Although open space in eastern Massachusetts seems to be shrinking, we do have an abundance of land zoned for agricultural or horticultural use on the edges of our towns or even tucked in and around our villages and shopping centers.  Any person or company interested in buying, selling or operating a farm should become familiar with Massachusetts General Laws Chapter 61A.

What is that you ask?

 

M.G.L. Chapter 61A is a state law intended to reduce property taxes on commercial farmers who raise animals or grow crops and other plants.  Farmers who meet the Chapter 61A requirements can enter the program and apply to their town’s Board of Assessors to be assessed at a lower tax rate.

Sounds great so far, so what’s the catch?

Arguably there is no catch.  The Commonwealth has put a program in place to assist farmers in areas where property taxes have steadily increased beyond what a farm can economically sustain.  It’s when the owner wants to close the farm or sell to another person who plans to develop the land for non-farm use, that close attention to Chapter 61A is required.

The first obstacle to overcome is what is known as a Right of First Refusal.  Chapter 61A gives the town the option to purchase the land if the current owner wants to convert the land to another use or sell to another person who intends to make that change.  In either case, the landowner must give notice to the town and the town then has 120 days to purchase the land.  Chapter 61A has a very particular process the owner must follow to start the clock ticking on the Right of First Refusal period.

If the town declines its right to purchase the land, all is not clear for the farmer.  Upon a change in use, the property may be subject to either the Conveyance tax or the Roll-Back tax.  These two taxes use separate calculations to determine the tax penalty levied on the farmer for changing the land use.  The history of the farm and the timing of the conversion will determine the amount of the two taxes and the town will assess the higher, but not both.

The devil is always in the details and how a farm will be penalized for conversion depends on the set of facts for each piece of land.  Without the proper analysis, an unwary seller or buyer may end up with a surprise tax bill.  At Stiles Law, we can assist buyers and sellers of farm land in navigating Chapter 61A to successfully complete their sale or purchase.