Preservation Restrictions

How to Protect Your Historic Property

by C. Richard Loftin, Attorney at Law


What is a historic preservation restriction?

A preservation restriction is a legal agreement between you, the owner of a historic house, and a qualified preservation organization. In this document, which has the effect of a permanent deed restriction, you agree to protect the historic nature of your house by giving up the right to develop or alter its historic elements.

Why should I worry about what happens to my house when I no longer own it?

As Michael May, executive director of the Nantucket Preservation Trust, puts it, "there are only 800 pre-Civil War structures on the island. Each year eight or ten of them are being completely gutted, and something important is being lost forever -- kind of like tearing pages from a novel, where you lose part of the story." A preservation restriction will help to save a piece of Nantucket's history.

Do I have to restrict the entire house?

The extent of the restriction is up to you. It can be broad and protect all parts of the house. Or it can apply only to the interior or to the exterior of the structure. Or it can be limited to certain rooms -- kitchens and bathrooms are commonly excluded so that they can be updated over time. Or the restriction can narrowly protect only those historic features that you believe to be of particular importance. The restriction can also apply to a garden or other open space next to your house that you wish to remain undeveloped. You decide how the property can and cannot be changed in the future, and the terms of the restriction will be tailored to meet your objectives.

The restriction will bind all future owners and thus guarantee that they will share your commitment to preserving the historic nature of your house.

Who enforces preservation restrictions?

The preservation organization that holds your restriction is the party charged with enforcing it. While a number of organizations are qualified to hold restrictions on Nantucket, the Nantucket Preservation Trust (NPT) and The 'Sconset Trust are active in encouraging owners to seek restrictions for the protection of their properties. The Town of Nantucket, through its Historic District Commission, has also agreed to enforce restrictions.

What are the benefits of a preservation restriction?

As an owner of a historic house, you are a steward of Nantucket's greatest resource: its architectural heritage. By granting a preservation restriction, you are ensuring the integrity of your home and its place in the community.

Besides satisfaction and peace of mind, the grant -- if it meets certain requirements -- will qualify as a charitable donation and thus may give you an income-tax deduction. The amount of the deduction, which can be carried forward to future tax returns for up to five years, is the appraised value of the restriction. An independent appraiser will determine the reduction in the value of your property based on the development rights you relinquish by imposing the restriction, and this reduction is considered to be the your charitable donation. Tax deductions in the range of 5% to 15% of the value of your property are common and will be allowed by the I.R.S. so long as they reflect a legitimate decrease in your property's worth.

Another possible benefit of the restriction is a reduction of your estate-tax liability.

How will a preservation restriction affect the resale value of my home?

That's hard to say. Theoretically, the restriction will result in a modest devaluation of the property. Over time, however, authentic antique houses will gain value because there will be fewer and fewer of them. Yes, it is possible the absolute top dollar would be paid only by those who want to gut the house, and thus you would lose that segment of the market. Here's the key question: Would you want your house to be owned by that kind of buyer?

Is my property disqualified if it has been recently renovated?

If your house is historic, you can protect any (or all) historic features that remain in the house. If you've built an addition, the new construction will be excluded from the restriction so that only the old parts of the structure are protected. Even if your house has been mostly gutted, you might be able to find something to preserve -- but you may be too late to have the satisfaction of perpetuating a true antique.

How much does a preservation restriction cost?

Although you are required to share the expense of creating the legal document that defines the restriction, many preservation organizations (such as NPT and the 'Sconset Trust) will contribute to the process by providing an expert to help you draft a custom-tailored document. In addition, you likely will need an appraisal and a survey of your property.

You may be asked to make a tax-deductible contribution to the preservation organization to supplement their endowment fund or to help cover operating expenses. The amount of the donation will vary, and the request for a donation may be waived altogether, depending on the scope and the complexity of the restriction and whether you are a private individual or a nonprofit organization.

Regardless of the expense involved, it is not uncommon for the income-tax benefits of a preservation restriction to cover its cost.

Can a nonprofit organization impose a preservation restriction on a historic building it owns, and is such a restriction different from a restriction on a privately owned house?

For the most part, the two types of restrictions are similar. If, however, the nonprofit's only reason for imposing a restriction is to be eligible to receive a grant from the Town's Community Preservation Committee, the organization may decide to limit the protections included in the restriction to those parts of the building that directly benefit from the expenditure of CPC funds. The organization would be wise to make its goals clear to its attorney who negotiates the restriction.

Can a preservation restriction be terminated?

The holder of a restriction may release it in whole or in part. The release must be approved by the Massachusetts Historical Commission, which must find the release to be in the public interest.

How do I get started with my restriction?

First, consider the features of your property you would like to protect. A preservation restriction typically contains two categories of restricted activities: activities that are strictly prohibited, and activities that can be undertaken only with advance approval of the preservation organization. For example, you may wish to include an outright prohibition on changing the original floor plan of the oldest portion of the house, but at the same time allow a room to be added to the rear of the house if the addition meets the preservation organization's approval.

A typical preservation restriction includes a third category of activities: those that are allowed as a matter of right, without advance approval. So you should think about what you or future owners might want to do to the house without guidance from the preservation organization, such as renovate the attic or update a bathroom.

The next step is to call NPT, The 'Sconset Trust, or any other organization you know to be interested in holding historic preservation restrictions. Tell them what you have in mind and invite them to visit your property and discuss the project. If you're not sure whom to call or what you want to restrict, give me a call instead -- I will be glad to help you get started.


fax 508-228-6223
For more
information,
contact:
C. Richard Loftin, Attorney at Law
36 Madaket Road, Nantucket, MA 02554
telephone 508-228-6222
e-mail rl@richardloftin.com

For other commentaries by Richard Loftin, click HERE

Copyright © 2014 C. Richard Loftin. The above commentary is the opinion of the author and is for information purposes only. It is not intended as professional advice and should not be construed as such. This commentary was adapted from a brochure published by Nantucket Preservation Trust.

August 1, 2014

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