Real Estate & Development

Changes to the Attorney General Registration Process Improve NH Developers’ Experience

March 2016

By Erik Newman* for Granite State Builder Magazine

The development community fought for meaningful changes to the subdivision registration process in 2015 and more reforms may be on the horizon.

Many developers have experienced their share of frustrations with the registration process under the Land Sales Full Disclosure Act, RSA 356-A, and the Condominium Act, RSA 356-B, which require developers to obtain a certificate of registration issued by the Consumer Protection Division of the Department of Justice before lots or units may be marketed or sold, subject to certain exemptions. Well-intentioned as these consumer protection laws may be, their content and administration has not kept pace with the needs and practices of builders, leading to a cumbersome and sometimes lengthy registration process that can stifle development.

Some relief came in 2015 from Senate Bill 235, which relaxed two of the more costly and cumbersome requirements for registering subdivisions and condominiums. The requirement that developers demonstrate “reasonable assurance” that all proposed improvements will be completed had increasingly become a stumbling block. Developers who utilized a construction line of credit whose limit was less than the total cost of the development were susceptible to initial rejection of their applications for registration. The Land Sales Full Disclosure Act and Condominium Act now stipulate that “reasonable assurances” shall be satisfied by a revolving line of credit in an amount equal to one-fourth of the total cost of total numbers of units to be registered if the loan terms requires the lender to notify the attorney general in the event the line of credit is cancelled and the loan covers the cost of the infrastructure supporting all the units. The attorney general is now also expressly authorized to find that other sources of financing may provide reasonable assurances.

Senate Bill 235 also eased some of the expense associated with registration by eliminating the requirement for CPA certified or reviewed financial statements where the developer is an entity, such as a corporation or limited liability company. In such circumstances, the developer may instead submit certified personal financial statements on behalf of all principals holding more than a 25 percent interest in the entity, certified as complete by the principals, together with federal tax returns for the two prior years. The cost and time savings of not having to prepare financial statements that satisfy the accounting standards for a certification or review can be significant.

Additional reforms are likely to arise from the recommendations of a legislative study committee established in 2015 under HB 175 and tasked with improving the efficiency of the subdivision registration process. The study committee’s report recommended adopting a fast-track process for applications seeking to register subsequent phases of previously registered subdivisions. The report also called for clearer guidelines for determining whether an applicant’s financial information is acceptable, in an effort to restrain the imposition of certain conditions on registration, such as requiring personal guarantees of developers.

The study committee also proposed an annual meeting with the Attorney General in charge of registration, which the current Consumer Protection Division Chief, Sr. Asst. Attorney General James Boffetti, welcomes. He routinely comments that registration should not be an adversarial process and that the AG’s office is committed to moving registration files along faster and encouraging direct communication with his staff. This author’s experience over the past year bears that out. In fact, Attorney General Boffetti encourages any developers with questions about registration applications to contact Laura Hamilton at 603-271-1262 or to minimize the need for the deficiency letter writing campaigns of old.

As to the study committee report’s questioning of whether registration remains an essential consumer protection practice, it is likely to remain the law for the foreseeable future. Developers and regulators alike agree that the registration regulations need to be re-written and simplified, but that undertaking requires resources not presently available. Until then, the development community should experience less rigidity in the current regulations’ implementation by the Consumer Protection Division, particularly where a developer can demonstrate previous development success and is building in a municipality with professional planning support.

* Erik Newman is admitted in New Hampshire.

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