Real Property Law: Lot Consolidation – the New Battleground

Originally published in New Hampshire Bar Association News – May 13, 2011 By: Paul Alfano

The regulation of real estate offers a great example of the rub between personal freedom and providing for the good of the whole, and few better flash points exist than ordinances mandating the merger of contiguous, nonconforming lots. A person may think he or she owns two lots, only to discover the lots have been merged without his or her knowledge. This concept has been around a while, but it has come to the fore recently due to a recent Supreme Court decision and legislative activity. A quick history will get you orientated.

Passed in 1995, RSA 674:39-a permits owners of contiguous lots to merge the lots voluntarily. Yet this statute did not preclude certain municipalities from involuntarily merging contiguous, nonconforming lots. See Sutton v. Gilford, 160 N.H. 43 (2010).

The court in Sutton upheld a Gilford ordinance requiring the merger of contiguous nonconforming lots having the same owner. The non-conformity needed to relate to size, dimension or frontage only, and merging could continue with additional contiguous lots until the lots became conforming. If all the lots contained preexisting, principal uses, such as houses, they were exempt from the ordinance, but if one of the nonconforming lots were vacant, it would be merged with the contiguous lot. Lots protected by RSA 674:39, the statute grandfathering approved subdivisions for four years under certain circumstances, also were exempt.

The Gilford ordinance was not unique. Property owners have developed a device called “checker boarding” to avoid the effect of these ordinances. The technique simply involves taking title to adjoining, nonconforming lots in different names.

These ordinances also create an interesting dynamic for assessors. A nonconforming lot still has value because the owner could seek a variance to build a house, which would not be difficult under today’s more lenient “hardship” standard. As a result, the total assessed value of two contiguous, nonconforming lots likely is greater than one larger conforming lot. It is interesting to note the municipal appraiser in the Sutton case recommended the lots remain separate. The lots were located on Governor’s Island.

Perhaps in response to the Sutton decision (decided March 30, 2010), the General Court enacted a significant change to RSA 674:39-a in 2010. While maintaining the power to merge contiguous lots voluntarily, the new law protected property owners against having lots merged without their consent. The new language, and current statute, reads as follows: “No city, town, county, or village district may merge preexisting subdivided lots or parcels except upon the consent of the owner.” The effective date was September 18, 2010.

One way municipalities are responding to the 2010 change is to limit the effect of involuntary merger ordinances to lots acquired after September 18, 2010, which probably is consistent with the statute. If a person owned two contiguous, nonconforming lots on, say, September 17, 2010, those lots would have merged automatically that same day (presumably – see below), assuming the ordinance mandated immediate merger. On September 18, that person would not have owned two lots, but one. Therefore, the 2010 change would apply only to contiguous lots acquired September 18, 2010 or after.

The General Court is tinkering further with RSA 674:39-a this year. House Bill 352 would add the following new language:

Lots or parcels that were merged prior to September 18, 2010 by a city, town, county, village district, or any other municipality without the express consent of the owner, shall at the request of the owner, be restored to their premerger status and all zoning and tax maps shall be updated to identify the premerger boundaries of said lots or parcels as recorded at the appropriate registry of deeds.

At least one town is proposing a change to its ordinance that would permit persons whose lots were merged to be restored to their pre-merger state, subject to planning board approval. House Bill 352 does not require planning board approval. If both pass, the statute would take precedence and planning board approval would not be required in that town.

Even if these changes are passed, questions still remain. For example, on what date does a merger occur? Immediately upon taking title? The court in Sutton was asked only to affirm whether a merger had taken place at all, and found that showing the lots in question as one on the town tax map was evidence of a merger. Yet the tax map alone may not have been sufficient. The court pointed to other factors as well, including a prior lawsuit involving the same land where the property owner recognized the land as a single lot.

If no procedural requirements exist, such as notice to the taxpayer, and the tax map is not yet changed, what effect should the ordinance have on prospective purchasers? A prudent buyer should check the ordinance and make a decision using his or her judgment. Even a letter written by the Director of Planning and a pre-litigation agreement entered into with the board of selectmen stating that two lots have not been consolidated cannot override the effect of these ordinances. See, e.g. Sutton.

Given both the General Court and municipalities are addressing the issue of lot consolidations at the same time, and given the inherent delay in the ability of municipalities to respond to changes in state laws, this topic is ripe for uncertainty. Keep an eye on both HB 352 and any ordinance with which you may be working. House Bill 352 has been sent to “study” by the House Municipal and County Government Committee, meaning it has a good chance of being killed, although it could re-appear. Some municipalities may have amended their ordinances to incorporate the 2010 changes by now, while others may not have.