Tips for a Better Loan Closing Experience

By Philip M. Hastings,Esquire

            For novice and seasoned real estate owners, investors and developers alike, the commercial loan closing process can be time-consuming, frustrating, and expensive. Here are a few things that can make closings easier (and perhaps save the borrower some money, too).

            Pay Attention to the Loan Commitment.  The lender’s loan commitment is not a mere formality.  In addition to identifying the key terms of the loan (amount, interest rate, repayment terms), it contains requirements binding on the borrower and sets forth specific conditions that must be satisfied before the lender will advance the loan proceeds.  Some of these conditions can impose substantial burdens on the borrower – What is the lender requiring for additional collateral or guarantees?  Will the lender require an opinion of the borrower’s counsel with respect to the loan transaction, the status of permits and approvals, or zoning compliance?  Will the lender need estoppel certificates from tenants?  Will the lender want a survey of the property?  What endorsements to its title policy will the lender require?

An inaccurate loan commitment is likely to cause delays and confusion at the closing and can inadvertently commit the borrower to unfavorable terms which may be difficult to negotiate later.  Because the loan commitment provides a road map for the closing, even mundane details – the wrong name of the borrower or property address, for example – can get a closing off-track from the very beginning.  Having a lawyer review the loan commitment on behalf of the borrower and help negotiate its terms before it is signed will go a long way to minimizing problems and reducing costs.

Address Real Estate Issues Early.  Obviously, the real estate is the center-piece of a commercial real estate loan.  Regardless of loan-to-value, no lender will close until it is assured that the borrower’s title is sound.  If the borrower does not have a title policy covering the property, then it should make sure that it will be able to obtain one at closing.  Well before closing, the borrower should position itself to have the title transferred to the borrowing entity (if different). Find out whether the lender will want the survey exception deleted and whether this will require a new survey.  Make sure old mortgages have been discharged and all leases will be subordinate to the new financing.  Satisfy all outstanding tax liens.  Take care of any boundary or access issues.  If you have worked with a real estate attorney before, then check with the lender to see if that attorney can provide the title commitment instead of lender’s counsel.  This will give the borrower better control over how title issues are being handled and avoid duplicative efforts.

Relatedly, the borrower should make sure that all leases are current, security deposits are properly accounted for and that all landlord obligations have been fulfilled.  The borrower should take care to ensure that the conditions of any land use permit (e.g., site plan review) have been satisfied (especially with newly-constructed projects) and that the property complies with zoning and land use regulations.

Organizational Housekeeping.  Not paying attention to the legal requirements for corporations or limited liability companies are a sure way to mess up a closing and add costs to the transaction.  The borrowing entity and all entity guarantors should be duly formed, in good standing and registered to do business in the jurisdictions in which they operate.  Corporate and LLC record books, shareholder agreements, bylaws, and LLC operating agreements should be up-to-date.  Internet-based form documents should be avoided; they are notoriously inadequate and lender’s counsel will probably insist on revisions.  For corporate borrowers and guarantors, directors and officers should be named, and managers should be named, if necessary, for LLC borrowers and guarantors. Trade name registrations should not lapse.  In the long run, it’s cheaper to pay a lawyer to take care of these issues on an ongoing basis than it is to deal with them on an expedited basis at closing.

Closings don’t just happen.  Paying attention to certain details, with the help of capable real estate professionals, will reduce aggravation and save time and money. 

Philip M. Hastings is the President and a Shareholder and Director of Cleveland, Waters and Bass, P.A. (www.cwbpa.com), a full-service law firm based in Concord, New Hampshire, with offices in New London, New Hampshire, and Haverhill, Massachusetts.  Mr. Hastings practice focuses on real estate development, transactions and finance.  He is also a principal of Granite State Title Services, LLC (www.granitestatetitle.com).  He can be contacted at 603.224.7761 or by email at hastingsp@cwbpa.com. 

Phased Condominium Developments

By Philip M. Hastings

[This article originally appeared in the New England Real Estate Journal, September 1, 2017.]

               Large-scale condominium projects are often developed in several phases over a period of time.  While this approach may be beneficial to the developer for a number of reasons, phased condominium developments can be complicated.  A recent New Hampshire Supreme Court case – Condominiums at Lilac Lane Unit Owners’ Association v. Monument Garden, LLC - highlights some of the complexities that arise with the phased development of a condominium under the state’s Condominium Act. 

The Lilac Lane Condominium case centered on a dispute between the condominium association and the successor to the original developer/declarant.  Created in 2010, The Condominiums at Lilac Lane in Dover was planned as a 120 unit condominium to be constructed over time, with 24 units in five separate buildings.  At the time of its creation only one building was fully completed, with a second under construction; construction had not begun on the other three buildings.  After a change of ownership and some delay, the new developer re-started construction on the unfinished buildings in 2013 and 2014. 

The association objected to the plans to complete the project and brought suit against the developer.  It claimed that the only way a condominium can be developed in phases in New Hampshire is if the declarant designates certain portions of common area as “convertible land” at the time of the condominium’s creation and subsequently converts that area into additional units as described in the condominium documents within certain time limits set forth in the Condominium Act.  The association argued that because the partially completed and unconstructed buildings in the Condominiums at Lilac Lane had not been treated as “convertible land”, they could not be built out as originally planned.

               The Court rejected the association’s argument, recognizing that, in addition to using convertible land, there are in fact two other distinct ways that a condominium project can be developed in phases in New Hampshire.  The second method uses “expandable land”.  In this method, the developer withholds a portion of the developable land from the condominium, reserving the right to add it to the condominium and build additional units on it at some later date.  The expansion must take place within certain time limits, but, unlike with convertible land, the expandable land never becomes part of the condominium unless the developer exercises its rights in a timely fashion.  The expandable land also must be a separate lot for zoning and tax purposes, in case the expansion never takes place.

The Condominiums at Lilac Lane represents a third model of phased condominium developments.  There, the developer submitted the entire parcel to the condominium and described all 120 units in the initial condominium documents.  The Court agreed with the developer that, even though some of the units were created prior to their construction and the condominium did not include any convertible or expandable land, this method complied with the Condominium Act because the recorded condominium plans identified some of the units as completed, some as not yet completed and some as not yet begun.

Each of the three methods for creating a phased condominium in New Hampshire have advantages and disadvantages.  As the Court noted in the Lilac Lane Condominium case, the use of convertible land and expandable land is subject to a number of requirements in the statute, including fairly stringent time limitations.  While the third method does not contain the same time limitations and other restrictions associated with convertible or expandable land, creating all of the units at the start may impose certain obligations on the developer that can be avoided or minimized by using convertible or expandable land. 

While the Condominium Act gives the developer flexibility with respect to phasing a condominium project, several factors must be considered with each approach.  These include the project financing, property tax implications, and marketing strategy.  The choice of approach may also have ramifications for the project’s permits and approvals and for the sales registration process with the Attorney General’s office.

Before beginning any condominium project, the developer should consult with his legal advisors and other consultants to craft the best approach in the particular circumstances.

Northern Pass Decision: A Road Well Traveled

By Philip M. Hastings

[This article originally appeared in the New England Real Estate Journal, March 3, 2017.]

 

               It was only a matter of time before the controversial Northern Pass project ended up in court.  While the recent decision by the New Hampshire Supreme Court in Society for the Protection of New Hampshire Forests v. Northern Pass Transmission, LLC did not exactly shake the legal world’s foundation, it illuminates important aspects of the law dealing with highways for developers and landowners.

               The Northern Pass case centered on the utility’s proposal to bury a portion of its high-voltage transmission line (intended to bring hydroelectric-generated power from the Canadian border to southern New Hampshire and Massachusetts) within the bounds of a state highway in Clarksville.  The Forest Society, which owns land on both sides of the highway, sued to stop this plan on the grounds that it would exceed the scope of the public right-of-way and could not be legally accomplished without the Forest Society’s consent.  Relying on case law stretching back to the 19^th century, the court reaffirmed that the use of a public highway right-of-way for the placement of public utilities, including electrical transmission lines, is within the scope of the easement.  The court further concluded that there was no evidence that the Northern Pass plan would unreasonably burden the Forest Society’s property.

The first point illustrated by the Northern Pass case is the importance of knowing, especially in a dispute with a municipality or utility, the extent of one’s ownership of the land on which a highway is located.  The Forest Society’s claim was predicated on the general legal presumption that the owners of land abutting a public highway own to the center line of the highway, subject only to whatever easement rights the public may have.  This gave the Forest Society a plausible, albeit unsuccessful, argument that using the highway to bury the utility lines would exceed the scope of the public right-of-way.

Although not disputed in this case, the legal presumption of ownership of the land under a highway by the abutting landowners does not always hold.   For example, in providing for a public street, a developer may have unwittingly conveyed full title to the land underlying the road.  Alternatively, a developer may have specifically reserved the right to a subdivision road for itself or a homeowners’ association.  If that had been the case with Route 3 in Clarksville, the Forest Society would have had no opportunity to challenge the plan to bury the utility lines.

The second point illustrated by the Northern Pass case is the importance of paying attention to the possible scope of the easement granted in a highway deed to a municipality.  Although the Forest Society owned the land under Route 3, its opposition to the Northern Pass plan failed because of the scope and nature of this particular easement.  As a general matter, the scope of an easement will be defined by its terms, and the holder’s use of the easement cannot exceed what was reasonably intended by the terms of the easement.  However, the express terms of an easement are often vague, and courts will infer the scope of an easement from the context. 

The Northern Pass case demonstrates that the scope of a highway easement can be quite broad.  It is not necessarily limited to the movement of people or property in vehicles.  Quoting from a 1957 decision, the court stated that “[as] science develops highways may be used for any improved methods for the transmission of persons, property, intelligence or other means to promote sanitation, public health and welfare.” 

There is very little a landowner or developer can do to narrow the scope of a highway easement once created.  However, it may be worth reviewing the specific language of the documents that created the right-of-way to see if it lends itself to a more constrained interpretation of the public’s rights.  Landowners should also consider seeking a formal discontinuance of the public’s rights in little used or “paper” streets. 

In most new projects in which a public street is being created, developers tend to accept the municipality’s standard highway easement, paying little attention to the potential consequences.  Given the state of the law as affirmed in the Northern Pass case, and rapidly evolving technology (new energy sources, unmanned drones, etc.), developers should consider ways to limit the scope of the easement in order to avoid undesirable uses of the street at some point in the future.  For some projects, it may make sense to forego entirely the benefits of making a street public and keep complete control of the roadway.

What We Are Looking for in 2017?

A Number of Policy Changes That Will Impact the Real Estate Industry

By Philip M. Hastings

[This article originally appeared in the New England Real Estate Journal, January 6, 2017.]

            With new administrations in Washington and Concord, we approach 2017 with certain hopes, and fears, for the real estate industry.  We are expecting a number of policy changes at the federal and state level which will be sure to specifically impact real estate ownership and development.  Here are some things we will be looking for in the New Year:

            Changes in Environmental Regulations.  We think that a Trump administration is more likely than not to relax the burden of federal environmental regulations, and we expect that the regulatory agencies (the EPA and Army Corps of Engineers) will take a more constrained view of the limits of their jurisdiction, particularly with regard to wetlands.  At the very least, property owners should be secure in knowing that the scope of the existing regulations will not be expanded.

            In Concord, Governor Sununu will have the opportunity to put his stamp on the Department of Environmental Services by naming a replacement to outgoing Commissioner Burack.  We thank Commissioner Burack for being a steady and fair hand at the helm for the past decade.  A new Commissioner can take further steps to make DES a more user-friendly agency with respect to permitting and enforcement, and with the new Governor’s engineering background, we believe he has a clear understanding of the real-world effect of the bureaucracy on economic growth.

            Tax Changes.  The election of President Trump and a return of Republican control to Congress has created a lot of talk about tax reform, both at the corporate and individual levels.  While a reduction in marginal rates and simplification of the tax code should be good for economic growth in general, we also will be looking to see how such reforms effect real estate-specific provisions, such as the mortgage interest deduction and Section 1031 like-kind exchanges.  Even minor changes in the tax code can have big impacts on the real estate industry and on individual circumstances. 

            At the state level, we might expect the Republican majorities in the State House to push for accelerated reductions in the business tax rates, an effort that began in the past budget cycle and appears to be successful.  Until the election, we had feared that the exemptions to the real estate transfer tax created in 2016 for certain internal reorganizations might be reversed or cut-back.  Fortunately, we now think that this window of opportunity will remain open for some time.

            Energy Policy.  Recent reports continue to conclude that New England, and New Hampshire in particular, have the highest utility rates in the country, which impedes all types of economic development.  We will expect the Sununu administration and Republican legislature to craft a comprehensive energy policy for the state, which strikes the correct balance between the need to increase the supply of both renewable and carbon-based energy and preserving an attractive way of life.   

Housing Policy.  The need for more affordable housing in New Hampshire begs for innovative policy solutions.  Last year, the legislature created additional opportunities for alternative housing arrangements with the passage of Senate Bill 146, the Accessory Dwelling Unit law, which will go into effect on June 1, 2017.  We will be looking to see whether the legislature takes further steps to create flexible approaches to zoning and curb the sometimes excessive limitations put on the housing supply at the local level.

            In Washington, President Obama’s HUD has been pushing under-the-radar regulations, in the guise of “Affirmatively Furthering Fair Housing”, which if fully-implemented would effectively extend the federal government’s reach into local housing policy.  We hope that this federal overreach will be curtailed.

            Infrastructure Spending.  President-elect Trump seems to be preparing for a fairly large-scale infrastructure spending program.  We can hope that such funding will give as much flexibility as possible to the states to direct the money to those bridge and road projects that are most in need and are not unnecessarily targeted to projects favored by the bureaucrats in Washington.

            2016 was a year of surprises.  While we will monitor the developments discussed in this article, we are mindful that the New Year is likely to have its share of surprises as well.  A team of high-quality real estate professionals can help guide you through whatever 2017 has in store. 

Important Changes to New Hampshire's Transfer Tax Creates Opportunity

[This article originally appeared in the New England Real Estate Journal, September 2, 2016.]

By Philip M. Hastings and Jeffrey C.Christensen

The New Hampshire legislature continues to demonstrate its interest in helping the business and real estate community.  The latest example is some long overdue and significant exemptions to the real estate transfer tax.

New Hampshire imposes a tax on all transfers of real estate (and of ownership interests in real estate holding companies). The tax rate is 1.5% of the value of the real estate (the purchase price in a typical transaction).  Although gifts and a limited number of other types of transactions (e.g., transfers to governmental entities or pursuant to a divorce decree) are exempt, a number of transactions that do not involve an arms-length sale or the payment of any consideration have been treated as taxable transfers.  In many cases, this has limited the ability of real estate owners to hold their property in the most effective manner.

Effective June 21, 2016, with Chapter Law 288 (HB 1656), the legislature fixed three of the worst problems with the transfer tax statute.

First, prior to the new law, if an entity owned real estate and wanted to change its form of ownership (e.g., from a partnership to a limited liability company), the reorganization would be subject to the transfer tax.  Although the Department of Revenue Administration modified its regulations in 2014 to clarify that a conversion of a business entity into an LLC is subject to the minimum, $40 tax, it was still a taxable transfer.  Chapter 288 creates a new statutory exception for any real estate transaction “coincidental” to a change in an entity’s form of organization, so long as the ownership, assets, and liabilities of the transferor and transferee are identical before and after.

This will allow business organizations a great deal of structural flexibility, without having to account for a transfer tax that often made internal reorganizations prohibitively costly.  Entities will still need to be cautious, however, as the exemption is carefully crafted.  For example, a reorganization that results in a cash-out of a business partner or changes the percentage ownership of the entity’s principals will not meet the requirements of the exemption and will trigger a transfer tax.   

The second new exemption will have an even broader impact.  Before the new law, a transfer of real estate from an individual into his own business organization or from a corporation into a wholly-owned subsidiary would be subject to the transfer tax.  Worse, the tax would be calculated on the full value of the property, even though no actual consideration was exchanged and the ownership effectively remained the same.

Under the new legislation, this is no longer the case.  A transfer of title from an owner of an entity to that entity, and vice versa, is not subject to the tax if there is no consideration paid,  the owner (directly or indirectly) remain the same before and after, there is no change in percentage ownership, and the combined assets and liabilities of the transferor and transferor are unchanged.  This allows for a number of structuring options that previously would have resulted in substantial tax liability.

Finally, the new law provides some relief for borrowers, who are often required as a condition of financing to transfer real estate collateral into single purpose entities.  This also occurs in the residential context, where a lender will sometimes require property to be moved from a borrower’s estate planning trust into his individual name.  Prior to the legislative action, these transfers were considered as contractual transfers, subject to the transfer tax, although no consideration was exchanged.  The statute now provides a safe harbor for a transfer “made solely to obtain financing or refinancing, as required by a lending institution, and that accomplish no other business purposes.”  Under those circumstances, the transfer is not contractual in nature and therefore is not subject to the tax.

While Chapter 288 represents meaningful reform by providing a number of helpful planning opportunities for businesses and real estate owners, the new exemptions are not without ambiguity, and the transfer tax rules remain complex. We will need to wait for regulatory guidance from the Department of Revenue Administration to see how the new law will be applied to a number of individual situations.  Given the uncertainty and complexity, you should include legal and tax professionals in the planning of any significant transaction involving real estate or a real estate holding company.

               Keep in mind, too, that what the legislature gives, it may take away.  While we are hopeful that the promising developments embodied in the new law will remain in place for years to come, the ever-changing political landscape and the state’s fiscal situation may make these exemptions short-lived.  Property owners that are contemplating transactions that fall within the new exemptions may want to take advantage of the opportunity without delay.

 

 

 

Philip Hastings becomes a New Hampshire Fellow of the American Bar Foundation

In recognition of his exemplary dedication to the profession, commitment to the work of the American Bar Foundation, and support for the ideals and objectives of the American Bar Association, Philip Hastings has been elected and has become a Fellow of the American Bar Foundation.  Election as a Fellow is evidence of professional distinction and constitutes a professional honor.

Live Free? A Rather Long List of Regulations on Development in N.H.

By Philip M. Hastings, Esq.

Considering the myriad rules and regulations governing real estate development in the Granite State, you might wonder whether New Hampshire’s official motto of “Live Free or Die” has gone the way of the Old Man in the Mountain. The list of regulations that a real estate developer is likely to encounter (or will at least have to think about) for virtually any project in any New Hampshire community, regardless of the project’s size or nature, is long and requires a thoughtful and comprehensive approach in the planning stages.

 At the local level, the list includes:

·       Zoning ordinances

·       Subdivision regulations

·       Site plan review regulations

·       Impact fee ordinances

·       Wetland and wetland buffer ordinances

·       Floodplain ordinances

·       Sign ordinances

·       Driveway/curb cut rules

·       Solid waste disposal/septic or sewer connection rules

·       Well/community water system or water connection regulations

·       Demolition regulations

·       Building and fire codes

·       Health codes

 
Many municipalities also have historic district regulations and architectural design regulations.  Some have their own shore land protection and similar regulations.

Each of these regulations imposes constraints on the design and use of a project.  In addition to ordinary use restrictions, dimensional requirements and density limitations, a typical zoning ordinance often includes specific restrictions on certain types of uses.  For example, a zoning ordinance may have special buffer requirements for commercial uses near a residential district or restrict the outdoor storage of goods and merchandise by a retail store.

Similarly, a municipality’s subdivision and site plan review regulations contain other development limitations.  For example, site plan review regulations may restrict the location, length and width of driveways, prohibit parking between a building and the street or require detailed plantings and other landscaping features.

 
Architectural design review laws can be particularly onerous, often regulating the minutest details of the construction process, such as the type, texture and color of building materials.

Historic district and demolition rules can inhibit (and sometimes prohibit) the redevelopment or retrofitting of older properties, based on age alone and regardless of the property’s actual historic significance.

Aside from the substantive restrictions contained in the various land use regulations, any given project will require separate permits and approvals from the local Planning Board, Zoning Board of Adjustment, Selectmen or City Council (or Mayor, Board of Alderman or Town Council, as the case may be), heritage or historic district commission, architectural design review committee, building inspector, fire chief, road agent, health inspector and others.  Changes to the zoning ordinance in most New Hampshire towns will require a vote at Town Meeting, which is a once-a-year occurrence. 

 Each local board has its own set of rules governing its procedure and processes.  While there is some uniformity in the process from community to community, local variations are important.  For example, Concord’s site plan review process requires a pre-Planning Board staff review, plus review by the architectural design committee, and the Planning Board holds at least two separate meetings on any application, the first to determine whether the application is complete and the second to hold a public hearing.  Other communities require a pre-application meeting with a technical review committee to vet a project before formal consideration.

In addition to the local rules, development projects are almost always subject to regulation at the state level, including:

·       Wetlands regulations

·       Alteration of Terrain rules

·       Water Quality regulations

·       Air Quality regulations

·       Solid waste disposal/septic regulations

·       Well/community water system regulations

·       Driveway/curb cut regulations

Properties adjacent to water bodies will involve the state’s Shoreland Protection Act.

On account of these state rules, permits are often required through the New Hampshire Department of Environmental Services (involving multiple bureaus) and the New Hampshire Department of Transportation.

Larger subdivisions and condominium projects are subject to the Land Sales Full Disclosure Act and Condominium Act, with registration or exemption certificates required from the Attorney General’s Office.

Each layer of regulation, and each step in the permit process, adds complexity and cost to a project. Requirements are sometimes contradictory or inconsistent.  Being unaware of the requirements or ill-prepared to deal with them can delay or derail an otherwise good project.  Assembling a team of qualified professionals – including engineers, surveyors, architects, lawyers and other consultants – will pay significant dividends in the long run.

 

New Hampshire Supreme Court Update: JMJ Properties, LLC v. Town of Auburn

This blog has previously addressed considerations for current use taxation in New Hampshire. This is a concept of particular interest to New Hampshire property owners, and the New Hampshire Supreme Court recently addressed a question regarding when a land use change tax (“LUCT”) may be assessed against a property when it no longer qualifies for current use taxation. This post summarizes the facts and holding of JMJ Properties, LLC v. Town of Auburn. 

The Facts: JMJ Properties, LLC ("JMJ") owned an 18-lot cluster subdivision in Auburn, which was taxed based upon its current use status in 2011 and 2012. In July 2011, JMJ began constructing a road in the subdivision, and thus the entire parcel no longer qualified for current use assessment. The Town learned about the change in use in the summer of 2012 (after issuing its 2012 tax bills) and issued a Land Use Change Tax (“LUCT”) bill in December 2012. Because the original 2012 tax bill reflected a current use assessment, the Town also “abated” the 2012 tax bill for the parcel and issued supplemental tax bills for each lot to reflect the market value for the tax year that commenced on April 1, 2012.

The Arguments: JMJ disputed the timing of the LUCT and supplemental taxes that were owed following the change in use. JMJ argued that the supplemental bills could not be issued until the beginning of the tax year following the issuance of the LUCT bill (this would mean tax year 2013); the Town argued that land changing use shall be taxed at its full value after the LUCT bill is issued. 

The Decision: The New Hampshire Supreme Court acknowledged that the market value assessment of property is triggered at the time of change in use (here, when the new road was constructed), regardless of when the LUCT bill is issued. Accordingly, a market value assessment is authorized at the time of the change in use, regardless of when the municipality learns about the change or when it issues an LUCT bill. This interpretation is consistent with a policy that prohibits landowners from enjoying a reduced assessment when the land is no longer in current use, and the statute clearly states that land shall be assessed at current use rates “until a change in land use occurs.” 

This case presents a new consideration for New Hampshire property owners, for it determines that property can be properly reassessed for taxation as soon as the change in use occurs. Property owners considering a change that might alter their current use status should consult the real estate lawyers at Cleveland, Waters and Bass to determine how this case might affect their specific interests.

Current Use Taxation: Traps for the Unwary

By Tenley Callaghan

As Phil Hastings noted in his recent blog post, current use taxation can create a trap for unwary buyers, sellers and developers of land.

Does this affect me? If you are purchasing property that is being subdivided from a large tract of land, or if you are constructing a new home or commercial building on land that has been in current use, or if you are selling a portion of your property, you should find out if this action will cause the loss of current use status for the property. If the answer is yes, a penalty (called a land use change tax, or “LUCT”) will be assessed.

Who pays this penalty? The parties should decide which party will be responsible for the LUCT payment during the negotiation of the purchase and sale agreement. Absent an agreement otherwise, the payment will be the responsibility of the owner of the property at the time the LUCT is assessed.

How much is the penalty? The LUCT is equal to 10% of the property’s value, and the timing of the assessment will directly affect the amount of the penalty. For example, if the land is subdivided before a building is constructed, and the town assesses the LUCT before construction, the town will be assessing the LUCT on a building lot. If the assessment is made after the building is constructed, the LUCT penalty will be much higher.

Will this be paid at closing? It is often the case that the town has not yet assessed the LUCT at the time of the closing. But the settlement agent at closing will want to collect funds to hold in escrow to pay the LUCT once assessed. This can result in a significant amount of money being needed at closing to cover the future payment. The settlement agent may request funds equal to 15% of the property’s future value to ensure enough is held to pay the LUCT. The funds may be held in escrow for many months, sometimes well over a year, as the town may not reassess the property until tax time the following year.

How can I protect myself? Prior to signing any purchase and sale agreement regarding property, consult with an attorney who can provide guidance on these and other issues regarding the risks involved in buying and selling property in New Hampshire. The real estate attorneys at Cleveland, Waters and Bass are happy to meet with clients and discuss how current use taxation might affect their property interests.

GSTS Update: June 2015

On June 2, 2015, Tenley Callaghan presented at a seminar organized by Old Republic National Title Insurance Company. The presentation focused on negotiating commercial loan documents. Tenley and a colleague held mock loan negotiations before an audience of attorneys to provide practical tips on the nuances of the loan negotiation process; topics included cross default provisions, insurance coverage requirements, and how to bring value to the table when representing borrowers and lenders. This presentation introduced other attorneys to the careful consideration and attention to detail that Cleveland, Waters and Bass and Granite State Title Services employ when representing clients in commercial transactions.

Real Estate Basics: Current Use Taxation

By Philip M. Hastings

Current use taxation is a special New Hampshire tax program for property owners who maintain their land in an undeveloped condition. Farm land, forest land, wetlands and open space of 10 acres or more are eligible for current use, under which the land is taxed significantly below its current market value. When current use land is developed or changed to a non-qualifying use, a land use change tax (“LUCT”) is assessed against the property in an amount equal to 10% of the property’s full and true value. The current use designation runs with the property, so land ordinarily does not lose its status when transferred.

Current use can be an important tax savings tool for landowners, but it can also be a trap for the unwary. Although a landowner must apply with the municipality to have the property put into current use, once land is so classified it cannot be voluntarily removed without an actual physical change to the property. In addition, the timing of the development of land in current use may have a significant impact on the amount of the LUCT and when it is collected. Any plan to purchase or develop current use land should include careful planning with counsel.

Real Estate Basics: Warranty vs. Quitclaim Deeds

By Philip M. Hastings

New Hampshire conveyancing law and practice is fairly typical in most respects. The form of deed that should be used when transferring real estate, however, can be confusing, especially to those used to doing business in other states. Here, the most often used form of deed is the warranty deed, which gives grantees the most extensive assurances of title. A conveyance by warranty deed includes an implied promise that the grantor has lawful title to and the right to convey the property, the property is free from encumbrances (except as otherwise stated in the deed), and the grantor warrants and will defend the grantee’s title against all claims. Most buyers should insist on receiving a warranty deed.

An alternative type of deed is the quitclaim deed, which grants limited assurances of title. The quitclaim deed generally corresponds with the warranty deed, except that the grantor’s promise to defend the grantee’s title is limited to claims arising during the time of the grantor’s ownership. In other words, a quitclaim deed does not provide the purchaser with any protection against the title claims of third parties not claiming by and through the grantor.

Another important thing to note is that warranty and quitclaim deeds are not the only forms of deeds used. We also have fiduciary deeds, foreclosure deeds, release deeds and other variations. Counsel should be relied upon to explain when it may be appropriate to use these various forms. If you have any questions about the form of deed in New Hampshire, contact the knowledgeable and experienced team at Granite State Title Services.

GSTS Update: April 2015

The professionals at Granite State Title Services frequently attend local events and seminars to educate the public on legal issues and other topics pertaining to real estate. This series will track our attorneys’ efforts as they reach out to the community to keep New Hampshire up to date on the latest developments in real property, banking, and title matters. 

On April 24, 2015, Tim Britain, Steve Notinger, and Tenley Callaghan presented a seminar to the New Hampshire Bankers Association on recent cases and pending legislation affecting lending in New Hampshire. Topics included recent cases on the homestead exemption, mortgage acknowledgements, bankruptcy developments, and proposed changes to the rules governing New Hampshire’s real estate transfer tax. To learn more about these topics and how they might affect your loans, please contact any of our attorneys at Granite State Title Services.

Residential Title Insurance 101: The Basics for New Hampshire Homeowners

Title insurance is a vital asset for New Hampshire homeowners, but many homeowners—whether new or old—aren’t as familiar with this type of insurance as they may be with health, car, or homeowner insurance policies. This post will “demystify” title insurance for property owners to demonstrate how valuable such a policy can be for local residents.

While home insurance covers the actual structure of the home and its contents, title insurance protects the owner’s interest in the real property on which the home and improvements are built. Simply holding the deed to your property does not mean that others cannot challenge your title (or ownership) of the property. Accordingly, title insurance will protect an owner’s interest in real property from title disputes that might arise from fraud, forgery, liens, or missing heirs of a previous owner who may have once had an interest in the property. Title insurance will provide the property owner with financial protection against losses and the forced removal of improvements to the property, and the policy often pays for the defense costs in lawsuits that might arise regarding these issues.

Many homeowners assume that the property is “theirs” when they sign their closing documents and obtain the deed and keys. Most people don’t want to think about these expensive and complex challenges that could arise in the future to question their ownership of the property they purchased in good faith. Title insurance gives property owners peace of mind and assurance that they will have financial resources to protect their most valuable investment: the home.

Unlike the ongoing premium payments associated with maintaining car, home, and health insurance, title insurance is obtained with a one-time payment. In exchange for that single investment, the title company will research the ownership history of the property to determine if the purchaser is obtaining valid title. The title company facilitates the closing of the sale and issues an insurance policy that insures the purchaser’s ownership interest in the property. There is no “expiration” on a title insurance policy; the one-time premium will protect the owner for as long as he owns the property.

Granite State Title Services is proud to offer New Hampshire’s commercial and residential property owners with the tools they need to purchase and protect their investments. If you have questions about title insurance or are considering obtaining title insurance for a pending transaction, please contact the Granite State Title Services team.

Tenley Callaghan To Head Granite State Title Services

Tenley P. Callaghan
Managing Director
Granite State Title Services

CONCORD, NH — Tenley Callaghan has been named managing director of Granite State Title Services. Granite State Title Services was founded to serve the title and closing needs in commercial and residential transactions throughout New England.

"We are comprised of professionals with expertise in all areas of real estate and commercial transactions," said Callaghan. "The vast experience of our staff enables us to provide service that is highly professional, fast, flexible and able to meet our clients’ needs. We strive to provide outstanding customer service in every deal."

"Personal service is key — we want to assure folks that they will be in touch with dedicated staff who are creative, responsive and capable. Granite State’s ability to provide superior service to our clients stems from the knowledge and skill level of our staff, who have over 150 years of collective experience in commercial and residential transactions," she said.

"We are focused on providing the type of service that lenders and buyers and sellers expect. We hope that our personal approach will resonate with the marketplace — we stand by our work, we are here to provide post-closing support and issue resolution. We're not a faceless company," she said.