United States: New Hampshire And Massachusetts Condominium Practice: What’s Different? What’s The Same?

This article was published in the March 2012 edition of REBA News

As bordering states it is hard to think of two other bordering states with more contrasts, although Utah and Nevada come to mind. While we regard Massachusetts as being more likely to regulate trade and commerce than New Hampshire, it is New Hampshire that provides an extensive regulatory review and registration requirement for any residential condominium development containing more than 10 units. Massachusetts has no corollary requirement.

This article will provide an overview of the New Hampshire registration process for a residential condominium containing more than 10 units.

New Hampshire Condominium Act

The New Hampshire Condominium Act, RSA 356-B (the "NH Act"), sets forth the requirements for creating a condominium. Significantly different from the Massachusetts condominium act is the requirement that a developer ("declarant") proposing a residential condominium of more than 10 units (including phasing rights) obtain a certificate of registration from the consumer protection and antitrust bureau of the New Hampshire Department of Justice ('the Bureau"). No registration is required for commercial, industrial or any other condominium where only nonresidential units are proposed.

The Bureau's primary purpose is to ensure: (1) that all municipal/governmental approvals are in place; (2) the declarant provides adequate consumer protection disclosures; (3) the declarant has the financial capability to complete the project, and (4) that violations of the NH Act are prevented. The Bureau has enacted Condominium Rules at Chapter 1400 of the New Hampshire Administrative Code (the "Rules") that more fully describe the documents to be filed with any application where registration is required.

How Does One Obtain a Certificate of Registration for More than 10 Residential Units?

An application for registration must be filed with the Bureau for any residential condominium containing more than 10 units. Since there are several form applications, one should have a thorough understanding of the NH Act and the Rules before filing an application. For example, there are both a comprehensive application and an abbreviated application depending on the number of units. The form applications are available on the Bureau's web site.

What Must be Filed with an Application for Registration?

Along with a completed application and payment of the filing fee (currently $30.00 per unit with a minimum $200.00 and maximum of $2,000.00), the Rules require at least the following other documents: (1) the irrevocable appointment of the attorney general to receive service of process; (2) Principal's background statement which requires at least the disclosure of past condominium projects, list of other projects in any state where the declarant has filed for registration or where registration was rejected, list of lawsuits involving the declarant or a principal; the names of every shareholder, partner, member of any closely-held entity, and the principal's tax returns; (3) draft condominium documents; (4) draft Public Offering Statement; (5) draft Purchase and Sale Agreement with identification of Escrow Agent; (6) draft proposed deed; (7) draft marketing or promotional materials; (8) draft management agreement; (9) financing commitment or other evidence of financial ability to complete the project; and (10) statement of the title to the property and encumbrances.

How Long is the Registration Process?

The registration process may take upwards of 70 days. Statutorily, the Bureau has 10 days from the date an application is filed to determine if the application is deemed complete. Thereafter, the Bureau has an additional 60 days to act on the application. During the 60 day period, the Bureau may issue a notice of deficiency requesting additional information or an expanded disclosure. A notice of deficiency may further delay the issuance of a certificate of registration beyond the 60 day period. More importantly, the declarant's failure to address the notice of deficiency within 15 days of receipt may result in rejection of the application.

May I Sell Units Before Registration?

Prior to registration, only non-binding reservations on forms provided to the Bureau may be used. Additionally, all promotional materials disseminated prior to registration must contain a form disclosure stating that the condominium has not yet been registered by the Bureau. Violations may result in fines or rejection of the application.

Upon favorable action by the Bureau, a certificate of registration is issued to the declarant confirming the number of residential units registered. The certificate is then recorded along with the condominium documents and a copy as recorded must be submitted to the Bureau.

It is important to note that the Bureau maintains jurisdiction over the declarant until all of the improvements have been completed and all of the units have been sold. A declarant is required to file annual reports with the Bureau stating any material change in information from the original application and any change in ownership. Change in ownership also triggers a new registration obligation.

The foregoing provides only a basic overview of the registration of a residential condominium in New Hampshire containing more than 10 units. In contrast, Massachusetts currently has no registration process and units may be conveyed as soon as the condominium documents are recorded, assuming it is not a conversion condominium.

While the extensive and costly New Hampshire registration process provides consumer protections, it appears that few clients take the time to read the condominium offering documents. Often a purchaser's motive to buy is driven by the unit's location, price and curb appeal, not the adequacy of condominium offering documents. Some purchasers mistakenly assume that a certificate of registration means the unit is a good investment, clearly an unintended result. In the end, consumer protection disclosures should never replace the old adage, "Buyer beware."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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