Who is Entitled to Receive a “Refund” in NH of Impact Fees May Surprise You

We usually think that the word “refund,” refers to money being returned to the person who paid it.   The NH Supreme Court, in the recent case of K.L.N. Construction Company, Inc. v. Town of Pelham, 2013-0374, turned this notion on its head in concluding that a “refund” of impact fees could be paid to current property owners that never paid the impact fee in the first place.

The Town of Pelham adopted an impact fee ordinance in 1999 (pursuant to RSA 674:16 and RSA 674:21, V) assessing fees on new development in order to pay for capital improvements.  The ordinance provided that, if the Town had not spent or otherwise encumbered the impact fees within six years, “[t]he current owners of property on which impact fees have been paid may apply for a full or partial refund of such fees, together with any accrued interest.” (emphasis added).    Subsequent to the enactment of the  ordinance, the Town required certain residential real estate developers to pay impact fees to the Town.  After paying the fees, the developers sold the properties to individual homeowners.

Certain of these residential developers sought the refund of impact fees that they had paid more than six years earlier.  The Town argued that because these developers no longer owned the properties which had been developed, they lacked standing to seek a refund of the impact fees.  The trial court agreed with the Town finding that the statute did not prevent municipalities from choosing to direct refunds to the current property owners.  The developers then appealed and the NH Supreme Court affirmed.

The NH Supreme Court reached its conclusion primarily by considering how the term “refund” was used in connection with unused exactions in another statute (RSA 674:21, V(j)). Exactions are fees charged to a developer for off-site improvements needed for the occupancy of a development.  When an exaction is predicated upon a municipality paying a portion of the improvement’s cost, and the municipality fails to appropriate its share of the cost within six years, the statute provides that “a refund of any collected exaction shall be made to the payor or payor’s successor in interest.”  The residential developers argued a similar interpretation should apply to impact fees.  The Court concluded, however, that the absence of the “payor or payor’s successor in interest” language in the impact fee statute, which was enacted a decade before the exaction statute, indicated that the legislature did not intend the two sections to have identical meanings.  The Court then concluded that the Legislature must have intended the potential recipients of impact fee refunds to be broader than the residential developers who paid them or their successor’s in interest.  Thus, the Town properly interpreted the impact fee statute in making its decision to refund such fees to current property owners rather than the residential developers who paid them.