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A tale of commercial development and PILOTs gone awry p3

5/20/2014 | Real Estate Blog

We are still discussing the decision in a federal court case about payments in lieu of taxes. The dispute is in Massachusetts, so the situation is a little different from what we would see here in Philadelphia or across the river in New Jersey. The facts are interesting, though, and there is, perhaps, a lesson for us all as well.

A brief recap: Almost 30 years ago, a developer purchased a parcel of land that straddled the line between two towns. He negotiated with one town, Marlborough, to make payments in lieu of taxes in return for access to the town’s sewer system. Although the agreement was in writing, neither the developer nor the town filed a copy with the town recorder.

Whenever property changes hands, there is a title search. The title search will include a close examination of the property records filed with the city or county, and it should turn up any liens or encumbrances on the property — an easement, for example, or a mortgage.

The seller or purchaser can then negotiate over which encumbrance the purchaser would take on — in this example, probably the easement — and which lien the seller would take care of prior to or at the time of sale, like the mortgage. This idea is for the purchaser to know exactly what he or she is getting, and the property can change hands without incident.

If something shows up years down the road, something like, say, a PILOT agreement, clearing it up can be a hassle and can even include legal action. That is what happened here.

We’ll finish this up in our next post.

Source: Wicked Local Marlborough, “Judge tells Marlborough: ‘In lieu of taxes’ payments were ‘illegal’,” Kendall Hatch (Daily News), May. 9, 2014