Below are some questions that we are frequently asked by clients related to title services and real estate transactions. We hope you find these helpful. Please do not hesitate to call us with your questions. We are here to help.

1. What is the difference between a warranty deed and a quitclaim deed?  

A warranty deed conveys title with 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.” A quitclaim deed instead grants limited assurances of title, as “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.”

For more information on this topic, see “A Few Things You Should Know About New Hampshire Real Estate,” New England Real Estate Journal, March 4, 2010, by Phil Hastings and Elizabeth D. McCormack.

2. What is title insurance?

An owner’s title insurance policy can protect an owner’s interest in real property against losses from certain title issues such as fraud, forgery, liens and missing heirs, as well as against a lack of access to the property, an inadequate legal description or a deed not properly recorded. Title insurance is something that only needs to be purchased once and it will cover the owner for the entire time they own property and even after the property is sold. In addition to protection against financial loss or forced removal of improvements, title insurance can pay for the cost of defending against claims made against the owner for covered issues.

3. Does the lender’s title insurance cover an owner? 

No. While the owner pays the cost of the lender’s title insurance premium as part of the loan closing costs, the lender’s policy insures that the lender has a valid lien against the property. It does not provide protection to the owner against defects in the property that would be covered by an owner’s title insurance policy.

4. What is current use taxation? And what will the penalty be when the land is removed from current use? 

“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 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.”

For more information on this topic, see “A Few Things You Should Know About New Hampshire Real Estate,” New England Real Estate Journal, March 4, 2010, by Phil Hastings and Elizabeth D. McCormack.

5. I’ve created an LLC. Now what?

LLC owners need to remember that “merely forming an LLC is not sufficient to shield personal liability from potentially adverse parties, such as tenants and creditors.” In order to benefit from the shield against personal liability, an LLC must be operated separately from the owner’s personal affairs and other businesses. Otherwise the owner may find he or she has lost the shield and is personally responsible for the obligations and actions of the LLC. “At a minimum, every LLC owner should:
  1. Keep all bank accounts for the LLC separate from personal accounts and from the accounts of any other businesses; 
  2. Make sure that all contracts, invoices and correspondence of the LLC are in the name of the LLC, and sign each contract and other obligation of the LLC as a member or manager of the LLC (as the case may be), not individually; 
  3. Maintain all insurance in the name of the LLC; 
  4. Keep and maintain records for the LLC, including making the necessary annual filings; and 
  5. Use a qualified accountant to assist with the tax reporting, financial operations and financial recordkeeping of the LLC, including keeping track of all capital contributions and distributions to and from the LLC.” 
For more information on this topic, see “Have you Sabotaged Your Own LLC?New England Real Estate Journal, April 4, 2014, by Philip M. Hastings and Mark E. Beaudoin.

6. Do I need an operating agreement for my LLC?

Yes. Many business owners choose the LLC form of ownership to afford protection from personal liability and ease of management. However, without an operating agreement specific to the LLC, governance and operation of the LLC defaults to the provisions found in RSA 304-C. This statute requires members and managers to act with certain duties of care and loyalty that may be beyond that intended by the owner including a duty not to compete against the LLC, a duty not to engage in “self-interested” transactions with the LLC and a duty not to “usurp business opportunities” of the LLC.

For more on this topic, see “Know Your Duties Under the New LLC Act,” published in the Greater Concord Chamber of Commerce’s Business Focus Column, March, 2014, by Philip R. Braley.

7. Will a transfer from me to my single member LLC trigger real estate transfer tax?

Generally, yes. New Hampshire “imposes a direct tax on the transfer of real estate (the “RETT”) at the rate of 1.5% of the purchase price. Payment of the tax is usually split equally between the buyer and seller.” Limited exemptions to the RETT include “non-contractual (gift) transfers, transfers between spouses pursuant to divorce, transfers to the state or a municipality, and transfers that occur upon death by will or otherwise.” Transfers “to and from any business organization generally will be taxable based on the full value of the real estate, regardless of whether any consideration was actually exchanged.” Even the sale of an ownership interest in a real estate holding company, including an LLC, corporation or partnership, will trigger the RETT, though title to the real estate has not changed hands. There is currently litigation percolating through the courts in New Hampshire challenging this issue, so stay tuned and proceed with caution.

For more information, see “A Few Things You Should Know About New Hampshire Real Estate,” New England Real Estate Journal, March 4, 2010, by Phil Hastings and Elizabeth D. McCormack.

Do you have a title services question not answered here? Please give us a call at 603-229-1080.