A conveyance of a durable or perpetual lease creates a leasehold interest and not a fee interest. The relationship between parties to a durable lease is that of lessor and lessee. The character of land governed by a perpetual lease may not be treated as irrelevant by a title examiner if such character is discovered in the search.
Unless the governing instrument provides otherwise, the lessor retains title to mineral rights in the leasehold property. A lessee is not entitled to extract minerals from the leasehold property; to do so constitutes voluntary waste for which the tenant is answerable. Galkin v. Town of Chester, 716 A.2d 25, 168 Vt. 82 (Vt. 1998).
Comment 1. Reference is made to Act 152 of the Adjourned Legislative Session of 2017-2018 concerning only those lease lands owned by municipal corporations. Inter alia, the Act provides that unless municipalities affirmatively vote to retain owned lease lands prior to January 1, 2020, fee ownership of such lands becomes vested in the current lessees of record as of that date.
Comment 2. Lease land is a form of real property interest that originates from certain lands being set aside in the original town charters, to be held in trust for the benefit of various public institutions. In charters issued by provincial New Hampshire Governor Benning Wentworth, the beneficiaries were typically a town school, the Church of England, and the Society for the Preservation (Propagation) of the Gospel in Foreign Parts (SPG), an Anglican missionary society. Post-Revolutionary Vermont charter beneficiaries were typically a town school, a county grammar school, seminary or college (UVM, Dartmouth, Middlebury) and the social worship of God – local churches.
Not all town charters provided lease lands for all of these purposes, but all charters set aside land as sources of income for the various public or pious uses.
The lease term typically ran “as long as water runs and grass grows” and provided a fixed annual rent. The proprietors leased the land by perpetual lease to encourage use of the property that could not be purchased in fee.
Such lease lands, other than those dedicated to the Ministry of the Church of England, remain as leaseholds, unless the lessor has conveyed the fee to a present leaseholder, and should be conveyed exclusively by quitclaim deed or portion thereof.
Comment 3. In order to determine who owns the fee interest in a parcel identified as lease land, a title examiner may be required to extend the search well beyond the statutory 40 year period.
Comment 4. The definitive treatise on Vermont lease land is The Vermont Leaselands, Walter Thompson Bogart (1950).
Comment 5. Lease lands, other than those dedicated to the Ministry of the Church of England, remain as leaseholds, unless the holder of the fee (lessor) has conveyed the fee to a present leaseholder. For a grant to the Ministry of the Church of England see the U.S. Supreme Court holding in Town of Pawlet v. D. Clark & Others, 9 Cranch 292 (1815).
Comment 6. Towns rarely collect rents, as perpetual leaseholds are now taxed as land owned in fee. 32 V.S.A. §3610.
Comment 7. Educational, ecclesiastical or municipal corporations may convey by deed the fee simple in lands the title to or use of which is held by such corporations under state or colonial grant for purposes defined in such grants. Such conveyance may be made to the owner and holder of leasehold rights in such land if such lands are then held under lease, but shall not be made to other than such holders of leasehold interests except subject to such leasehold interest, if any, or simultaneously with the extinguishment thereof. 24 V.S.A. §2406.
Before 1937, town selectmen were precluded from conveying public lands in fee. See, Trustees of Caledonia County Grammar Sch. v. Kent, 86 Vt. 151, 156, 84 A. 26, 28 (1912). In 1935 the Legislature enacted a statute permitting the Town of Belvidere to convey certain public lands. See 1935, No. 239, § 1; see also Jones v. Vermont Asbestos Corp., 108 Vt. 79, 102, 182 A. 291, 302 (1936) (upholding statute). In 1937 the statute was amended to remove the prohibition altogether. See 1937, No. 56, § 1. Galkin v. Town of Chester, 716 A.2d 25, 168 Vt. 82 (Vt. 1998)
Comment 8. The successor in interest to the Incorporated Society for the Propagation of the Gospel in Foreign Parts is the Trustees of the Episcopal Diocese of Vermont. Mikell v. Town of Williston, 129 Vt. at 588. In 1927, the SPG conveyed, through a quit claim deed the right to collect the annual lease payments to the Trustees of the Diocese. The Trustee initiated a procedure through which a lease obligation could be set aside through a quit claim deed. Contact information for the Diocese is Five Rock Point Road, Burlington, Vermont. www.diovermont.org. For UVM, contact the General Counsel’s office at UVM.
Comment 9. Under the current statutory framework, lease lands are fully taxable subject to a credit for the annual rent 32 V.S.A. §3610. For rents supervised by towns, the rents are collected as part of the property taxes and, in theory, turned over by the town to the beneficiaries from time to time.
In 1971, the Vermont Supreme Court declared the statute requiring ratable distribution of fees generated by school lease lands to the existing religious organizations in town a violation of Article 3 of the Vermont Constitution and the First and Fourteenth Amendments of the U.S. Constitution in Mikell v. Town of Williston, 129 Vt. 586 (1971). The fees are not paid to the town.
When collected, rents payable to non-municipal lessors are collected directly from the lessees.
Comment 10. In connection with mortgages to financial institutions, 8 VSA §14302 provides in part: “a mortgage upon lands impressed with a public use, sometimes known as lease, society or glebe lands, but held under a durable lease, shall not be deemed to be subordinate to such lease or public use.” A similar provision for mortgages to Credit Unions is found at 8 VSA §32302.
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