Landmark Limitations - What you CAN and CAN'T do in a Landmarked renovation

Brooklyn Heights homes have architectural beauty and historical significance. The distinctive low-rise architecture and picturesque brownstone row houses were predominately constructed before the Civil War. If you're contemplating the purchase of a landmark property or considering renovation, here is what you need to know about owning a piece of this historic neighborhood.

When a property is designated as a landmark, it's recognized by a governing body as a vital piece of the community's fabric, worthy of preservation for future generations. A building qualifies as a landmark based on several criteria, the most fundamental of which is its age. Generally, landmarks must be 50 or older. However, some buildings under 50 exhibiting exceptional design merit or profound historical significance can transcend the typical age requirement.

The criteria for what constitutes "historically significant" can vary significantly from one city to another. Local ordinances and zoning regulations determine a property's status, whether it is on the National Register of Historic Places or not.

Owning a historic home is a unique privilege with responsibilities aimed at preserving the architectural and cultural integrity of the property. When a house is listed on the National Register of Historic Places or situated within a recognized historic district, the possibilities for renovation are guided by specific conditions set forth by the local municipality. These regulations ensure that updates respect the historical significance and aesthetic of the home, maintaining its character for generations to come.

One common restriction faced by owners of historic homes is related to expansions. As families grow and space needs increase, the instinct might be to add to the property. However, most historic homes would not be eligible for such additions. This limitation is rooted in the desire to preserve the original architectural footprint of these properties, keeping their historical essence intact.

Renovations that could alter the defining historical features of the home are typically subject to limitations. Changes to windows and shutters, for example, are often scrutinized, as these elements are crucial to a building's historical appearance. Exterior paint color is another area where guidelines are strict; the chosen hues must align with the property's period and style to ensure coherence with the historical narrative of the area.

Despite these constraints, homeowners have options. If restoration focuses on safety improvements or aesthetic upgrades consistent with the property's look and feel, there is usually more flexibility. Such renovations include updating electrical systems, plumbing, or heating to meet current safety standards or interior redecorations that enhance the home's beauty without altering its historic character.

Owning a home on the National Register of Historic Places opens the door to unique financial opportunities, thanks to the National Historic Preservation Fund. Overseen by the U.S. Secretary of the Interior, this fund is a resource for homeowners looking to maintain or restore their historic properties. It provides project grants to improve landmark homes and incentivizes first-time homebuyers to invest in and renovate these houses.

The fund supports four types of renovation activities:

Preservation is the care and maintenance of a property's existing historical materials and form as it has evolved. It safeguards the authenticity and integrity of the home, ensuring that original elements and structures are kept intact and in good condition. Preservation projects include routine maintenance of historic woodwork, repair of original windows, or upkeep of period-specific architectural features, all aimed at retaining the property's historical significance without significant alterations.

Rehabilitation recognizes the practical aspect of historic properties as living spaces that must adapt to contemporary needs. This type of renovation allows for changes or additions to a landmark property, provided these modifications respect and retain the property's historic character. Rehabilitation projects can include updating a home's electrical or plumbing systems, adding accessibility features, or repurposing rooms while preserving the building's historic essence.

Restoration focuses on accurately depicting a property at a significant historical period while removing elements from other periods. It involves research to determine the most authentic materials and techniques used during the era being showcased.

Reconstruction is unique because it involves re-creating non-surviving portions of a property for interpretive purposes when significant parts of a historic site have been lost but are essential for understanding its historical importance. Reconstruction uses available evidence to make the re-creation as accurate as possible, often serving educational or commemorative purposes, allowing visitors and residents alike to experience the property as it once was.

When financing these architectural treasures, prospective buyers should be prepared for a mortgage process that might be more rigorous than that for a modern property. The underlying reason is straightforward: historic homes are often perceived to require greater upkeep and maintenance, and they may be less energy efficient, leading to higher monthly costs. These factors can influence a lender's risk assessment when underwriting a mortgage.

Historic properties are less likely to meet the eligibility criteria for mortgage products that offer $0 or low down payments, such as USDA, FHA, and VA loans. These programs often have strict requirements regarding the condition and energy efficiency of the property, criteria that many historic homes may only fulfill with significant updates.

Given these realities, conventional 15-year and 30-year home loans are the most suitable financing options for historic properties. These types of mortgages provide the stability and predictability for managing the additional expenses of maintaining a historic home.

For those who are purchasing or already own a historic property in need of remodeling, there are additional financial resources available. Rehab grants and low-interest loans can provide much-needed support for renovations, making preserving the home's historic character feasible while meeting contemporary living standards. Your state's Historic Preservation Office provides information about grant opportunities and low-interest loan programs designed to renovate landmark properties.

Owning a historic home is a stewardship of cultural heritage and commitment that comes with unique economic challenges. Various incentives and tax credits have been established to alleviate the financial burden on homeowners and encourage the conservation of historic structures.

The National Trust for Historic Preservation reports that 35 states offer tax benefits for homeowners who restore landmark properties. These incentives can vary widely, with some states providing additional benefits for specific types of historic properties, such as barns, mills, or income-producing landmark buildings. Homeowners are encouraged to consult with a tax advisor to navigate the specifics of these state tax credits and understand how they can apply to their renovation projects.

While the Historic Rehabilitation Tax Credit is well-known, it's important to note that it does not apply to owner-occupied residential properties. However, by creating a preservation easement, homeowners can protect their property from future development, preserving its historic character. In return, they may qualify for federal income tax deductions based on an easement donation to a preservation organization. It's worth noting that easements are complex legal agreements, and navigating their implications requires the guidance of experts in legal and tax matters.

A historic property can be incredibly appealing for those drawn to living in a unique, one-of-a-kind home steeped in history and character. These homes offer a connection to the past, a distinctive architectural style, and the opportunity to preserve a piece of history.

Your accountant can help you understand the tax implications and benefits, an attorney can advise on legal matters such as easements, and a knowledgeable real estate agent can offer insights into the local historic property market. Additionally, government agencies dedicated to historic homes provide valuable resources and support for preservation efforts.

Owning a historic home can be a rewarding experience with the right support and a passion for preservation.

David Rosen is a licensed real estate broker and a Brooklyn native. His knack for thinking outside the box and negotiating favorable deals ensures that his clients find their dream historic homes and do so with the best terms possible.