House Approves Permit Reform That Takes Aim at One of Puerto Rico’s Biggest Structural Obstacles to Doing Business

The House of Representatives approved the proposed permit reform on Thursday with amendments, forcing it into a conference committee of both chambers for further evaluation before a final version of the measure is approved by Tuesday.

The new Planning and Permitting Code (Código de Planificación y Permisos, Senate Substitute to S.B. 1173 and S.B. 1183) is designed to streamline bureaucracy while redefining rules for major infrastructure, environmental zones, and rural land. The legislation also reshapes how businesses of all sizes operate across the island.

At the core of the reform is an institutional restructuring intended to replace scattered statutes and regulations with a unified administrative pipeline:

• Central Permitting Office (OCP): Established under the Department of Economic Development and Commerce (DDEC) to centralize permit evaluations.
• Unified Information System (SUI): Consolidates all digital permit records onto a single platform, integrating notifications for the Directorate of Excavations, Demolitions, and Pipes under the Department of Transportation and Public Works (DTOP).
• Puerto Rico Surveying Office: Newly created to manage official geospatial data across the island.
• Registration of Use (Registro de Uso): Replaces traditional pre-operation discretionary reviews with an automatic, declarative model based on economic activity intensity, shifting government auditing and enforcement to a post-launch phase.

Fast-tracking small businesses and startups

For entrepreneurs and small and medium-sized enterprises (SMEs/PYMES), defined as businesses with an average annual business volume of $3 million or less, the Code replaces the existing Single Permit (Permiso Único) with the automatic Registration of Use.

Provided a business qualifies as ministerial and meets objective zoning intensity parameters, owners can submit a notification via the SUI and begin operating immediately.

The legislation also introduces simplified guides, operational incentives, and provisions allowing startups and business incubators to operate within residential spaces without undermining the neighborhood’s primary residential character.

To keep compliance affordable, the DDEC will review fee schedules annually to reflect actual service costs without stifling commerce, while municipalities and government instrumentalities will pay a reduced 25% filing fee.

Priority for major investments, hotels, energy

While cutting red tape for local shops, the Code creates an expedited track for large-scale capital investments designated as Priority Socioeconomic Impact or Strategic Projects. This includes projects designated by the Governor, priority developments in Opportunity Zones under the Incentives Code, and critical projects under Title V (Section 503) of the federal PROMESA law that are coordinated alongside the Revitalization Coordinator.

The highlights are:

• Ad Hoc Committee: A special committee (comprising the DDEC Secretary, the President of the Planning and Urbanism Board, and a representative of the Governor) will oversee and accelerate strategic project reviews directly through the OCP. Affected municipalities must still be formally consulted, though they face a strict, non-extendable 30-calendar-day deadline to submit comments or resolutions.
• Tourism and Hospitality: Hotels and lodging facilities are classified as priority developments, handled by specialized OCP units for centralized interagency review. Under the incorporated Building Code, hotels and high-occupancy venues must meet strict life-safety, egress, accessibility, and fire-protection standards, including mandatory assisted/family restrooms.
• Energy Infrastructure: Generation, transmission and distribution projects approved by the Puerto Rico Energy Bureau automatically qualify as Priority Socioeconomic Impact Projects. Both the Puerto Rico Electric Power Authority (PREPA) and private grid operators serve as Concerned Government Entities to evaluate interconnection points. Facilities must meet updated Building Code standards for hurricane and seismic resilience, electrical safety, and renewable energy integration.

Strict utility and highway prerequisites

The Code ties development approvals directly to physical infrastructure capacity. Before any construction permit is issued and before a municipality or adjudicating body can legally process a Registration of Use, applicants must prove basic utility availability via a Certificate of Infrastructure Capacity and Availability (CCDIS) issued by the Puerto Rico Aqueduct and Sewer Authority (PRASA/AAA), or demonstrate an effective mitigation plan.

The law clarifies that classifying surface water, groundwater or wetlands as “Waters of Puerto Rico” does not automatically define them as natural water bodies or watercourses for permitting and land-segregation purposes, subjecting them instead to technical criteria in the Joint Regulation while preserving Department of Natural and Environmental Resources (DNER) extraction rules and federal Clean Water Act compliance.

In new residential apartments, internal water shut-off valves are now mandatory, with a second exterior valve required for condominiums (horizontal property regimes).

The Highways and Transportation Authority (ACT) acts as a key Concerned Entity evaluating traffic impacts, rural road connectivity, and public space infrastructure. The Code also formalizes “Fronting-Road Segregation” (segregación frente a vía) for lots with direct access to existing public roads.

Reevaluating rural land, protecting the karst zone

The legislation establishes clear tiers for non-urban Rural Land (low-to-medium intensity agriculture, livestock, compatible agro-industry, tourism, and rural housing), Agricultural Reserves (strictly controlled farmland mapped with the Department of Agriculture), and Specially Protected Rustic Soil (SREP), which is assumed barred from urban conversion due to ecological, topographical, archaeological or aesthetic value.

However, the Code opens legal pathways to reevaluate and convert Specially Protected Rustic Soil into urban development if a project meets at least one of four exceptions:

Strategic or Critical Status: Projects designated by municipalities, state authorities, or under PROMESA Section 503, where state designation of economic development or public good alone justifies urban incorporation.

• Technical and Environmental Justification: Studies proving the project is compatible with environmental conservation.
• Mitigation Plans: Development plans that actively protect or mitigate the specific features that earned the land its protected status.
• Special Development Modalities: “Cluster Developments” (Desarrollo en Agrupación) on high-value rural land, allowing higher construction density on up to 25% of a parcel provided the remaining 75% is permanently preserved, as well as Special Construction Permits for Sustainable Homes.

In contrast, Karst topography, caves, caverns and sinkholes are formally designated as Special Protection Areas. The Code enforces a general prohibition against altering or extracting natural materials, such as stalactites and stalagmites, and preserves strict environmental review mandates for protected regions like the Río Tanamá Karst Zone National Park.

Coastal mapping, guaranteed beach access

Along the coastline, the Puerto Rico Surveying Office is tasked with creating a digital, georeferenced Official Base Delimitation mapping the inland boundary of the Maritime-Terrestrial Zone (ZMT) and adjacent legal easements for standardized use in the SUI.

While this serves as an administrative baseline rather than a final legal title adjudication, property owners retain the right to submit segment-specific surveys by licensed surveyors for state validation.

Meanwhile, the DNER has 180 days to adopt formal regulations governing public-domain ZMT boundary demarcations, and coastal builds remain subject to risk assessments and federal FEMA National Flood Insurance Program rules.

The legislation reaffirms that Puerto Rico’s beaches remain public domain. Where continuous parallel coastal access is not feasible, the Code enforces mandatory maximum intervals between public entry points to guarantee beach access:

• Urban Districts: Maximum 800 meters between vehicular accesses and 400 meters between pedestrian accesses.
• Non-Urban Districts: Maximum 1,600 meters between vehicular accesses and 400 meters between pedestrian access paths.

Key amendments in the code

• Telecommunications Exclusions: At the urging of the Puerto Rico Telecommunications Alliance, the final text incorporates formal definitions for telecommunications infrastructure and extends emergency work exemptions to private providers of essential communication networks, ensuring rapid disaster recovery.
• Risk Categorization and High-Risk Uses: The amendments establish categorical risk-based controls and expand the list of “high-risk uses” requiring mandatory pre-operation inspections to include gas stations, chemical warehouses, and hazardous material workshops.
• Authorized Professionals and Bonds: Unlike inspectors, Authorized Professionals (Profesionales Autorizados) now face mandatory bond or insurance requirements to provide financial backing in professional liability claims. Procedural safeguards were added to ensure professionals have notice and review rights before any SUI digital access is revoked.
• Federal Alignment: Language was strengthened to explicitly subordinate provisions to federal environmental laws, such as the Clean Air Act and Clean Water Act and allow the acceptance of federal environmental reviews by reference, eliminating duplicate evaluations without losing federal funding or delegated authority.