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Massachusetts Amends Chapter Land Statutes Effective March 22, 2007

Beveridge & Diamond, P.C., April 2007

On March 22, 2007 the first significant amendments to the so-called Chapter Land statutes, since their adoption in 1973, went into effect.  G.L.c. 61, 61A and 61B (“Statutes”) (Chapter 394 of the Acts of 2006) (“Amendments”).  In an effort to craft a bill that was likely to be passed,  the Amendments were developed after a lengthy collaborative process involving representatives of the farming and forestry communities, land trusts, municipalities, assessors and the Executive Branch of state government. 

For more than thirty years, the Statutes have offered a favorable tax classification for land held and used in accordance with the statutory requirements, that is for forest (Chapter 61), agricultural and horticultural (Chapter 61A), and open space and recreation purposes (Chapter 61B).  In return, the municipality in which the land is located obtains a right of first refusal (“ROFR”) exercisable in the event the owner decides to sell or convert the land to a non-Chapter Land use.  The recent Amendments clarify and codify practices that have developed over the Statutes’ lengthy history.  Although many questions have been answered, others are sure to arise. 

By far the most significant change in the Statutes is the clarification of the ROFR granted to municipalities under the Statutes.  The Amendments increase the time period during which the ROFR is effective by one year, outline in detail the parties’ responsibilities in the event of a sale or conversion, define a bona fide offer and elaborate on the assignment process.  They also give the municipality or assignee an express right to access to the property and clarify their due diligence rights.

Another important change to the Statutes is the inclusion of a definition of a bona fide offer.  This has been an oft litigated issueThe Amendments makes it clear that a purchase and sale agreement containing a purchase price that fluctuates depending upon the number of lots or units actually permitted or presupposes changes to the current zoning does not constitute a bona fide offer under the Statutes.  It is less clear whether a purchase and sale agreement with a fixed price, but conditioned upon the permitting of a certain number lots or units is a bona fide offer.  If the latter does not constitute a bona fide offer, purchase and sale agreements that are standard in the development industry will not constitute a bona fide offer under the Amendments until the actual build-out has been determined; that is, after the permitting process is complete.  An unanswered question is who will bear the burden and the cost of completing the permitting process.  While a potential buyer may be willing to invest in the costs associated with due diligence without knowing the outcome of the permitting process, it may be reluctant to take on this cost if there is a possibility a municipality will exercise its ROFR after it has expended significant funds to obtain the necessary development permits. 

The Amendments also elaborate on the assignment process and increase the amount of land to be conserved by an assignee.  Under the Amendments, a municipality retains the right to assign the ROFR and, for the first time, in addition to nonprofit conservation organizations, entities eligible for assignment expressly include the Commonwealth and any of its political subdivisions. While the Statutes required the assignee to maintain the “major portion” of the Chapter Land in use consistent with the Statutes, the Amendments increase that amount to no less than 70 per cent.   Moreover, the assignee cannot develop a greater proportion of the land than was proposed by the buyer whose offer gave rise to the assignment.  The land that is not slated for development must be bound by a permanent deed restriction that meets the requirements of G.L.c. 184. 

The Amendments are far from perfect, leaving many ambiguities.  However, while the Amendments may raise further questions to be answered by the courts, they go a long way in responding to issues that have plagued transactions involving Chapter Land for many years. 

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For further information please contact Deborah A. Eliason at deliason@bdlaw.com