Section 1
Introduction
Upon enrollment in Vermont's Use Value Appraisal Program,
also known as the Current Use Program (the "Program"), a lien arises on the
enrolled property to secure the payment of the Land Use Change Tax.
32 V.S.A. §
3757(f). This lien is
superior to any subsequent encumbrances upon the land and serves to protect the
State's interest in collecting the Land Use Change Tax that may subsequently be
imposed on the property, pursuant to
32 V.S.A. §
3757. The Commissioner has discretion to
subordinate the State's lien in favor of a lender's mortgage interest in
circumstances in which the State's interest is protected.
32 V.S.A. §
3777. Subordination of the Current Use Lien
relegates the State's priority claim on the property to a subordinate position.
Therefore, as the administering agency of the Current Use Program, the
Department of Taxes (the "Department") reviews subordination requests to ensure
protection of the State's lien and compliance with Program standards.
Section 2 Application for
Subordination of Current Use Lien and Application Review
To request subordination of the State's lien, a completed
Application for Subordination of Current Use Lien (Form CU-306), together with
a nonrefundable statutory fee of $ 179, must be submitted to the Department by
the landowner, buyer or lender (Applicant). To subordinate its lien, the State
will also require copies of the following documents:
(1) A title opinion issued by a licensed
attorney or commitment for title insurance issued by a company licensed to
issue title insurance in the State of Vermont with an effective date no more
than thirty (30) days prior to the date of the application for the
subordination, which describes the property for which the subordination is
requested and all encumbrances and claims against that property. Following
review of the title report or title commitment by the Department, the
Department may require that the applicant provide copies of one or more of the
documents identified in the title report or commitment letter;
(2) A copy of a commitment letter or other
evidence of the proposed term and provisions of the loan to which the current
use lien will be subordinated. In the event of a material change in the terms
of the proposed loan during review of the subordination request, the applicant
shall submit the revised commitment letter or revised term or provisions of the
loan to the Department.
(3) Such
other documentation as the Department deems necessary to protect its interest
in collecting the land use change tax.
Section 3 Inspection of Relevant Materials
(A) The Department will review completed
applications to assess whether:
(1) There is
sufficient equity to satisfy all existing mortgages and liens superior to the
State's lien, the proposed mortgage, and the potential land use change tax. A
subordination request for which the value of all mortgages, liens, and the land
use change tax constitute no more than 90 percent of the fair market value of
the property shall be generally considered to have sufficient equity.
(2) Whether the parcel presently complies
with the eligibility requirements of the program as set forth in statute and
regulation.
(B) In the
course of its review the Department may:
(1)
Review the relevant parcel file in order to establish whether any changes have
been made to the parcel since enrollment, including, by way of example:
(a) Changes in the owner(s) of
record;
(b) Subdivision or sale of
the parcel to a different owner;
(c) Development of the parcel as defined in
32 V.S.A. §
3752(5);
(2) Determine whether Program
standards are being met. Such determination may be made through review of
relevant documents, including parcel maps. The Department may review the
relevant parcel maps to determine, by way of example, whether:
(a) Parcel maps on file meet Program mapping
standards;
(b) Parcel maps are
accurate regarding excluded land location, enrolled land location, land uses,
house sites, and other geographical information;
(3) Consult with county and consulting
foresters regarding relevant parcels;
(4) Request and review legal documents, such
as a title report, in order to ascertain property ownership and the existence
of other liens and encumbrances upon the property;
(5) Request and review bank documents, such
as property appraisals, in order to calculate residual equity in the
parcel;
(6) Require the applicant
to submit new or revised documents as a condition of subordination in order to
ensure compliance with Program requirements and standards.
(C) Unless all requested documents and
information are provided to the State, its lien will not be subordinated. If a
requested document or information is not provided to the Department within 45
days of the Department's request, the application will be denied.
Section 4 Denial of Subordination
Requests
Subordination requests may be denied when:
(1) The applicant has not provided all
required documents or information to the Department;
(2) There is insufficient equity in the
parcel to satisfy the proposed mortgage, all current liens and mortgages
superior to the State's lien, and the potential land use change tax; or back
taxes are owed on the enrolled property to be subordinated;
(3) The subordination request is not an
active condition of the loan, as evidenced, for example, by receipt of a
subordination request for a mortgage that closed before the completed
Application for Subordination of Current Use Lien and required documents were
submitted.
Section 5
Recording a Subordination Request
The applicant bears the responsibility and the cost of filing
any approved subordination agreement for recording in the appropriate town land
records.
