The 1998 legislature responded to the 1997 Bianchi v. Lorenz decision of the Vermont Supreme Court by passing the "Bianchi Law," or "An Act Relating to Recording of Instruments and Documents Required to Determine Marketability of Record Title." In 1999, the legislature modified this law. This paper seeks to provide a brief background on the Bianchi case and the 1997 law, and will explain what is required of municipalities under the new Bianchi law ("Bianchi II").

The Vermont Supreme Court decision Bianchi v. Lorenz established that violations of local land use regulations are a cloud on the title of property. The result of this decision was that, before any real estate could be sold, the attorneys involved in the transaction had to determine whether the property was in compliance with local zoning and subdivision regulations and permit conditions. This was not a bad result for municipalities since, when problems were discovered, the landowners were highly motivated to cure the violation so that clear title could be transferred. However, this ruling made it costly and time consuming to search title, and prevented many land transactions from being completed because of difficulty establishing that proper permits had been obtained. This is because in some towns, municipal zoning record keeping was spotty, at best, so it was difficult to determine whether a property had received all required permits.

The 1998 legislative fix, for the first time, required municipal land use permits, or memoranda of those actions, to be recorded with the town clerk. It also created a statute of limitation on enforcement of certain municipal permit violations. Unfortunately, because of a lack of clear definitions and too many statutory exceptions, the legislative fix did not work. Costly title searches remained, and many town clerks and zoning offices felt overburdened by the recording requirements . Consequently, this year the legislature passed Senate Bill 144 which tries again to amend the law to create a permanent fix to the Bianchi decision. The new law seeks to:

• establish clearly what constitutes an encumbrance on title to real estate, by returning to the standard commonly accepted prior to the Bianchi decision. (ie. permit violations do not constitute title defects.)
• provide relief to the purchasers and sellers of real estate by eliminating unnecessary delay in real estate transactions. (ie. by recording permits or notice of permits for easy access.)
• reduce the costs of title searches and title insurance by providing for a statute of limitations on enforcement of municipal land use violations and for limited amnesty in regard to state subdivision regulations.

From a record-keeping perspective, Bianchi II continues to require municipalities to build a record of permitting and regulatory actions pertaining to land. Although Bianchi II precludes planning and zoning irregularities from creating a title defect, having a clear, searchable record of regulatory actions will improve municipal enforcement efforts since potential purchasers will have notice of violations, thereby giving sellers an incentive to fix any problems. Note, however, that a 15-year statute of limitations on enforcement of land use regulations will require the municipality to be somewhat more vigilant in determining whether violations exist on property that may not be up for sale.

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The new law establishes the following:

1. Permit violations do not constitute an encumbrance on title. From the landowner’s point of view the most important thing that Bianchi II does is to clarify that violations of zoning and subdivision permits do not create an encumbrance on title.

27 V.S.A. § 612 is amended to read: " Notwithstanding the majority decision in Bianchi v. Lorenz (1997), for land development, as defined in 24 V.S.A. § 4303(3), no encumbrance on record title to real estate or effect on marketability shall be created by the failure to obtain or comply with the terms or conditions of any required municipal land use permit as defined in 24 V.S.A. § 4303(24)."

• Note that this provision of law became effective when the bill was signed into law on May 26, 1999. It applies retroactively to April 27, 1998, and terminates specified encumbrances that otherwise might have existed at any time before or after that date.

2. Purchaser May Terminate Contract Because of Violations. In order to ensure that purchasers of real estate are protected from purchasing properties that violate land use regulations, the new law gives a purchaser the right to terminate a real estate sales contract if, prior to closing, the buyer finds that there are violations of land use permit requirements or conditions.

27 V.S.A. § 612 (b) has been added, which provides "A purchaser shall have the right to terminate a binding contract for the sale of real estate if, prior to closing, the purchaser determines and gives written notice to the seller that land development has occurred on the real estate without a required municipal land use permit or in violation of an existing municipal land use permit. Following the receipt of written notice, the seller shall have 30 days, unless the parties agree to a shorter or longer period, either to obtain the required municipal land use permits or to comply with existing municipal land use permits. If the seller does not obtain the required municipal land use permits or comply with existing municipal land use permits, the purchaser may terminate the contract if, as an owner or occupant of the real estate, the purchaser may be subject to an enforcement action under 24 V.S.A. § 4496."

3. A Municipality May Only Enforce a Land Use Violation for 15 Years after the Violation First Occurred. This provision is very controversial among local officials. Essentially, it excuses violations after 15 years. The purpose of this provision is to allow property owners who purchased property that may have been in violation of the bylaws, or property owners who cannot prove that the property complies with permits, or who have lived with a violation, to be insulated from an enforcement action if the municipality has not brought an enforcement action within 15 years of the violation first occurring. The new law also provides that this statute of limitations will not prevent a municipality from requiring that health hazards (i.e. failed septic systems) be abated. Specifically, 24 V.S.A. § 4496 has been amended to provide that:

"(a) An action, injunction or other enforcement proceeding relating to any municipal land use permit may be instituted . . . against the alleged offender if the action, injunction, or other enforcement proceeding is instituted within 15 years from the date the alleged violation first occurred and not thereafter. The burden of proving the date the alleged violation first occurred shall be on the person against whom the enforcement action is instituted."

"(c) Nothing in this section shall prevent any action, injunction or other enforcement proceeding by a municipality under any other authority it may have, including, but not limited to, a municipality's authority under Title 18, relating to the authority to abate or remove public health risks or hazards."

• This provision became effective when the bill was signed into law on May 26, 1999 and it applies retroactively to July 1, 1998. Note however that, for property sold (or otherwise transferred) after April 27, 1998 but before July 26, 1999, the appropriate statute of limitations established in 24 V.S.A. § 4496 upon April 27, 1998 will apply for a period of 10 years from the date the violation first occurred, after which time the 15-year statute of limitations created in Bianch II will apply. In these instances, enforcement actions that would be allowed under a 15-year statute of limitations but were not allowed in the original version of 24 V.S.A. § 4496, as it existed on April 27, 1998, will not be allowed. This is because the parties and the municipality may have acted in reliance on the first Bianchi law, which came into effect April 27, 1998.

4. A Municipality May Only Enforce Violations of Permits if the Permit, or a Notice of Permit, Has Been Recorded With the Town Clerk. In order to encourage municipalities to record land use permits, or notices of the permits in the Town Clerk’s office, a provision was added that prevents a municipality from enforcing a violation of land use permit that has not been properly recorded. Specifically, the law provides that:

" No action, injunction, or other enforcement proceeding may be instituted to enforce an alleged violation of a municipal land use permit which received final approval from the applicable board, commissioner, or officer of the municipality after July 1, 1998, unless the municipal land use permit or a notice of the permit generally in the form provided for in subsection 1154(c) of this title was recorded in the land records of the municipality as required by subsection 4443(c) of this title."

F Note that this provision became effective when the bill was signed into law on May 26, 1999 and it applies retroactively to July 1, 1998.

5. Fine For Zoning Violation Increased to $100. The new law updates the penalty provision of 24 V.S.A. § 4444 increasing the fine for violating a bylaw from fifty to $100 dollars for each offense. Note that every day a violation continues, it is considered a new offense. Specifically, the law provides that:

"(a) Any person who violates any by-law after it has been adopted under this chapter or who violates a comparable ordinance or regulation adopted under prior enabling laws shall be fined not more than $100.00 for each offense."

F Note that this provision became effective when the bill was signed into law on May 26, 1999.

6. Town Clerk Must Record In Land Records Municipal Permit Or Notice of Permit. Like the previous Bianchi law, Bianci II requires the town clerk to record permits or notices of permits in the land records. What has changed in the new law is that fewer documents are to be recorded. A new definition of "Municipal Land Use Permits" provides a specific, more narrowly drawn, list of what must be recorded; hopefully, preventing further confusion. Specifically, the new law amends 24 V.S.A. § 1154, and provides:

"(a) A town clerk shall record in the land records, at length or by accurate, legible photocopy, in books to be furnished by the town: . . . (6) municipal land use permits (as defined in section 4303 of this title) or notices of municipal land use permits, as provided for in subsection (c) of this section, notices of violation of ordinances or bylaws relating to municipal land use, and notices of violation of municipal land use permits, (7) denials of municipal land use permits . . ."

"(b) A temporary permit (if defined by the bylaws of the municipality) is not required to be recorded."

F Note that this provision became effective when the bill was signed into law on May 26, 1999.

7. Municipal Land Use Permit is Defined. The new law adds 24 V.S.A. § 4303(24) which provides:

"’Municipal land use permit’ means any of the following whenever issued:

(A) a zoning, subdivision, site plan, or building permit or approval, any of which relate to "land development" as defined in this section, which has received final approval from the applicable board, commission or officer of the municipality; or

(B) a septic or sewage system permit issued under any municipal ordinance adopted pursuant to chapter 102 of this title; or

(C) final official minutes of meetings which relate to the permits or approvals described in subdivision (24)(A) or (B) of this section which serve as the sole evidence of such permit or approval; or

(D) a certificate of occupancy, certificate of compliance or similar certificate which relates to the permits or approvals described in subdivision (24)(A) or (B) of this section; or

(E) an amendment of any of the documents listed in subdivisions (24)(A) through (D) of this section."

F Note that this provision became effective when the bill was signed into law on May 26, 1999.

8. Bianchi II Still Permits a Notice Of Municipal Land Use Permit to Be Recorded Instead of the Entire Permit. The new law changes the term "municipal memorandum" to "notice of land use permit. The new 24 V.S.A. § 1154 provides:

"A notice of a municipal land use permit or a notice of violation specified in subdivision (a)(6) of this section may be recorded, and if such notice is recorded, it shall list:

(1) as grantor, the owner of record title to the property at the time the municipal land use permit or notice of violation is issued;

(2) as grantee, the municipality issuing the permit, certificate or notice;

(3) the municipal or village office where the original, or a true, legible copy of the          municipal land use permit may be examined;

(4) whether an appeal of such permit, certificate, or notice has been taken;

(5) tax map lot number or other description identifying the lot.

1. The town clerk shall keep in each book of record an index of reference to the instruments or records in that book."
2.  

• Note that the requirements for the notice of municipal land use permit or notice of violation have not changed from the 1998 law.

9. Bianchi II does not change the recording method. Under 24 V.S.A. § 1161(b) "Each owner of record title to the property at the time such an instrument is issued shall be listed as the grantor . . . [and] the municipality issuing the instrument shall be listed as the grantee for instruments described subdivision 1154(a)(6) of this title [municipal land use permits]."

• Note that this provision of law became effective when the bill was signed into law on May 26, 1999.

10. Zoning Office Is Still Required To Record Permit or Notice of Permit in the Land Records. Bianchi II does not change the obligation of the appropriate municipal official (generally the zoning administrator) to record municipal land use permits or notices of the permit with the clerk. The only changes to this provision include deleting the laundry list of permits covered by the old law, which are now included in the definition of "municipal land use permit", and the addition of a specific requirement that a copy of the land use permit be filed in a location where all municipal land use permits are to be kept. 24 V.S.A. § 4443 specifically provides:

" Within 30 days after a municipal land use permit has been issued or within 30 days of the issuance of any notice of violation, the appropriate municipal official shall:
(A) deliver the original or a legible copy of the municipal land use permit or notice of violation, or a notice of municipal land use permit . . . to the town clerk for recording . . . ; and

(B) file a copy of that municipal land use permit in the offices of the municipality in a location where all municipal land use permits shall be kept.