Vermont Property Owners Must Act Before December 31 to Preserve Land Use Rights

 
On October 12, 2020, Governor Scott signed S. 237, Act 179, into law. This bill was designed to promote affordable housing in the State of Vermont.
 
Act 179 comes with major issues however. The biggest problem is the addition of Section 545 at the last minute to Title 27. Section 545 has severe consequences for every property owner in the State of Vermont. In short, the new Section 545 it bans any real estate covenant or easement that limits the development and use of a property to something less than what is allowed by a town’s zoning bylaws. Therefore your rights as a property will change radically on January 1, 2021. You must take action now if you wish to preserve your property rights.
 

Certain Easements and Covenants Banned in Vermont Under Section 545

 
The new provision of Title 27, Section 545, states as follows:
 
§ 545. COVENANTS, CONDITIONS, AND RESTRICTIONS OF SUBSTANTIAL PUBLIC INTEREST Deed restrictions, covenants, or similar binding agreements added after January 1, 2021 that prohibit or have the effect of prohibiting land development allowed under a municipality’s bylaws shall not be valid.
 
“Land Development” under Vermont law is essentially any change in the use of a property and any construction or deconstruction. This definition includes obvious things like new construction, additions and subdivisions, but also extends to the use of a property, or a change in the use of property, such as converting a hardware store to a restaurant.
 
The goal of Section 545 was to make the creation of accessory dwelling units easier by preventing parties from executing covenants banning them. However, the language of Section 545 is so broad that the unintended result is almost a total ban on easements and real estate covenants that in any way prevent or inhibit “land development.” With the passage of Section 545, the Vermont State Legislature has made it illegal for property owners, business owners, developers or neighbors to enter into any covenant or grant any easement that limits development of any property to something less than what local zoning rules allow.
 
Here are a few examples of recent easements and covenants that would be illegal after January 1, 2021, under Section 545:
 

1. Developer proposes 50-unit subdivision with minimum lot size of 2 acres to maximize value in a district that allows 1-acre lots. Home Owner’s Association declarations and covenants state that there shall be no further subdivision so as to maintain character and value. This would be illegal under the new law if subdivision commenced after January 1, 2021.
2. Developer proposed 74-unit development with 25% of the units designated as affordable housing. Town approves under zoning. Neighbors object to the scale of the project and appeal. The developer and neighbors enter into an agreement with new setbacks and agree to reduce to 55 units. Under Section 545, this agreement would be illegal. The project would spend years in litigation and the developer would have walked away. No affordable housing units would be built.
3. A farmer wanted to sell land for development but was concerned about a competing farm stand operation next door. The farmer subdivided the property with a covenant that prevents the establishment of an agricultural products business on the sold land. This would be illegal under Section 545. This forces the farmer to choose between realizing the value of their property or protecting their farm business. This is an unfair choice.
4. A neighbor objected to the size of a proposed solar field. Neighbor and developer agreed to permit a reduced solar development with greater setbacks, tree protection easements and a limitation on the total number of other commercial uses on the developer’s property. This allowed the solar development to move forward. Under Section 545, this renewable-energy project would have spent years in litigation and possibly been abandoned.
5. Property owner wishes to subdivide 2 lots out of his larger 10 acre property. Access is proposed via an existing driveway near owners house. Owner is concerned about overall impact on his house from traffic to new lots and so executes subdivision with access easement that limits the use of the driveway and new lots to residential uses only. Zoning would allow for AirBnB or other commercial uses on the new lots. Under Section 545 this easement would be illegal and homeowner could not control the development of his property during subdivision.

 

Act Now to Preserve Your Property Rights

 
It is MSK’s position that the Vermont Legislature passed Section 545 without realizing its true impact. MSK has called these issues to the State Legislature and Governor’s office. MSK attorneys are working to change Section 545 as fast as possible given its devastating effects, but this may not happen before the January 1, 2021 deadline.
 
If you have plans for future development of your property and want to limit use or manage future development, you should do so before December 31, 2020. It is unknown if, or how long, the Legislature will take to change Section 545.
 
We encourage all developers and property owners near proposed developments to contact us immediately so that we can arrange covenants and easements before the January 1, 2021 deadline. You can contact us online or call us at 1-802-861-7000.