Marina Purchase and Sale

pexels-photo-2There are many marinas in Maryland, ranging from large commercial ones the size of small towns to “informal” (or illegal) ones with a few slips and a ramp.  The purchase or sale of a marina property has all of the financial elements of a regular commercial property, but with highly specialized business, riparian rights, zoning, and environmental concerns.  There are many risks to purchasers, and they pose very interesting questions for the real estate lawyer that knows about waterfront and marine businesses.

I was recently hired by a cash buyer to review a potential marina purchase in Baltimore County.  Intellectually, this was an exciting opportunity, since it meant that it was up to me to do the due diligence that is often handled by the lending bank, and it gave me the freedom (and responsibility) to know all aspects of the deal.  Here are some of the things that I looked at.

Zoning and Development Restrictions: This property was in a very specialized and highly restrictive zoning category, and some face to face discussions with the zoning office revealed that prior sales had fallen through because the property had been considered as having the ability to convert to residential condominiums, when that was not possible under current zoning.  These restrictions limited the upside potential of the property significantly.

Piers and Riparian Rights: The possibility of expansion of the existing marina was an intriguing aspect of the purchase.  Careful review, however, revealed that the marina was already built out to the maximum side-lot restrictions and out to the harbor line, which prevented further expansion.  The slips could potentially be reconfigured, but expansion was not possible.

Lease Agreements and Tenant Relations: The seller provided all of the lease agreements with current tenants for review.  These were professionally done, transferable, and enforceable, but during the course of the review it came to light that one of the tenants was unlikely to continue at the expiration of the lease in a few months.  Even more concerning, the largest tenant (who made up nearly half the revenue) appeared to be teetering on the edge of default, and had recently requested that the rent be renegotiated.

Environmental Review and Survey: With marinas, it is crucially important to be sure that there are no significant environmental concerns — especially buried or leaking hazardous materials.  Also key is the question of whether there are easements across the property or other issues that might materially limit the access to and control of the waterfront.  With this property, those reviews did not reveal any issues.

Revenue and Business Concerns: The seller in this instance was a well established commercial business with a known history and other similar properties.  There were no concerns about its ability to deliver good title or to demonstrate that it had the authority to sell the property.  The business concerns in this case were with the revenues generated by the property and whether they supported the investment.  Secondarily, whether there might be future appreciation (or depreciation) with the property or upside from redevelopment.  In this case, current revenues were good, but deviated from historical norms, and were also highly dependent on the largest tenant, who did not look sustainable.  We ran numbers for return on investment based on historical norms and accounting for the possible loss of tenants — these made the property look riskier than it had initially appeared based on revenues.  The difficulty redeveloping the site, in light of the restrictive zoning in place, also limited upside potential and future appreciation.

J. Dirk Schwenk is a Maryland lawyer in Real Estate law, Waterfront Property, Civil Litigation and Maritime Law from Annapolis, Maryland.  He graduated cum laude (with honors) from the University of Maryland School of Law in 1997 and has been in private practice in Maryland ever since.

 

Contract Law 101 – Maryland Contracts

Back to Basics – Contracts 101.

(Originally published in the Mid Atlantic Mariners Club Newsletter, 2010).

The first rule of contract: capture the intent of the parties.

In every profession, not just the law, we are faced with making, interpreting and abiding by contacts.  Sometimes these contracts are long and impossible to understand (mortgage refinancings, consumer warranties) sometimes they are so fleeting that one hardly notices (“I’ll pick up lunch”).  In law school, we learn that a contract consists of an enforceable promise.  It’s a promise that one can take to court, and the court can make the other comply or award damages for their failure to do so.  All contracts, though, include a major element of hope and trust and if that trust is broken, bad things happen, and the threat of a court’s intervention may not be enough to save the deal.

When a client comes to me about a contract, it is usually one of three things — reviewing a contract that someone else has prepared; papering an understanding where the framework is already in place; or protecting a client from the risks of a particular kind of deal.  The most frequent contracts for me are boat and ship purchase contracts — these often involve a significant outlay of funds before the product is near completion, and therefore require both trust and legal protections.  With all projects, I generally start with the same three questions.  What are you trying to accomplish?  What has already been agreed to?  How much do you know and trust the other party?

 When it comes to reviewing a contract that someone else has prepared for my clients’ signature, I focus on two things.  First, does it capture the items that my client thinks are being agreed to?  Many times I am given a form contract such as a boat brokerage agreement, and the parts of the deal that are most important to my client (the time of delivery and the promises that the boat will be fully commissioned to spec) are nowhere to be found.  Usually this can be handled with an addendum that sets out the specifics (Boat to be delivered to Maryland on date certain at the seller’s risk and expense), but sometimes the brokerage contracts simply will not do the trick.  Lawyers often joke about the boat brokerage and real estate contracts — they do a great job protecting the brokers or agents, but beyond that, its usually a lot of words that don’t say too much.

 My favorite project is when a client comes to me and says … “I agreed to _____ with ______ – can you write a contract for that?”  I like this kind of project (not just for the irony of the fact that there may already be an oral contract) because it usually allows me to work from the ground up, as opposed to slogging through pages of 8 point font prepared by someone else.  I get to start with “what exactly has been agreed to?”  Typically a clients’ answer to that question feels like the tip of the iceberg … “we agreed that I would sell his product for a 10% commission.”  This leaves open all sorts of lawyer-fun — how much do you have to sell; can you sell competitor’s products, too; can they hire other brokers or salespeople; where will suit take place; what happens upon termination?  And what happens if there is no agreement on all of the side issues?  I love that question.

 The Second Rule of Contract: be reasonable.

Assuming that there is enough of a contract to be a contract (generally that it is known what is being agreed to, including when it is to be done and how much it is going to cost) everything else may be an open term.  In some areas of the law, like partnerships, employment and state insurance contracts, there is a whole body of statutes that fills in the blanks.  In those areas people may “agree” to many things that they never even thought of.  If there are not default terms, then the agreement reverts to the rules of reasonableness.  These rules are essentially human instincts — most people will agree most of the time about certain things even if they have never considered them before.  If the contract is to buy a certain thing (say a house), then it is only for that particular thing, not something else.  If it is for something that is largely interchangeable (like a Blackberry), then it may not mean a specific thing, just a thing like it.  You can usually do well in contracts by staying polite and acting reasonably, but sometimes that is mighty hard.

 The rest of contracts is just simple interpretation — if the words on the paper say to do X, and X isn’t illegal or completely unreasonable, then that is what you do.  Words are notoriously tricky things, though, so one must write with care and make sure that everyone abides by at least the most important terms over time.  There are a few contracts (marine insurance, for example) where certain words and phrases have such a history behind them that their meaning is known with some certainty.  But for most contracts, even ones that have been used many times, no court has ever interpreted the key language, and everyone is operating on   hope that the words mean what they think they mean.  This is the real difficulty with “form” contracts — people trust it because its The Form, but who knows whether it captures the agreement that was really intended.

 What can you take away from all of this?  First and foremost, be sure that the contracts you enter into actually capture what is being agreed to — this can be trickier than you think.  Second, sometimes the simplest contracts are the best ones — agree to the key items, and otherwise act reasonably.  Third, there are times when a very thorough papering is necessary — like when a major asset like a house or a business is on the line.  In those cases, have clear goals and good representation that is looking out for your specific interests.

J. Dirk Schwenk is a Maryland real estate and civil litigation lawyer.  He graduated cum laude from the University of Maryland School of Law in 1997 and has been in private practice ever since.

Maryland Partition Actions

Dividing Real Estate in Maryland

What do you do if you own a piece of real property with someone else, but you can’t stand them anymore?  Or you need to sell the property, but they want to keep it?  In law, this implicates the doctrine known as “partition.”  In a partition action, one owner of a property files suit against another and asks that the property be divided up or sold and the money split.  It is similar to what happens in a divorce, but the owners aren’t married.  Typical examples: two brothers are made joint owners in their Grandparents will.  One brother uses the property, the other would like to sell it and use the money to work on his own house.  Also typical two people are in love and buy a house together; their love cools and one moves out.  The person that moves out wants to get her money out of the house; the one that stayed is happy with the status quo.  What to do?  File a partition action and ask the court to either divide up the land (perfect if there are two similar lots) or order the land to be sold and money split (necessary if there is one house on the property and it cannot be split in half).

The right to a partition is set out in the Real Property Article of the Maryland Code.  It says:

“Decree of partition (a) A circuit court may decree a partition of any property, either legal or equitable, on the bill or petition of any joint tenant, tenant in common, parcener, or concurrent owner, whether claiming by descent or purchase. If it appears that the property cannot be divided without loss or injury to the parties interested, the court may decree its sale and divide the money resulting from the sale among the parties according to their respective rights. The right to a partition or sale includes the right to a partition or sale of any separate lot or tract of property, and the bill or petition need not pray for a partition of all the lots or tracts.” § 14-107

As the language indicates, if the property cannot be divided without losing value to its owners, then the court should order that it be sold and the proceeds divided.  That is what is known as a sale in lieu of partition.  Such sales are controlled by a section of the Maryland Rules of Civil Procedure that state: “When the relief sought is a sale in lieu of partition, the court shall order a sale only if it determines that the property cannot be divided without loss or injury to the parties interested.”  MD R PROP ACT Rule 12-401.

This is the correct result — if the property can just be split, as with two similar lots that are not improved with buildings — they should be split and the parties can keep or sell them as they see fit.  If the property cannot be split, however, it needs to be sold.

For the owners of the property, however, there are very strong reasons not to actually go through the sale as it would be ordered by the Court.  Under the Rules, the normal procedure is to appoint three commissioners who can establish a value and oversee the sale.  “When the court orders a partition, unless all the parties expressly waive the appointment of commissioners, the court shall appoint not less than three nor more than five disinterested persons to serve as commissioners for the purpose of valuing and dividing the property.”

MD R PROP ACT Rule 12-401.  These commissioners, in turn, can be paid out of the proceeds of the sale.  “Payment of the compensation, fees, and costs of the commissioners may be included in the costs of the action and allocated among the parties as the court may direct.”  MD R PROP ACT Rule 12-401.  If needed, the sale would then proceed to judicial sale –an auction on the courthouse steps.  This means that, if the owners cannot agree to sell it on the open market, it will likely go for a steep discount and then be subject to significant fees to pay the attorneys, commissioners, trustee, and related court costs.

 The bottom line: if you own property and the other side won’t sell, or if someone has sued you to partition a property you own — you will need pragmatic, effective counsel that realizes that all fees and costs will ultimately come out of the value of the clients’ property.

J. Dirk Schwenk is a Maryland Real Estate, Waterfront Property, Civil Litigation and Maritime Lawyer from Annapolis, Maryland.  He provides civil litigation services in real estate issues, contract disputes, environmental and zoning issues, adverse possession and boundary disputes.  He graduated cum laude from the University of Maryland School of Law in 1997 and has been in private practice in Maryland ever since.

Condominium Units – Damages from Common Elements

Damage to your Unit as the Result of a Defect in the Common Elements: Who is Responsible?

A common problem for condominium unit owners is when their unit is damaged as a result of a defect in a common element of the condominium.  Common elements, as defined by the Maryland Condominium Act (the MCA), are all of the condominium property except the units.  For instance, the lobby area of a condominium and the pipes and wires that run from unit to unit are all common elements.  A common problem that arises is when a defect in the common elements causes damage to your unit.  The question that often comes up is: “who is responsible for paying for that damage?”

The answer, generally, is that the council of unit owners’ property insurance will cover the loss.  However, the council of unit owners – or the Condominium Association – will often refuse to reimburse a unit owner for damage to his or her unit.  Generally, they will hide behind the language in §11-108.1 of the MCA, which states that “each unit owner is responsible for maintenance, repair, and replacement of his unit.”  However, there is an important exception to this rule:  when the damage is caused by a defect in the common elements, the council of unit owners is responsible to cover the loss through its property insurance.  We can reach this conclusion by further examining the text of the MCA.

Section 11-114(a)(1) of the MCA mandates that the council of unit owners maintain property insurance on the common elements and units, insuring against those risks of direct physical loss commonly insured against.  Furthermore, § 11-114(g)(1) of the MCA imposes a duty upon the council of unit owners to promptly repair or replace any portion of the common elements and the units that are damaged or destroyed.  If the council fails to take corrective measures, and a condo owner’s unit is subsequently damaged as a result of the failure to fix the defect, the council of unit owners’ property insurance will cover the loss, and the insurance deductible is a common expense.  Md. Code Ann., Real Prop. § 11-114(g)(ii) (West).

Furthermore, even if the council of unit owners couldn’t have fixed the problem before it caused damage to your unit – e.g. if a pipe bursts and floods your unit – the council of unit owners’ insurance will still cover the loss.  What this means is that the council of unit owners is responsible for reimbursing you if a defect in the common elements causes damage to your unit.

This insurance coverage should also generally apply in situations where your unit is damaged as the result of another unit owner’s negligence.  Section 11-114(g)(iii) of the MCA provides that “[i]f the cause of any damage to or destruction of any portion of the condominium originates from a unit, the owner of the unit where the cause of the damage or destruction originated is responsible for the council of unit owners’ property insurance deductible not to exceed $5,000.”  This seems to mean that the coverage extends to defects not only in the common elements, but also defects in other unit owners’ units that cause damage to your unit.

If your unit has been damaged by some defect in the common elements or as a result of some other unit owner’s negligence, you should not be forced to pay out of pocket for repairing the damage.  If you find yourself in this situation, please contact us and we will be glad to assist you in enforcing your rights as a condominium owner.

 

Contracts to Purchase or Sell Real Estate

For most people, if they encounter a real estate contract, it will be a prefabricated agreement presented by a real estate agent.  It may seem as if it is a final document, created by experts, and protecting your interests.  To a degree it will, but it is also there to protect the brokers and the other party, and many of its terms can be negotiated.  Remember that brokers and agents are typically paid out of the proceeds of the deal.  This means that they they have a strong incentive to get you to go through with the deal, even if it may not be in your best interest.  If you grow concerned — get a knowledgeable lawyer — the fees will be much cheaper than making a mistake.   This article is broken up into three sections: 1) Basic requirements for a contract; 2) disclosure considerations; and 3) investigation that is worthwhile to do when entering into a real estate contract.

Maryland Real Estate Contracts — basic requirements: 

There are only a few required elements to a real estate contract — most of the rest is filler required by statute and terms that help the brokers to enforce their right to receive a fee (and to protect themselves in the event of future litigation).

1. A writing, signed by the parties, that identifies the property and the basic terms of the contract:

In Maryland, as in most states, there is no enforceable contract to transfer land unless there is at least a written document identifying the property and the nature of the contract and signed by the seller.  The relevant code states no “interest in land may be assigned, granted, or surrendered, unless it is in writing signed by the party assigning, granting, or surrendering it, or his agent lawfully authorized by writing, or by act and operation of law.  Md. Code Ann., Real Prop. § 5-103.

2. Statutory Disclosures

There are a long list of disclosures that are required to be placed in Maryland real estate contracts by statute.  These include everything from the application of the Critical Areas laws, to notices about where deposits are placed by the broker, to sections on the homeowners associations, to land that cannot be used for residential purposes.  (See Maryland Real Property Article Section 14-117).  It should be noted, however, that failure to include those provisions does not render the contract void — it just means that a seller can sued for the failure to disclose, if the failure causes damages.  “Unless specifically provided, a contract for sale is not rendered invalid by the omission of any statement referred to in this section.”

3. A Deed

After a contract is reached, a deed is required to be filed in order to complete the transfer of property.  A deed is a somewhat more technical instrument, but its basic requirements are a sufficiently specific description of the property, identifications of seller and buyer, and it has the seller’s signature, property witnessed.  To be effective against someone else trying to claim ownership, it must be filed and indexed in the land records.

Maryland Real Estate Contracts — Thinking About Your Contract:

Aside from the boilerplate in a contract, there some things you should pay close attention to:

1. Special Disclosures:  As a purchaser, you can request specific disclosures from the seller – here are some you may want to consider:

a. Mold, mildew, flooding.  If there is any one thing that can ruin a house, its water damage, mold and mildew.  You definitely want to carefully look for any sign of water damage, including the kind of painting and repairs that might indicate past damage.  You can — and if there is any doubt you should — specifically request that the sellers disclose in writing any past water damage, mold, mildew or repairs.

b. Past litigation.  If there has been a past case concerning the house, such as against a homeowners association or neighbor, you probably want to know what that case was about.

c. Any unpermitted additions or structures.  If there is anything on the property that was not permitted, you want to know about it before you purchase not after — it can be very difficult to remedy such a situation.

2. Deadlines and Conditions.  If the contract is conditional (say on disclosure of water damage), and that condition is not fulfilled, then be sure to know exactly how and when to rescind the offer.

3. How much is the broker being paid?  If you are a seller, this item is negotiable, and it is a zero sum game.  Any money that your broker gets, is money out of your pocket.

4. “Other”:  Many contracts contain a blank term for special agreements — this often turns out to be the most important term in the deal.  Is there a boat that is supposed to transfer?  Is there a plan to lease the house back to the seller for a period after closing?  These things need to be written down clearly if they are going to be enforceable.

5. Homeowners Associations, Condo Associations and Improvement Associations.  If you are buying property in a subdivision, you definitely want to know what the covenants are and how they are enforced in the community.  This information should be available as part of the mandatory disclosures — READ IT!  You don’t want any surprises.  If it is not given to you, it should be on file in the land records of the County — find it or have your attorney get it for you.

Maryland Real Estate Contracts — Investigation Before Contract

Any contract requires a certain amount of trust with the other party — here are some things that are relatively easy to find, and very important to know:

1. Is the other party going to run to Court?  Most people never end up in trial – they never sue their neighbors – they just go about their business and pay their bills.  Some people are not like that — they always end up suing (or being sued by) the people that they deal with.  If someone makes you an offer on your house (or you make an offer on their house) take a few minutes to find out whether the other party is a repeat litigator — if they are, there had better be a good explanation or the hassle may take away from the joy of the transaction.

2. Are there proper permits?  Go to the planning department in the County where the property is — ask whether there are any issues with the property.  They can help.  You do not want to buy a house based on an addition that will need to be torn down.

3. Is there a bad neighbor?  Few circumstances are worse than buying a house only to find that you live in fear of your neighbor.  Many bad neighbor situations are the result of a dispute about the true boundaries — a survey can help you determine if there any encroachments either way.

4. What is the neighborhood/house/street really like?  Go to the property without the agent.  Walk along the street at night.  Is it what you want?  If not, move on.

Good luck!

J. Dirk Schwenk is a Maryland Real Estate, Waterfront Property, Civil Litigation and Maritime attorney from Annapolis, Maryland.  He provides civil litigation services in contract disputes, environmental and zoning issues, adverse possession and boundary disputes.  He does real estate law, including preparing and filing deeds.  He graduated cum laude (with honors) from the University of Maryland School of Law and has been in private practice in Maryland ever since.

 

 

 

Real Estate Law, Riparian Rights and the View

Waterfront Property and the Elephant In the Room: What About the View?

Imagine a waterfront house with a large privacy fence that blocks all view of the water — its a strange image.  If there is no view, the property loses most of its “waterfront” essence and most of its value, so somehow, somewhere, the law must protect a waterfront owner’s view.  But I regularly hear other attorneys and government officials recite the old saw: “there is no right to a view.”  They are wrong in some ways, but they do have good reason to say that.  Maryland law (and the law in most coastal states) is silent about the water view.  Concerning riparian rights, Maryland’s court says:

The term “riparian rights” indicates a bundle of rights that turn on the physical relationship of a body of water to the land abutting it….  This bundle includes at least the following rights: (i) of access to the water; (ii) to build a wharf or pier into the water; (iii) to use the water without transforming it; (iv) to consume the water; (v) to accretions (alluvium); and (vi) to own the subsoil of nonnavigable streams and other “private” waters. To be sure, access to the water is a primary asset of riparian rights.  Gunby v. Olde Severna Park Improvement Ass’n, Inc., 174 Md. App. 189, 239-40, 921 A.2d 292, 322 aff’d, 402 Md. 317, 936 A.2d 365 (2007).

The view wasn’t an issue in the Gunby case, but this is an accurate summary.  Florida law, for example is much different: “Upland owners hold several special or exclusive common law littoral rights: (1) the right to have access to the water; (2) the right to reasonably use the water; (3) the right to accretion and reliction; and (4) the right to the unobstructed view of the water.” Walton Cnty. v. Stop Beach Renourishment, Inc., 998 So. 2d 1102, 1111 (Fla. 2008).

Are Maryland property owners without protection then?  The answer is no, the view is protected, but getting to that can be a bit convoluted.  First and foremost, “access to water is a primary asset of riparian rights.”  Most things that obscure the view, such as a fence or wall or, to a lesser degree plantings, also obstruct access and therefore can and should be challenged.   (Need more on potential issues and solutions for waterfront purchases?  Look here.

A pier typically obscures the view and water access to a lesser degree than a fence — but it seems clear that someone else should not be able to build one in front of a lot owned by someone else.  This brings up the riparian owners’ right “to build a wharf or pier into the water.”  When it comes to someone else other than the owner putting in a pier, this is what I consider a negative right.  If the riparian owner as the affirmative right to build a pier, it follows that they also have the negative right to prevent a non-owner from building a pier.  This right is also captured in the Maryland Code (and most County and City zoning provisions) insofar as it is only the owner that has the right to build a pier in front of waterfront property.  The owner “may make improvements into the water in front of the land to preserve that person’s access to the navigable water …. After an improvement has been constructed, the improvement is the property of the owner of the land to which the improvement is attached.” Md. Code Ann., Envir. § 16-201.

And so, there are ways to protect a riparian owner’s view of the water, even if that right is not specifically laid out in Maryland’s cases or statutes.   If you are not an owner, however, the options to protect a view are drastically more limited — that will need to be a topic for another article.

If you are in a situation where you are concerned about a neighbor infringing on your view — send me an email at dschwenk@baylawllc.com or give me a call at the number to the right.

J. Dirk Schwenk is a Maryland Real Estate, Waterfront Property, Civil Litigation and Maritime Lawyer from Annapolis, Maryland.  He provides civil litigation services in contract disputes, environmental and zoning issues, adverse possession and boundary disputes.  He graduated cum laude (with honors) from the University of Maryland School of Law and has been in private practice in Maryland ever since.

 

 

The End is Near — Settlement and Dispute Resolution

As a lawyer it sometimes feels as though you work and work but nothing is ever fully resolved.  This month has been different for me – I have actually put the final signatures on settlements of four different kinds of cases — all central to the kind of work that I do.  The cases included:

1. a dispute on the location of a boundary as it pertained to riparian rights and a pier location;

2. a dispute on insurance coverage on damages to a boat;

3. a dispute between a purchaser and broker on a boat purchase; and

4. a dispute over erosion control efforts on community property.

Resolution of a case is always a team effort that includes dedicated clients that are willing to do the hard work of obtaining facts and facing the risk that a case does not go their way.  Patience and appropriate strategy a must.  If the opportunity presents itself to obtain results through negotiation and settlement, the entire team must have a clear idea of the achievable goals and be ready to compromise as needed.

Dispute on Boundaries, Riparian Rights and Pier Location

In Calvert County, Maryland, our client owned a property with a house at the end of a street in an incorporated town.  When the town was designed, his lots did not reach the water and the town owned a strip of land which included the entire waterfront.  Over time, however, erosion ate through the land between his property in the water, so that some lots in the subdivision were entirely submerged, and my client had a small cove that provided access to the bay.  The town took ownership of the submerged lots and a small remaining parcel that was still above water, leading my clients to worry that the town intended to put a walkway around his property which would isolate his property from the bay and decrease his privacy.

We filed a declaratory judgment action stating that he had obtained riparian rights when the water reached his property and asserting adverse possession over the land next to his lot.  After discussions with the Town stemming from the suit, it came to light that the town was willing to forego putting in a walkway if it could get an easement along the water to install a flood control berm.  Although the negotiations were difficult, we eventually reached an agreement that allowed for my client to have a location that allowed him to install a pier for access to the Chesapeake Bay; maintained my client’s privacy; and met the town’s needs for installation of flood control.

Dispute on Insurance Coverage on Boat Insurance

In Anne Arundel County, Maryland, we had a client whose boat had water enter into the core of his boat hull and eventually cause rot and damage.  When the boat was on jackstands at the marina, the hull partially crushed and required significant fiberglass and core repairs.  The client filed a claim under his hull insurance policy but surveys were inconclusive as to how the water entered the hull.  We filed suit asserting coverage under the all-risks policy of marine insurance, arguing that if the source of the water was not known, then none of the exclusions to the policy supported the denial of coverage.  We were unable to resolve the dispute through discussions with the adjuster, so we filed suit seeking a declaration of coverage.  Resolution was difficult and lengthy, but the client obtained money for repairs that he would not have had if he accepted the denial of coverage.

Dispute on failed erosion control project

Controlling erosion is a major issue for waterfront owners and waterfront communities, and the quality of contractors and erosion control projects is highly variable.  With new requirements preventing bulkheads and restricting hard shorelines, poor work can increase erosion or worse, leave large loose stones that can injure or even kill unsuspecting community members.  We recently obtained an insurance settlement to allow for reconstruction of a failed erosion control project on community land — the project was so bad that it required installation of “keep off” signs on the community’s main beach area as well as environmental citations against the contractor and a community board member.  Resolution required changing the way that the community’s erosion control funds were managed and contracts awarded, as well identifying appropriate experts to testify on the deficits with the project.  The Court’s intervention was required to determine significant related issues about the nature of the community’s land and covenants as well.  Perseverance was required — luckily it was a community that had leaders and community members that were willing to carry through with a difficult job to the end.

Dispute with Buyer and Broker in Boat Purchase Contract

One of the most interesting aspects of boat purchase/boat broker and boat tax cases is that they often involve many different states.  This case was no different.  The contract called for arbitration in New Jersey, where my client was located.  The boat was located and seat rialed in Tennessee.  The listing broker broker was in Alabama and the buyer was located (and the boat was delivered to) Illinois.  The buyer alleged that there were undisclosed problems with the boat and filed suit in Illinois (where he signed the contract).  Right away, the case involved the tension between arbitration and litigation; maritime and State common law; and the substantive law of multiple states — and all of that before getting to the question of whether the purchase contract’s terms protected my broker-client.  My client’s first questions to me concerned whether I was comfortable working across so many jurisdictional lines and areas of law.  Luckily those issues come up in most significant boat purchase disputes, and I had an idea of how to mitigate the issues of the Plaintiff having filed in Illinois.

This was a rare case in which there was an intense week of work preparing motions to dismiss or stay the action in Illinois.  We argued that the contract called for Arbitration in New Jersey, and that therefore the suit in Illinois could not go forward there.  Since there was some question about whether the arbitration clause would be enforced, we also argued that since boat was delivered to the purchaser in Tennessee, that was the appropriate State if the case was not going to be in New Jersey.  Ultimately we were able to reach a rapid resolution prior to the Court ruling on the motions.

Riparian Rights and Oyster Aquaculture

“No one can so use the navigable waters in front of the riparian owner’s property as to interfere with his rights, and when the owner wants to make improvements he can do so, even if they absolutely destroy any structure or other thing in the way of the improvements not there by the consent of the owner of the shore.”

This was the holding of Hodson v. Nelson, a decision of the Court of Appeals of Maryland in January 1914, almost exactly 100 years ago as I write.   In the case, Mr. Hodson was a riparian owner of land surrounding a cove in the Chesapeake Bay.  Mr. Nelson was a waterman operating a crab business in the cove, including erecting a “crab shanty” on piles not connected to the shore.  The riparian owner sought to prevent the waterman from maintaining structures in the cove, but was not directly impacted by the crab shanty, and did not have a pier in the cove.  Despite the strong language quoted above, the Court held that the landowner did not have the right to force the removal of the crab shanty.

In 1942, however, the Court of Appeals considered Culley v. Hollis, in which I riparian owner was built a pier that extended into an underwater oyster lease area.  The waterman filed suit to stop the pier, but the Court of Appeals confirmed the fact that the riparian owner was allowed to build a pier, and that an oyster lease on the bottoms could not prevent the construction.

With the tremendous loss of oysters and crabs in the Chesapeake over the past 100 years, the tension between riparian owners and watermen diminished greatly, and has not been the topic of an important decision in decades.  According to studies, the oyster population in the Chesapeake dropped to about 1% of historic levels by 1994, and has remained very low.  In 2009, Maryland began a significant initiative to increase oyster populations — this effort included the streamlining and expansion of oyster aquaculture in Maryland.  It should be no surprise that the expansion of oyster aquaculture has also created new tensions with riparian owners.

In recent months, I have represented two groups of landowners who were concerned about oyster leases being granted in front of their properties.  In one instance, the primary concern was oyster floats anchored just off their property.  The second involved oyster cages being placed in shallow water immediately in front of the groups’ properties and piers.

There are two types of oyster leases in Maryland.  There are “submerged land leases” which allow a waterman to put shell on the bottom and exclusively harvest the oysters.  There are also “water column leases” which allow the waterman to place floating baskets on the surface or cages on the bottom and grow oysters in that manner.  There are a variety of restrictions and limitations on where a lease can be located, including leases may not be within 50 feet of a shoreline or pier without permission; leases cannot be in a submerged aquatic vegetation protection zone; and they cannot be in a public oyster fishery (typically a natural bar).  My groups’ primary concern in both cases were with the water column leases, which placed equipment at or near the surface.

If you are faced with a lease being placed in front of your waterfront property, there are steps that you can take.  If the proposed lease meets the statutory requirements, the DNR is required to provide notice to owners of property that will be directly affected.  Riparian owners can file a petition with the Department of Natural Resources challenging the issuance of the lease.  In all likelihood, there will be efforts to reach a compromise, but if not, a hearing will be held before the Office of Administrative Hearings.  In that hearing, the DNR will present the case for the lease; the owners must be prepared to present concerns and arguments against it.

J. Dirk Schwenk is a Maryland Real Estate, Waterfront Property, Civil Litigation and Maritime Lawyer from Annapolis, Maryland.  He provides civil litigation services in contract disputes, environmental and zoning issues, adverse possession and boundary disputes.  He graduated cum laude (with honors) from the University of Maryland School of Law and has been in private practice in Maryland ever since.

Setbacks, Buffers and Variances

Setbacks, buffers and variances are some of the more confusing concepts in real estate law.  Both setbacks and buffers establish a distance from something (like a boundary line or a stream) and both setbacks and buffers limit development in the area.  In Maryland, setbacks and buffers are generally established by County or City ordinance.

In this simple diagram, the property owner cannot build next to the side lot lines because of setback restrictions, and cannot build near the water due to the required buffer zone.  The developable area, therefore, is that part of the lot that can be used without violating a setback or a buffer.

These restrictions would be fairly straightforward, except that a property owner can apply for a variance from the restrictions, which would allow him or her to build into the buffers and setbacks.  The word “variance” in this context basically means “waiver” – the property owner asks that zoning board waive the setback or buffer restrictions.

Under the Anne Arundel County Code, principal structures (houses) in residential areas must meet setbacks of 5 feet from the front lot line, 10 feet from the rear lot line and 7 feet from the side lot lines.  A setback can be granted under the following provision:

Anne Arundel County Code (2005) art.18 sec.16-305

Variances.

  (a)     Requirements for zoning variances. The Administrative Hearing Officer may vary or modify the provisions of this article when it is alleged that practical difficulties or unnecessary hardships prevent conformance with the strict letter of this article, provided the spirit of law is observed, public safety secured, and substantial justice done. A variance may be granted only if the Administrative Hearing Officer makes the following affirmative findings:

         (1)     Because of certain unique physical conditions, such as irregularity, narrowness or shallowness of lot size and shape or exceptional topographical conditions peculiar to and inherent in the particular lot, there is no reasonable possibility of developing the lot in strict conformance with this article; or

         (2)     Because of exceptional circumstances other than financial considerations, the grant of a variance is necessary to avoid practical difficulties or unnecessary hardship and to enable the applicant to develop the lot.

Assuming that there is something unusual about the lot dimensions or topography that makes development difficult, a variance is likely to be granted.  There are a second set of factors that the hearing officer will consider in determining the appropriate scope of the variance – the hearing officer must decide that (1) the variance is the minimum variance necessary to afford relief; (2) the granting of the variance will not: (i) alter the essential character of the neighborhood or district in which the lot is located; (ii) substantially impair the appropriate use or development of adjacent property; (iii) reduce forest cover in the limited development and resource conservation areas of the critical area; (iv) be contrary to acceptable clearing and replanting practices required for development in the critical area or a bog protection area; nor (v) be detrimental to the public welfare.

It is much more difficult to avoid, by variance, the impact of the critical areas buffer.  Critical area protections are established by state law, but its specifics are enacted by each locality in their zoning laws.  In Anne Arundel County, the basic buffers are established in 18-13-304 of the zoning code.

18-13-104.  Buffers, expanded buffers, and buffer modification areas.

  (a)   Buffer. There shall be a minimum 100-foot buffer landward from the mean high-water line of tidal waters, tributary streams, and tidal wetlands. Specific development criteria apply as set forth in Article 17 of this Code and COMAR.

  (b)   Expanded buffer. Except as provided in subsection (c), the 100-foot buffer shall be expanded beyond 100 feet to include contiguous sensitive areas, such as slopes of 15% or greater and hydric soils or highly erodible soils.

For waterfront lots, a 100 foot buffer can significantly diminish the buildable lot area, and the buffer can be expanded significantly if there are steep slopes, erodible soils or streams and wetlands.  At times, this can leave a lot with no area that can be developed without a variance.  A landowner can seek relief by obtaining a variance from the critical areas laws — variances can be granted if the following terms are met.

  (b)   Requirements for critical or bog protection area variances. For a property located in the critical area or a bog protection area, a variance to the requirements of the County’s critical area program or the bog protection program may be granted if the Administrative Hearing Officer makes the following affirmative findings:

     (1)   Because of certain unique physical conditions, such as exceptional topographical conditions peculiar to and inherent in the particular lot or irregularity, narrowness, or shallowness of lot size and shape, strict implementation of the County’s critical area program or bog protection program would result in an unwarranted hardship, as that term is defined in the Natural Resources Article, § 8-1808, of the State Code, to the applicant;

     (2)   (i)   A literal interpretation of COMAR, Title 27, Criteria for Local Critical Area Program Development or the County’s critical area program and related ordinances will deprive the applicant of rights commonly enjoyed by other properties in similar areas as permitted in accordance with the provisions of the critical area program within the critical area of the County; or

        (ii)   The County’s bog protection program will deprive the applicant of rights commonly enjoyed by other properties in similar areas within the bog protection area of the County;

     (3)   The granting of a variance will not confer on an applicant any special privilege that would be denied by COMAR, Title 27, the County’s critical area program to other lands or structures within the County critical area, or the County’s bog protection program to other lands or structures within a bog protection area;

     (4)   The variance request is not based on conditions or circumstances that are the result of actions by the applicant, including the commencement of development before an application for a variance was filed, and does not arise from any condition relating to land or building use on any neighboring property;

     (5)   The granting of a variance will not adversely affect water quality or adversely impact fish, wildlife, or plant habitat within the County’s critical area or a bog protection area and will be in harmony with the general spirit and intent of the County’s critical area program or bog protection program;

     (6)   The applicant for a variance to allow development in the 100-foot upland buffer has maximized the distance between the bog and each structure, taking into account natural features and the replacement of utilities, and has met the requirements of § 17-9-208 of this Code;

     (7)   The applicant, by competent and substantial evidence, has overcome the presumption contained in the Natural Resources Article, § 8-1808, of the State Code; and

     (8)   The applicant has evaluated and implemented site planning alternatives in accordance with § 18-16-201(c).

The critical area variance provisions require the developer to affirmatively show that there can be no reasonable building without a variance.  It also requires the developer to do sufficient planning and engineering to prove that the development will be no worse for development that fully forested buffer lands.  For better or worse, the real world effect of these provisions is that variances are only available to highly sophisticated and deep-pocketed applicants.  For those that are opposed to a development within the buffer, there are significant avenues that can be pursued — but in many cases effective opposition also requires significant engineering and legal expertise.

In conclusion — variances are exceptions to existing law that are available to a property owner if he or she has property that could not reasonably be developed without some sort of relief from the laws on the books.  Variances exist, at least in significant part, because the Supreme Court of the United States has determined that government cannot strip the value from real property by passing laws that prevent its reasonable use.  That sort of law is deemed a regulatory taking without compensation, and violates the United States Constitutional prohibition against the government taking citizen’s property without just compensation.

Maryland Adverse Possession

Adverse Possession, sometimes known as squatter’s rights, is the legal concept by which a person can come to own real estate by taking possession of it and holding it for a certain period of years.  In Maryland, the land must be held for a period of 20 years — many other states require shorter periods.  Under Maryland law, “to obtain title to property, the person claiming adverse possession must prove actual, open, notorious and visible, exclusive, hostile and continuous possession of the claimed property for at least 20 years.”  The classic case of adverse possession is, as between two neighbors, one fences in or builds on a part of the property that belongs to the other.  After 20 years, the property is deemed owned by the person that fenced it in or built on it.   The relationship between the parties may be friendly, but the acts of one must clearly against the legal interests of the other.

Most cases where adverse possession becomes an issue are far more complicated, however.   When trying to prove adverse possession, it is common that there have been multiple owners during the period and it can also be difficult to know who first built a structure or when it was built.   Many times a fence has been built, rebuilt and moved over the course of time.  Other times one party has used and maintained the property, by mowing the grass, raking leaves, etc., but has not fenced it in.  All of these sorts of issues present opportunities for counsel to dig up and present helpful facts from the past.   The burden of proof will be on the Plaintiff to show possession for twenty years — they can also “tack on” years in which their predecessor owners used and maintained the property.   The nature of possession that needs to be shown may be different, depending on what kind of property is at issue: “acts sufficient to demonstrate possession of wild, undeveloped forest may fall short of the activity needed to establish possession of developed property.”

If the Plaintiff can demonstrate exclusive possession for 20 years, the burden shifts to the Defendant (the person that has a deed for the property) to show that the use was not adverse.  There are two primary ways to show this: 1) show that the possession was with permission from the landowner; or 2) show that the deeded owners of the land took back possession by acts at least as dramatic as those that were used to obtain possession by the adverse possession claimant.  The “mere act of going upon the land is not enough. The owner must assert his claim to the land or perform some act that would reinstate him in possession, before he can regain what he has lost.”

All of these issues require historical evidence to be amassed and presented; historical imagery to reviewed; and more than likely “I remember when” testimony from people who have been around for 20 years or more.  It is also likely to require the expertise of a good land surveyor.

Dirk Schwenk is real estate attorney from Annapolis, Maryland.  He can be reached at dschwenk@baylawllc.com.