Throughout the past year, state legislatures and regulatory agencies across New England have enacted new laws and regulations set to impact the future operations of commercial real estate located in the region. These new laws and regulations are set to affect certain key aspects of commercial real estate operations, including financing, taxation, and zoning. To ensure continued success in the New England markets, it is imperative that commercial real estate owners and developers stay apprised of these changes and developments.
Here, we examine recent legal and regulatory changes affecting commercial real estate in three New England states: Massachusetts, New Hampshire, and Rhode Island.
Massachusetts: Changes in Seller Withholdings
On November 1, 2025, Massachusetts implemented new rules governing seller withholdings in real estate transaction closings. This new withholding structure will have significant financial consequences for high-value real estate located in the Commonwealth that is owned, in full or in part, by non-Massachusetts residents or other non-qualifying entities.
Specifically, all sales or conveyances of real estate located, in whole or in part, in Massachusetts with a gross sales price of at least $1,000,000.00 will have 4% of each seller’s share of the gross sales price withheld by the withholding agent, unless a seller qualifies for an exemption or exception. Notably, these new seller withholding rules exempt Massachusetts residents and certain business entities consistently doing business in Massachusetts. However, even if you or your business do not qualify for an exemption under this new withholding structure, your seller withholdings may still be reduced or not required at all if certain exceptions apply, such as if the transaction is part of a particular foreclosure sale or if the real property being transferred lies, in part, outside of Massachusetts.
Legal guidance will be crucial if planning to sell any high-value real estate assets in your portfolio. Particular attention should be given to whether your specific transaction qualifies for an exemption or exception under this new seller withholding structure.
New Hampshire: New Financing Opportunities for Energy Efficient Upgrades in Commercial Properties
Effective January 1, 2026, New Hampshire will implement a new commercial property assigned clean energy and resiliency (C-PACER) program for the State (the “C-PACER Program”). This C-PACER Program is a voluntary financing mechanism for energy efficient upgrades, building insulation, cost-effective renewable energy, and water conservation measures in commercial property, including manufacturing facilities, office buildings, retail buildings, and multifamily housing projects. The C-PACER Program will allow commercial real estate owners to invest in energy-efficient, environmentally conscious improvements and projects that not only benefit their communities, but also reduce their property’s long-term energy costs.
In essence, this new program allows commercial real estate owners to obtain private sector loans issued by private lenders that are then repaid through a voluntary property tax assessment on the commercial property as assessed by the municipality in which the property is located. Financing under the C-PACER Program is secured by a special assessment lien on the eligible property, which runs with the property and binds subsequent owners. While municipalities have the initial right to choose whether to opt-in to the C-PACER Program, once opted in, the New Hampshire Business Finance Authority will administer the program, creating a more consistent, streamlined process for real estate owners.
To be eligible for participation in the C-PACER Program, real estate owners must demonstrate, among other things, that (i) the proposed project provides benefits to the public in the form of energy or water resource conservation, reduced public health costs and/or risk, or reduced public emergency response cost and/or risk, (ii) for existing buildings, the proposed improvements will create greater efficiency or conservation, and (iii) for new construction, the proposed improvements will enable the property to exceed the efficiency and conservation requirements of the current building code.
Legal guidance will be crucial to determine eligibility and navigate the application process.
New Hampshire: New Allowances for Multi-family Housing on Commercially Zoned Land
Beginning July 1, 2026, municipalities in New Hampshire will be required to allow multi-family residential development on commercially zoned land, provided that adequate infrastructure, including roads, water, and sewer systems, are available or can be provided to support the development. This new law provides commercial real estate owners and developers with the unique opportunity to transform idle commercial space into multi-family and multi-use developments.
While it remains to be seen how individual municipalities will adjust their zoning regulations in light of this new law, there are certain particulars that the new law requires to be reflected therein. Namely, the new law gives municipalities discretion to restrict residential use in zones which permit industrial or manufacturing uses, provided such uses raise concerns over air, noise, odor, or transportation accessibility. Municipalities also have discretion under the new law to require that a multi-use building’s ground floor space, or a percentage thereof, be dedicated to retail use. Significant to commercial real estate owners and developers, the new law requires that municipalities provide exemptions to any requirements regarding setbacks, height, or frontage for existing properties being converted, in whole or in part, into multi-family or mixed-use properties, provided that the building’s physical dimensions do not change. In other words, when converting existing commercial structures into multi-family or mixed-use structures, real estate owners and developers need not worry about complying with the specific setback, height, or frontage requirements generally applicable to multi-family or mixed-use properties, so long as the existing commercial structure remains unchanged.
Legal guidance will be crucial for commercial real estate owners and developers looking to transform existing commercial property in light of this new law and the local zoning changes its enactment prompts.
Rhode Island: Changes in Real Estate Conveyance Taxes
On October 1, 2025, Rhode Island’s appropriations for Fiscal Year 2026 went into effect, including a change to the State’s real estate conveyance tax scheme, which imposes taxes on property sold, granted, assigned, transferred, or conveyed where the consideration paid exceeds $100.00. At present, the real estate conveyance tax is calculated on two tiers: (i) Tier 1, which applies to the entire consideration paid for the purchase of any real estate or any “acquired real estate company” (as defined by the Division of Taxation), and (ii) Tier 2, which applies, in addition to Tier 1, to the portion of consideration paid for the purchase of any residential real estate or any acquired real estate company exceeding $800,000.00.
Prior to October 1st, the Tier 1 real estate conveyance tax for any real estate or acquired real estate company was $2.30 per $500.00 of the entire consideration paid, and the Tier 2 real estate conveyance tax for any residential real estate or acquired real estate company was $2.30 per $500.00 of the portion of the consideration exceeding $800,000.00. However, after October 1st, both the Tier 1 and Tier 2 tax rates significantly increased. Namely, the Tier 1 real estate conveyance tax increased to $3.75 per $500.00 paid in consideration, and the Tier 2 real estate conveyance tax increased to $3.75 per $500.00 paid in consideration over $800,000.00, with the $800,000.00 floor now subject to inflation adjustments. Therefore, while the sale of a retail shopping center for $1,000,000.00 would have triggered real estate conveyance taxes in the amount of $4,600.00 prior to October 1st, the same sale will result in $7,500.00 in real estate conveyance taxes under the new scheme. With the real estate conveyance tax increasing more than 60%, sellers of commercial real estate, who often pay the real estate conveyance tax, will need to take this increased cost into account when considering the economics of a sale.
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