Feature

Navigating Maine’s New Road Disclosure Law

Maine practitioners representing a seller of commercial or undeveloped real estate must advise their client as to new access road disclosure requirements recently enacted by the state legislature. 33 M.R.S.A. § 193, which became law in Maine effective August 1, 2018, requires a seller of nonresidential real property to disclose to the purchaser, to the extent known by the seller, (i) information identifying any abandoned or discontinued town ways, any public easements, and any private roads located on or abutting the property, and (ii) information identifying any party, parties, or road association responsible for maintenance of any abandoned or discontinued town way, public easement, or private road so identified.

Section 193 represents a legislative response to concerns about access to undeveloped parcels. It is therefore ostensibly intended as a pro-development measure, aimed at protecting would-be developers with respect to any latent access issues affecting a potential development site. Upon closer review, however, it becomes clear that the law was passed without any input from the commercial transactional perspective—a conclusion that is bolstered by a legislative history that contains no testimony from any relevant trade groups, perhaps due to the initial drafts of the bill not having included any reference to commercial real estate.

What’s more, section 193 reflects a significant departure from Maine’s tradition, at least with respect to commercial transactions, as a strict caveat emptor state. In commercial transactions, Maine law previously required disclosures only of underground or above-ground storage tanks and subsurface waste water disposal systems within shore land zones. The legislation of an additional disclosure requirement without any apparent consideration of the commercial real estate implications has caused some concern among commercial real estate practitioners and state trade groups, including the primary special interest group for Maine real estate developers, the Maine Real Estate & Development Association (MEREDA).

Although superficially harmless, the law does have a punitive element. What is functionally a title question traditionally within the purview of the buyer’s due diligence is now thrust upon any seller who happens to be cursed with knowledge of such matters. The statute is also less than fully clear on the sanction for a failure to disclose. Aside from perhaps incentivizing a head-in-the-sand approach for sellers themselves, section 193 requires seller’s lawyers to determine how to properly advise their client with respect to any paper street or access issues affecting the situs.

One such practical consideration concerns waiver—i.e., whether the disclosure requirements of section 193 can be effectively disclaimed, in the first instance, and, if so, what would constitute an effective, enforceable disclaimer.

The following language, though untested, seems a good place to start:

Buyer hereby agrees that, notwithstanding the provisions of 33 M.R.S. § 193, the investigation of any and all matters relating to (i) the identification of any abandoned or discontinued town ways, public easements, or private roads located on or abutting the Property, and (ii) the identification of the party or parties responsible for the maintenance of any abandoned or discontinued town way, public easement, or private road located on or abutting the Property (including any responsible road association) shall be the sole responsibility of Buyer, and Buyer shall have the right to perform such investigation as part of Buyer’s examination of all other matters of title respecting the Property. Buyer hereby knowingly, unconditionally, and expressly waives its right to receive a property disclosure statement from Seller pursuant to 33 M.R.S. § 193. Buyer’s waiver of its right to receive a property disclosure statement from Seller pursuant to 33 M.R.S. § 193 shall not constitute a waiver of any other rights to disclosure afforded to Buyer pursuant to this Agreement or by law unless otherwise expressly provided herein. By execution of this Agreement, Buyer hereby releases Seller from and against any and all claims, losses, costs, liabilities, expenses, demands, or obligations whatsoever arising from or related to (i) the identification of any abandoned or discontinued town ways, public easements, or private roads located on or abutting the Property, and (ii) the identification of the party or parties responsible for the maintenance of any abandoned or discontinued town way, public easement, or private road located on or abutting the Property (including any responsible road association).

It should be noted that, while the above language is tuned to a purchase and sale agreement, the disclosure requirements of section 193 also apply to options, exchanges, or leases with a tenant purchase option. Any waiver language attending such transactions would need to be adapted accordingly.

Of course, section 193 itself has not been the law of the state of Maine for long, and as such it is untested in many ways, including as to waivability. There is no case law concerning the actual impact of the statute or its facially anomalous effect within the broader state jurisprudence that otherwise decrees caveat emptor as the law of the land. It seems that developments on such issues—whether by way of case law, legislative amendment, or, the MEREDA-supported solution, outright repeal—are almost sure to come. Regardless, barring any further word from the Maine legislature or courts, section 193 is the law of the state of Maine, and the current best analysis supports waivability of the disclosure of potential title issues thereunder.

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