whom have had trouble getting financing, more time to work on their projects.

But that automatic extension goes away at the end of December, which is less than six months away.

For some, it means breaking ground on projects despite an uncertain market. For others, there might be no hope of hanging on to that permit.

“If they lose the permit, then they have to go and refile and perhaps meet new regulations that weren’t in effect previously, and that costs everybody money,” said Mark Baldwin, executive vice president of the Home Builders Association of Charlotte. “And, ultimately, that affects the end user: the homeowner.”

Here’s how permit deadlines work:

Under the state’s building development ordinance, developers have six months to start work after a permit is obtained. They have another 12 months to continue work before their next inspection is due.

In August 2009, Gov. Beverly Perdue signed the first permit extension into law. That extended the life of building permits through Dec. 31, 2010.

Any permit that was valid after Jan. 1, 2008, was included in the extension. That included permits that were in any phase of construction.

In September, state lawmakers granted more time for the extension, pushing it to Dec. 31.

Bartl said the extension stopped the deadline clock for active permits. But once the extension expires at the end of this year, any deadlines that were in effect prior to the extension will resume.

In South Carolina, lawmakers have granted an extension until 2013 to keep permits alive there. In North Carolina, though, officials, such as Jim Bartl, director of code enforcement for Mecklenburg County, doubt there will be another extension.

There is no indication that an extension is even being considered, he said.

“A year ago, the extension was pushed through but there was a lot of disagreement and arguing,” he said. “There was an agreement then that that’s the last time.”

That puts a big question mark over the future of some Charlotte projects, such as some being built by Charlotte-based development company Faison.

Tom Brasse, lot development project manager for Faison, said his company doesn’t want to lose a permit for the second phase of the Village of Aberdeen in Berewick in southwest Charlotte.

“We will move dirt to avoid losing that entitlement,” said Brasse, who is also board chairman of the Charlotte-based Real Estate & Building Industry Coalition.

The second phase of the project includes developing 90 wooded lots. Brasse said he might wait another 11 months past the extension deadline before bulldozing the site because that is how much time is left on the permit before the company must prove that work is being done on the site.

For some developers, having to apply for a new permit could be costly, as regulations passed after they were awarded their permits would suddenly affect their projects.

For Faison, that means the city’s post-construction control ordinance, new tree canopy requirements and urban street design guidelines would be applicable to the site if Faison needed another to apply for another permit, Brasse said.

“We paid ‘X’ for the land and carried it for this long, so it’s already a tight deal,” he said. “To lose density through recently passed legislation and whatever else Charlotte throws in between now and then would hurt the deal considerably. That deal would not work.”

Brasse said Faison spent more than $50,000 on the Aberdeen project for architectural plans and the permit.

A Faison project in Asheville also would likely become a reality if the permit extension expires, he said.

Linda Holden, president of Charlotte-based The Linda Construction Co., planned to convert warehouse space into 30,000 square feet of small offices with her building permit.

But the project will die unless the economy dramatically — and quickly — improves.

“I’m not doing it,” she said. “I’m going to walk out on $50,000. But it’s going to cost me a million (dollars) to do it, so I’d rather lose $50,000 and still have something left.

“I’m too old to start over, and it’s not like we’re some huge company. That’s major money to us, but I’d still rather lose that than lose the bigger money.”

Holden’s is a commercial construction company, but she also rents office space to small businesses on a month-to-month basis. Her plan was to use the new office space at 1801 N. Tryon St. to expand that part of her business.

Holden said it’s been hard to find financing. She said lenders like a project to have qualified tenants with at least a signed five-year lease before they will approve financing.

She doesn’t want to switch to longer-term leases, because it would affect her tenants, she said.

“We deal with Joe’s Plumbing and Mabel’s Health Care,” she said, referring to fictional businesses. “And they love the month-to-month leases. In fact, I don’t even like to give them long-term leases. So the banks wouldn’t do the financing on it.

“I would have to get a mortgage or up my current mortgage. Three years ago, they would have said, ‘How much do you need?’ Three years ago, the market was there for it.”

Joe Padilla, executive public policy director for REBIC, said forcing developers to redesign a site if a permit is lost would be a “huge blow to the economy.”

“We’ve got an economy that even though it’s improving, it’s improving in fits and starts,” he said. “The reality for a lot of builders out there is they don’t have a tenant lined up and financing is more difficult. They don’t want to lose hold of that permit, but they also need that additional time to allow the economy to get back.”

Padilla wants municipalities to grant a waiver to projects that have already been awarded permits so that even if an extension were not granted they would not have to comply with ordinances that were adopted after they were awarded their permits. Complying with the new ordinances, he said, would mean redesigning plans and paying additional architectural costs.

Baldwin would like an extension through 2013.

As some hope for another extension, Holden blames delays in construction on the economy.

“Everybody thought that things would turn around in a year and we would all go back to building,” she said. “There are lots of us affected by this. I’m not the only one who spent this kind of money.”

Tara Ramsey can be reached at [email protected].