East Lyme ― The town has put $2.25 million in escrow pending the assignment of a $400,000 state grant to the town, a move that signals the years-long process to save 255 acres of land from development could be nearing a conclusion.

Steve Harney, the mortgage holder on 122 acres near Lake Pattagansett and another 100-plus acres of collateral property, said his “time is of the essence” message to First Selectman Dan Cunningham on Wednesday yielded movement where he hadn’t seen it previously.

Harney in his email warned Cunningham he’d foreclose on the land and collateral properties if his extended closing deadline next Tuesday isn’t met.

“They put their money up,” Harney said Thursday after the town deposited the money in escrow. “We’ll give them breathing room.”

On Tuesday the town will have to prove the $400,000 grant initially secured by the East Lyme Land Trust has been assigned to the town, based on Harney’s timeline.

Cunningham on Thursday said the assignment of the grant will close escrow, allowing the town to take the land and the seller to take the money.

The Hathaway land, secured by collateral properties in the Oswegatchie Hills and Giants Neck beach area, is owned by the East Lyme Land Trust. The nonprofit conservation group bought the Hathaway parcel from an entity associated with Harney’s family for $2.3 million in 2022, when Hathaway Farm LLC flipped from owner to lender.

Hathaway Farm LLC initially picked up the Hathaway land, which had been in the same family for hundreds of years, for $1.05 million in 2021.

Voters at an October referendum authorized spending up to $2.35 million on the purchase, which includes the collateral properties. Harney has been critical of the amount of time it’s taken to close the deal since then.

Cunningham said he’s hopeful the stars will align over what has been “a long and winding road.”

He said the transfer of the state Department of Energy and Environmental Protection grant is being scrutinized by the Office of the Attorney General. That’s because there have traditionally been restrictions on the transfer of grants from land trusts to another entity, according to the first selectman.

DEEP spokesman Paul Copleman last week said the state agency is working with the town and land trust to complete the transfer “and has yet to run into any significant hurdles.”

Cunningham described himself as hopeful the transfer will work out.

“But it’s not over till it’s over,” he said.

The sale is also contingent on the payment of back taxes incurred by Hathaway Farm LLC amounting to $21,203, according to tax collector Christine Dixon.

Harney said there’s a roughly $3,000 difference between the amount the town says it’s entitled to and the amount he thinks is owed.

The issue was being negotiated Thursday by attorneys, according to Cunningham. The first selectman didn’t know the outcome of those discussions.

Harney said the issue will be ironed out.

“There’s a number in there, and it’s a legitimate number,“ he said. ”We’ll pay whatever we owe.“

The struggling land trust has been criticized by conservationists, including members of the Friends of the Oswegatchie Hills Nature Preserve, for using property meant to be preserved as open space as collateral for the mortgage.

The land trust’s Oswegatchie Hills parcels, which are considered undevelopable, are valuable to the town and nature enthusiasts because they sit in the middle of the otherwise town-owned Oswegatchie Hills Nature Preserve.

Cunningham said he’s hopeful after Feb. 20 “we can all move on.”

He said all the parties have agreed to release each other from any legal claims, current or future.

He said the mutual release clause is typical in cases “where there are a lot of issues and consternation.”

e.regan@theday.com