Rhode Island Property Law

Protecting a "Million Dollar Water View" with Restrictive Covenants

John M. Boehnert — Mon, 09 Apr 2012 17:59:02 -0500

While a picture may be worth a thousand words, a Rhode Island ocean view may be worth millions, if not in fact be priceless, if a little-noted Rhode Island Supreme Court decision is any indication.

In Cullen v. Tarini, 15 A. 3d 968(RI 2011), the Rhode Island Supreme Court upheld a plaintiff’s efforts to enforce a restrictive covenant plaintiff placed on property before selling it in order to limit the location, size, and height of any structure that could be built on the land being sold.

The reason? The property plaintiff retained and did not sell “is very nearly the highest point on Aquidneck Island” with “a grand vista that looks out to the south and the southeast that has direct ocean views that are spectacular”. Construction on the property plaintiff was selling had to be limited in order to prevent it from blocking the ocean views of the property plaintiff was retaining.

When the first purchaser found that plaintiff would not modify its restrictions, it sold the lot without constructing a residence. The new buyer was less reserved.

The new buyer engaged a designer/builder to construct a significant residence, but according to trial testimony did not advise the designer of the restrictive covenants of record limiting construction, such as size and height, and only advised him that the house should be built in a designated area, but that these were “general guidelines only”.

The buyer did have discussions with the plaintiff and even showed him plans for the new residence, but the plaintiff said the plans were insufficient for him to understand that they violated the restrictions and the buyer did not tell the plaintiff that his plans violated the restrictions. In the words of the Supreme Court, the defendant buyer “ testified that he knew about at least two of the violations at the time of the October 2007 meeting between the parties, before beginning construction, and that he chose to ‘subtly ‘wait for the plaintiff to discover the violations rather than directly notify the plaintiff of them.”

Construction proceeded pursuant to plans that exceeded the height limitation, square foot limitation, and location limitation of the restrictive covenant. When plaintiff became aware of the violations, plaintiff sued for an injunction, which was granted. At that point, the new buyer had spent $1,250,000 on construction of the partially completed residence.

The trial court found for the plaintiff and ordered the offending construction removed. The Supreme Court upheld that decision, rejecting a number of challenges.

Significantly, the Court found that the in order to enforce restrictive covenants it was not necessary to make a separate finding of irreparable harm to the plaintiff. Quoting from the Restatement (Third) of Property Law, the court said “[t]he value of a restrictive covenant often is subjective and difficult to evaluate in monetary terms. For this reason, injunctive relief is an appropriate remedy so long as the purpose for which the restrictive covenant was created continues to exist”.

The Court also found that it was not necessary to balance the equities between plaintiff and defendant in a restrictive covenant case, as “proof of a violation of a restrictive covenant was sufficient for a court to grant injunctive relief”.

So it was a good day in court for restrictive covenants, not to mention ocean views.

And regarding the cost of that ocean view, in addition to the $1,250,000 the buyer spent on partial construction of its residence, some of which had to be redone and removed, the buyer was also ordered to pay plaintiff’s legal fees and other expenses in enforcing its rights under its restrictive covenants.

So by all means, use restrictive covenants when appropriate to protect water view property or other important view corridors and property interests. And if you acquire real estate subject to restrictive covenants, for goodness sake, be careful!

Are Property Owners Liable for an Oil Release on Their Property Even if it Occurred Before They Owned the Property?

John M. Boehnert — Thu, 17 Nov 2011 11:25:23 -0500

Rhode Island’s penchant for strict liability for releases of environmental contaminants appears to be getting even stricter.

A recent Superior Court decision just held that a property owner who owned property contaminated prior to its ownership was liable for remediation under the Oil Pollution Control Act, R.I. Gen. Laws 46-12.5-1 et seq. (the "Act”), since continued leaching of oil beneath the surface constituted a discharge under the Act. Power Test Realty Company Limited Partnership v. Sullivan, 2011 R.I. Super. LEXIS 118.

The Act defines “discharge” as “any spilling, leaking, pumping, pouring, emitting, emptying, releasing, injecting, escaping, leaching, dumping or disposing into the environment”. R.I. Gen. Laws 46-12.5-1(i). All those words seem pretty active, like you have to do something, except that pesky work “leaching”. That was the word relied on by the Department of Environmental Management (DEM) hearing officer in finding the property owner liable for the clean-up, not to mention a hefty $50,000 penalty.

The hearing officer’s decision was upheld by the Superior Court.

But did the General Assembly, in passing the Act, and using all those active-sounding words, like spilling, pumping, pouring, emptying, etc., really mean by including the word “leaching” to turn the Act into a strict liability statute? Under that reading, a property owner is liable for remediation simply by virtue of owning property contaminated by someone else before they owned it.

Of course, we have one of those strict liability statutes in Rhode Island, the Industrial Property Remediation and Reuse Act, R.I. Gen. Laws 23-19.14-1 et seq., which applies strict liability to property contamination, meaning that if you purchase property later found to have been contaminated before your period of ownership, you nevertheless are still obligated to clean it up, with few and narrow exceptions, by virtue of your status as the property owner.

That statute, however, excludes petroleum, based as it is on the federal Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., which also has a petroleum exclusion.

Even the Oil Pollution Control Regulations, written by DEM, do not sound like they are targeting passive activity. Oil Pollution Control Regulation Rule 6(a) provides that “[n]o person shall place oil or pollutants into the waters or land of the State or in a location where they are likely to enter the waters of the State…”.

Conventional wisdom, I believe, was that oil contamination under the Oil Pollution Control Act did not carry with it the same strict liability as would be found under the Industrial Property Remediation and Reuse Act for non-petroleum contaminants.

As of this writing, the order has not issued in this case, so the appeal period has not begun to run and we do not know if this decision is going to be appealed.

But what we do know is that there is enough potential environmental risk in the ownership of real estate that you can’t afford to be too careful in doing due diligence before you buy property.

If you haven’t done so already, you may want to check out the two White Papers available on this website. One focuses on environmental due diligence in Rhode Island and the other addresses a comprehensive checklist for environmental and real estate issues in a real estate purchase transaction.

And let’s keep an eye on whether or not this particular decision is going to be appealed to the Rhode Island Supreme Court.

Rhode Island and Massachusetts Issues on the Siting of Potentially Hazardous Facilities Will Get National Attention

John M. Boehnert — Thu, 06 Oct 2011 13:49:18 -0500

An American Bar Association Webinar will bring to a national audience Rhode Island’s and Massachusetts’ experience with the proposed development of a LNG facility as part of a discussion of issues facing states in the siting of potentially hazardous facilities in their communities.

Recall the political furor that developed when Weaver’s Cove Energy LLC proposed constructing a LNG (i.e. liquefied natural gas) facility in Fall River, Massachusetts, which would bring LNG through Rhode Island and Massachusetts coastal waters in ships similar to the one pictured here.

I would be the first to argue that all of that furor was not justified, but by way of disclosure I should also note that I represented Weaver’s Cove Energy in its federal consistency review filing with the Rhode Island Coastal Resources Management Council.

I will moderate the panel discussion and will be joined by veteran litigator Terrence Tierney, Esq., now with the University Of Massachusetts School Of Law and formerly with the Rhode Island Attorney General’s Office, where he was involved in litigation opposing siting of the LNG facility.

Also on the panel is an experienced planner, David Westcott, AICP, the chief planner and environmental scientist with Mason & Associates, Inc. in North Scituate, Rhode Island, who will be discussing the siting of locally unwanted land uses, also known as LULUs.

For my part, I will be discussing how the 34 coastal and Great Lakes states can use the Coastal Zone Management Act’s federal consistency program to protect its communities in the siting of potentially hazardous facilities.

And relying on Rhode Island’s first in the nation ocean zoning program, I will also be discussing how other states can follow Rhode Island’s lead and actually strengthen the protections available under the federal consistency review program.

So all and all Little Rhody is going to have the opportunity to showcase lessons learned here and how this may help other states.

The Webinar airs October 19^th at 1:00 pm – 2:30 pm Eastern, 12:00 pm – 1:30 pm Central, 11:00 am – 12:30 pm Mountain, and 10:00 am – 11:30 am Pacific.

Registration information is available here.

Title Problems May Occur Where You Least Expect to Find Them

John M. Boehnert — Sat, 30 Jul 2011 12:05:11 -0500

Recently a buyer who was purchasing waterfront property in Rhode Island said when we were discussing what due diligence should be conducted: I am sure the title must be fine; the property has been in the same family for years.

My response: “Well, let's see; they are often the properties with the most title problems."

And so it turned out.

There were two significant title issues, one of which required an easement from an abutter and another of which required an exchange of corrective deeds between the new purchasers and another abutter.

The second title issue was sufficiently involved that it could not be straightened out until after the closing. The closing only occurred on schedule because we were able to procure affirmative title insurance coverage to provide protection to the buyers and their lender.

Where Title Problems Often Lurk

In additional to infrequently conveyed properties, another warning sign is when abutting properties are held by related family members. That was the case in the waterfront transaction I just mentioned.

It was also the case in another waterfront property situation where the owners wanted to confirm the existence of an easement they expected to be on title. Again, one of the owners said the title should be fine-- it had been in the family for several generations and relatives owned abutting property.

Again, I was skeptical, and with good reason. That property, which had not changed hands in years, also had title problems.

And this was the common thread: no sales transfers in years, and family as abutters.

The simple fact is that properties which infrequently change hands are more likely to have title issues than properties with a number of recent sales. Reason: the problems are more likely to be flushed out and resolved in the prior transactions.

The reason that family members as abutters often give rise to title problems is that “friendly transactions" between these abutting property owners are often not handled with the same scrutiny or diligence that accompanies an arms-length transaction between strangers, or at least unrelated parties.

For example, parents may transfer an easement or certain property to a grown child without using any lawyer or without using an experienced real estate attorney. The legal description may be in error, or the manner or method of grant may be defective. Without experienced eyes looking at it on the other side of the transaction, mistakes may, and often do, slip by.

Waterfront Regulatory Issues and Title Issues

While I am often consulted on waterfront property transactions because of the regulatory issues affecting waterfront property, which is some of the most highly regulated property in Rhode Island, I will also pay particular attention to title issues when I see that the property has been held in one ownership for a protracted period of time, and particularly where I am told family members are abutters or this is a family compound or something similar.

And sometimes the regulatory issues can also become title issues, as where uncured regulatory violations are recorded in the land evidence records.

Identifying and Correcting Title Problems

In such cases, if there are plans to sell or finance the property in the future, I will suggest the owners engage a title attorney or title company to run title and issue a title report. This can provide significant benefit.

First, it allows the owners to determine if their title is problem free, and if not, it lets them know what is wrong and what must be done to cure it.

Secondly it eliminates the danger of losing a future sale because the buyer does not want to wait while the title problem is cleared up, and it eliminates the danger of having a favorable mortgage interest rate lock expire in a financing because the closing is delayed by a title problem.

Title problems can often be fixed. But the hardest to fix are the ones you don't know you have.

What's The Buzz in Real Estate and Environmental Law

John M. Boehnert — Sat, 25 Jun 2011 11:51:09 -0500

Getting the Right Information.

I was recently reminded—more about that later—of questions I have received from younger lawyers about the best way to stay current on developments, legal and business, in real estate and environmental law.

More specifically, is setting Google Alerts on specific topic areas the best way to keep up on new developments.

That question could be directed to other legal practice areas as well, or to other areas of interest, and my answer would be the same.

My answer is yes and no.

Yes, because letting one or more of the many fine reporting services work for you 24/7 on a complementary basis to bring customized and tailored information to you is an excellent idea.

No, because in this information age, the challenge is not to get the most recent information; the challenge is to get the best, most incisive, most trust-worthy information.

So, setting topic alerts will certainly generate a lot of information, but the quality of that information will vary widely, from brilliantly incisive to dangerously inaccurate.

My suggestion is to set alerts but to include in those alerts sources of information. When you find a reliable, thoughtful, thorough, accurate source of information, pursue the source.

Some examples from inside, and outside, real estate and environmental law.

Look for the Experts.

For investment information, one of my alerts is Jim Rogers, the iconic American billionaire investor. I don’t care what it is he is talking about, I want to read it! He is that good! If you heeded his call on commodities several years ago, your biggest problem today would be managing your huge fortune.

He not only thinks outside of the box, he lives outside of the box. He moved his family to Singapore because he is convinced that the future belongs to Asia, and one of the greatest gifts he could give his two young daughters was learning Mandarin. Check him out on Amazon if you are not familiar with his work or check out his blog.

If there is something more confusing that investments for which you may need advice, it may be the health care debate. Because I had met Joseph Rago a couple years back when we participated in a VIP tour of a military base down south, I would pay attention whenever I saw his byline in the Wall Street Journal or saw him on the Wall Street Journal Editorial Report television program. Yet, I never connected him to the extraordinary editorials in the Wall Street Journal on healthcare. Never, that is, until he was recently awarded the Pulitzer Prize for those editorials!

So if you are interested in health care, one of your alerts should be Joseph Rago, even if that does not turn up his editorials, which are unsigned.

Great Reporting!

Perhaps because I was trained as a journalist, I have a high regard for truly good reporting and writing, which necessarily involves excellent analysis, even if not labeled an analytical piece.

Closer to home, and closer to the subject of this blog, is the fine work of Peter Lord, the veteran environmental reporter for the Providence Journal. Peter has been covering the environment for the Providence Journal for as long as I can remember, and that covers some ground. He has the rare ability to thoroughly understand something complex with a lot of moving parts (which certainly includes environmental law) and explain it not only in an understandable manner but in a highly readable manner.

Great Writing!

Similarly, if I want a highly entertaining but extremely knowledgeable take on land use law, I look for anything my pal Dwight Merriam has written. Dwight is a land use attorney based in Hartford with a national practice, whose numerous books and articles have destroyed more trees than I like to think about, and who routinely speaks throughout the country.

Check out Dwight’s blog here. There is only one improvement I think Dwight could make—posting more frequently! I’ve threatened to kill him if he doesn’t blog more frequently, but then it occurred to me that would be counterproductive!

And if you need a comprehensive survey of what is going on in land use law across the country, Dean Patty Salkin’s Law of the Land is a must. I have previously referred to her incisive work, see my July 24, 2010 post; and like Dwight’s blog, it has a link on my website.

New Sources.

And as for the reason all of this occurred to me? I encountered what for me were two new writers who seemed to offer a similar ability to cogently analyze and clearly convey complex material.

The first, an attorney named Ashley Lyon, I found at an unlikely place, the National Cattlemen’s Beef Association, where she is Deputy Environmental Counsel. I was not in fact looking for anything to do with cattle or beef but rather researching the EPA’s response to recent court decisions addressing the limitations on the ability of the EPA to regulate wetlands.

In a recent posting, she tackled the EPA’s response to the complicated issue of what constitutes “waters of the United States” for purposes of regulation of wetlands by the EPA.

In my own view, it seemed the EPA’s answer to that question in the past was effectively “anything wet”. Ms. Lyon has a similarly critical but much more articulate response to that question, having analyzed the EPA’s recent “Guidance Document” written for the benefit of EPA staff in addressing, and in her view, expanding the EPA’s jurisdiction.

I look forward to reading further analysis from her.

Another source of information I have recently followed and found very useful and reliable is Offshorewind.biz, a blog on the offshore wind industry. It covers the industry worldwide, and of course much of that news is from Europe, where the wind industry is far more developed than in the United States.

And as is often the case, that reliable source of information led me to another new source of information that, like Ms. Lyon, appears to be worth following.

In a recent posting in Offshorewind.biz, Chip Young, a senior editor at Golocalprov.com, did an absolutely excellent piece on the plans of Deepwater Wind to expand its proposed Rhode Island offshore wind farm, and the controversy this created with fishermen. His reporting involved the wind industry, the Rhode Island Ocean Special Area Management Plan, the first marine spatial management plan adopted in this country, and information and facts about the implementation of that plan.

These are all things I know something about, and I could not find a false note or misstep in his report—just good solid reporting and excellent, thorough factual background.

I will be following him.

And that is my suggestion to attorneys who want to keep up on the business and legal changes in real estate and environmental law, or in whatever is their area of focus---follow the reliable sources not necessarily the informational topics.

A Real Estate Developer's Worst Nightmare Gets Even Worse

John M. Boehnert — Sat, 04 Jun 2011 11:57:52 -0500

To all those developers rushing off to federal court to sue because state regulations preventing development have “taken” your property without just compensation—NOT SO FAST!

And to all those real estate investors who can’t wait to get into real estate development to make the really Big Money—NOT SO FAST!

That first warning was the clear and unequivocal message from the First Circuit Court of Appeals on a Rhode Island inverse condemnation case, issued just days ago. Downing Salt Pond Partners v. State of Rhode Island and Providence Plantations, No. 10-1484 (1st. Cir. May 23, 2011).

And the second warning may be buried within the pages of the Court’s decision.

Developer’s Worst Nightmare

The facts are every real estate developer’s worse nightmare.

The developer, Downing Salt Pond Partners, acquired real estate in Narragansett for a residential development, and in 1992 received a Coastal Resources Management Council (CRMC) Assent to develop the property for a 79 lot residential subdivision.

After building 26 homes from 1992 through 2007, the Rhode Island Historic Preservation and Heritage Commission determined that artifacts found during construction indicated the property was the site of a Narragansett Indian settlement. The Historic Commission urged CRMC to withdraw the Assent.

While CRMC did not formally invalidate the Assent, it wanted to assess the issues raised by the Historic Commission.

Construction was halted, and Downing alleges the Historic Commission wanted to either prevent further development of the project or require the developer to undertake an archeological data recovery project that Downing asserted would cost it $6 million.

So there the developer sat, with the uncertainty of whether it could ever complete its project, after having purchased the land, gotten its permits, installed infrastructure to support development, and built less than a third of the houses it expected to sell.

By June, 2009 the issue had not been resolved, Downing started development, CRMC issued a cease and desist order, and Downing headed to federal court, claiming its property had been taken without just compensation, and also alleging denials of constitutional due process and equal protection provisions.

The Court Speaks—And Things Get Even Worse For The Developer

The federal District Court found against Downing, saying the developer was required to bring its claims in State court. Downing/Salt Pond Partners, L.P. v. Rhode Island, 698 F. Supp. 2d 278 (D.R.I. 2010) On May 23, 2011, the First Circuit Court of Appeals affirmed.

In essence, the Court held that the United States Supreme Court’s decision in Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), establishing ripeness requirements for such suits in federal court, required that the suit be brought in state court because Rhode Island had an adequate remedy for inverse condemnation claims and the claim must therefore be pursued in State Court.

The First Circuit refused to address the argument that even if the inverse condemnation claim was not ripe for hearing in federal court, the due process and equal protection claims were ripe. And while it did not address that argument substantively, it did suggest it did not find it a compelling argument.

(If you want to read an excellent commentary on the mess the Williamson County case has made for property owners claiming a taking, see the recent posting (May 30, 2011) by attorney Robert H. Thomas about the Downing Salt Pond case on inversecondemnation.com.)

So after four years of uncertainty, the developer still has no resolution, and no compensation, and presumably has to head back to court—this time State court—and perhaps back to the negotiation table.

Lessons Learned

It appears fairly clear that the federal courts continue to be reluctant to entertain land use regulatory takings cases, and your remedy is in State court.

There is a reason real estate developers expect to make Big Money; they take Big Risks, and the developer’s return is the compensation for those risks. And sometimes those Big Risks result in Big Losses.

So the next time you see a real estate developer driving a big fancy car, well, you may just want to wish him well!

Is Wind Energy Facing Stiff Headwinds?

John M. Boehnert — Sat, 23 Apr 2011 15:20:41 -0500

In the coming years, could wind energy be facing stiff headwinds, solar energy cloudy days, and wave energy turbulent seas?

Wind at Their Backs

Well, not if you listen to government officials and environmentalists. Not only is it hard not to find some official praising renewable energy today on any given day, including the President of the United States, but policy actions are following rhetoric.

Witness Rhode Island, where the state has made a huge bet just on wind energy, spending millions for studies to create a first-in-the-nation zoning of the ocean, enacting a regulatory Ocean Special Area Management Plan designed primarily to “zone” waters off Rhode Island’s coast to facilitate alternative energy development—wind energy.

And the U.S. Department of the Interior has just given final approval to the Cape Wind offshore windmill farm and also announced a new federal initiative to speed the permitting of offshore wind farms along the east coast.

State and federal regulatory regimes are clearly favoring renewable energy development, primarily wind power but also wave energy, and solar power.

Headwinds

But questions are being raised—by the scientists. And those questions are not only interesting, but for non-scientists may in fact be startling, as they are not positions heard in the general media.

Consider a study by Axel Kleidon, a scientist at the Max Planck Institute for Biogeochemistry in Jena, Germany, as reported in the Offshore Wind blog.

Mr. Kleidon notes that the source of wind and wave energy is the sun’s evaporation of water, which creates turbulence in the atmosphere, and thus, wind and waves. However, he says that only a small part of the sun’s energy is used for this purpose, and if there were a massive shift to wind and wave energy, there would be insufficient solar power to generate sufficient wind and waves to meet the vastly increased demand.

Accordingly to his theory, significantly increased usage of wind and wave energy could impact climate as much as current greenhouse gas emissions.

He also predicts that the more wind energy harvested, the more expected gains from building new large turbines will not be realized. In other words, there will be less wind than required.

According to the report in Offshore Wind, he is actually suggesting that large scale use of wind energy will deplete the reservoir of energy.

Perhaps renewable energy is not in fact renewable!

And while he also says that solar panels are the only viable solution, he acknowledges that they also contribute to continuous warming.

Another study of wind energy at the Massachusetts Institute of Technology has also raised some questions about wind power, finding that large scale use of wind power could increase temperatures on land by one degree Celsius, although reducing temperatures over water by one degree Celsius. The study, also reported in Offshore Wind, further concluded that the variability of wind power could necessitate significant power backup options, such as natural gas-fired power plants, which would of course also be expensive.

Again, these should be considered theories requiring further research and testing, and the MIT study’s authors say it should not be used as an argument against wind power, but rather as a guide to further research.

Fair enough.

But perhaps this is one the policy makers should get on top of, sooner rather than later. For example, if it is more advantageous to foster offshore wind facilities rather than large land-based wind facilities, given temperature change impacts, or to consider the appropriate density of wind facilities for the same reason, this would certainly be good to know.

After all, while it may be that it's an ill wind that blows no good, a still wind certainly does no good.

Memo to Real Estate Dealmakers: You Had Better Lawyer-Up From the Get Go!

John M. Boehnert — Sat, 26 Mar 2011 13:59:58 -0500

That’s the lesson I take away from a recent, and stunning, U.S. Ninth Circuit Court of Appeals decision that found a legally binding and enforceable contract for a highly complex multi-million dollar real estate transaction arose from a one page, nine paragraph, 205 word document labeled a “Final Proposal” and apparently crafted, if that is the word, by the business principals themselves. See First National Mortgage Company v. Federal Realty Investment Trust, 631 F.3d 1058 (9th Cir. 2011).

The Transaction

The transaction this “contract” was designed to document was a sophisticated ground lease transaction, which are decidedly not simple transactions, providing for rental payments of more than a million dollars a year, and containing a “put” and “call” provision regarding the ultimate purchase of the real estate, which was intended to be developed as part of the largest mixed use development project in San Jose, California.

You know, the kind of a transaction you document on a napkin in a cocktail lounge, take a picture of with your Iphone and send to the other side for signing.

The Final Proposal

Now that you know the parameters of the deal, take a peek at this “Final Proposal” to see if you think sophisticated and experienced real estate professionals could reasonably have intended this one page document to be a binding and enforceable agreement in a multi-million dollar real estate transaction. Final Proposal.

You will note that in addition to being labeled a “Final Proposal”, it provides that one party is to “prepare a legal agreement” for the other party to “review to finalize the agreement” and it further provides that “the above terms are hereby accepted by the parties subject only to approval of the terms and conditions of a formal agreement” . (Emphasis supplied.)

And there was an essential term not expressly set forth—the length of the lease term.

The Evidence

In fairness to the appellate court, this matter was tried to a jury, which heard evidence from the plaintiff seeking to enforce the “contract” that the President of the defendant real estate developer said he wanted to be sure “there was no way either party…could change any of the major points in the agreement”.

A representative of plaintiff, who was asserting the one pager was a binding contract, also testified that the “legalese and the minor points” would be taken care of in the formal agreement”. I am not making that up—see paragraph 11 of the decision!

There was also evidence that a provision in a prior draft stating the agreement was non-binding was removed from the Final Proposal.

And there was evidence that the parties intended the term of the lease to be ten years.

The trial judge concluded there was enough conflicting evidence to let the matter go to the jury.

The Decision

The end result was that based on the binding contractual terms of that one page document, the defendant was required to pay $15.9 million in damages.

Now, while it is true that the Ninth Circuit does not govern Rhode Island or the New England states, this case is nevertheless a wake-up call that juries, and even courts, might not always decide a real estate transactional dispute the same way experienced real estate professionals might assume or envision.

Lessons to be Learned

Business people, and/or their brokers, should not be negotiating letters of intent or preliminary agreements without getting lawyers involved
Never assume that because you say something is subject to a further agreement, it is non-binding
If you intend a document to be non-binding, say so clearly and emphatically
If some portions of the letter of intent are to be binding, such as confidentiality provisions, make that clear while stating expressly that the document is otherwise non-binding unless and until execution and delivery of a formal agreement
Be very careful of letters you or your brokers may exchange with the other side, to avoid the allegation that an exchange of correspondence constitutes a contract
Ask your lawyer for standard language to include in correspondence discussing potential deals to the effect that the letter is for discussion purposes only, no offer is being made or accepted, and no contractual obligations arise unless and until mutual execution and delivery of a formal agreement
If correspondence or discussion from the other side are framed in terms of an “agreement” or a “mutual understanding”, discuss with your attorney (sooner rather than later)

Oh, and you may want to try to stay out of the jurisdiction of the Ninth Circuit!

Landlords, Party Houses and the Scarlet Notice

John M. Boehnert — Sat, 05 Mar 2011 14:42:27 -0500

If you are a landlord, the First Circuit Court of Appeals has made it clear you may be liable for the overly exuberant merriment of your tenants if you own rental property in Narragansett, Rhode Island. And similar laws may be coming to other cities and towns in Rhode Island, Massachusetts, Maine and New Hampshire, given the green light provided by the Court.

The Court recently upheld a Narragansett ordinance which made landlords jointly and severally liable with their tenants and others organizing events, including social gatherings, which result in a violation of law and created a “substantial disturbance”. See URI Student Senate v. Town of Narragansett, No. 10-1209, 2011 WL 17610 (1st Cir. Jan. 05, 2011). (The ordinance is appended to the Court decision.)

The Problem

Narragansett is home to some stunning beaches and numerous college students, which have spawned a thriving rental market, with vacationers (and sometimes college students) renting houses during the summer and college students renting houses in the off-season (September-May, coinciding with the academic year).

Apparently the town felt the need to take action to control the partying of renters, and the ordinance it enacted gives some clue as to the behavior it was attempting to address.

“It shall be a public nuisance to conduct a gathering of five or more persons on any private property in a manner which constitutes a substantial disturbance of the quiet enjoyment of private or public property in a significant segment of a neighborhood, as a result of a violation of law. Illustrative of such unlawful conduct is excessive noise or traffic, obstruction of public streets by crowds or vehicles, illegal parking, public drunkenness, public urination, the service of alcohol to minors, fights, disturbances of the peace, and litter.”

Picky! Picky! Picky! Can’t college kids have any fun, for heaven’s sake?

The Solution

And the authorities didn’t stop there. Not satisfied with just prohibiting what may be the mainstays of college recreational activities, they actually imposed fines for violations, and even increased the fines for subsequent violations ($300, $400 and $500), perhaps targeting slow learners. And court-ordered community service was also a weapon sanctioned by the ordinance.

Not only that, they implemented a notice posting requirement that was particularly controversial, and they cast a wide net for violators.

The Scarlet Notice

At the heart of the ordinance, if one could say that any ordinance which clamps down on wholesome fun for college kids has a heart, was a requirement that a notice of the violation be posted on the offending property, and remain posted during the summer, for violations that occur during the summer, or during the remainder of the academic year, for violations that occur during the academic year.

And those wily town officials had the notice printed in orange, causing the Court in a footnote to suggest it was reminiscent of The Scarlet Letter. (The Court noted in that footnote that there was no explanation as to the color and “the choice of hue” was “perplexing”. There I part company with the Court, as it seems the choice of orange was not at all perplexing but rather was selected for the same reason hunting vests are orange—maximum visibility; so police could readily identify a “party house”.)

Subsequent violations at the same house incurred increased fines and subjected to joint and several liability the property owner (but only after receiving notice of the first violation), tenants, organizers of the offending event, and participants in activity resulting in a public notice.

The Decision

The Court’s decision swatted away a challenge to the ordinance arguing that the State’s Landlord and Tenant Act preempted the ordinance, as well as several constitutional challenges based on procedural due process, overbreadth, and vagueness.

Indeed, the Court only appeared to express reservations about the lack of a hearing before the Scarlet Notice was posted on the offending property and the possibility that the ordinance could potentially be applied in an unconstitutional manner. In considering the procedural due process challenge, the Court noted as follows:

“We, like the district court, are uneasy about the absence of a hearing. In addition, we recognize that there are potential applications of the Ordinance that might impair constitutionally protected liberty or property interests (say, if the police were to enforce the Ordinance in an invidiously discriminatory way). But the appellants have brought a facial challenge, not an as-applied challenge, and the record is barren of evidence that unconstitutional applications have occurred. The mere possibility of the misuse is insufficient to invalidate an ordinance on a facial attack.”

What Can Landlords Do

Landlords joined the legal challenge to the ordinance, arguing that the Scarlet Notice made the house harder to rent, and could result in the loss of rental income. (The Court was unmoved from a constitutional perspective.)

If you own rental property in Narragansett:

Make sure you know what your tenants are doing
Make sure your leases require Tenants to indemnify you for liability arising under the ordinance
Make sure the town has your correct notice address
Consider increasing your security deposit to address fines, if necessary
Consider trying to convince the town to amend the ordinance (difficult after being sustained by the Court) (i) to allow the removal of the notice if the tenant(s) causing the violation are subsequently evicted, at least as to a first violation, and (ii) to clarify designation of the offending premises (i.e. if it is a particular condominium unit, or one of many apartments, are all units in the complex tainted?)

If you own rental property in other localities where there are student populations or a large young rental market, as in the summer, such as Providence, Newport or Bristol, be alert for a similar ordinance being enacted and attempt to make it more “landlord friendly” as suggested above.

Oh, and for heaven’s sake, in any event, don’t join the partying yourself!

Why Isn't That Easement On My Survey?

John M. Boehnert — Wed, 16 Feb 2011 09:36:50 -0500

Real estate investors, developers, and even residential property owners who want to know specifically what they are buying or what they already own will often commission a survey. The survey will establish with precision the property lines and locate any structures on the property.

And it will also locate any easements which impact the property, such as utility easements and rights of way---or will it?

The short answer is: in theory, yes; in practice, often, but not necessarily always!

A Word About Surveys.

While most home buyers never seek a survey as a part of their due diligence in purchasing their property, surveys are common in commercial acquisitions and in purchases of land for development, including for residential purposes. And when a lot is being purchased for construction of even a single residence, it is often prudent to seek a survey, and one may in fact be necessary for purposes of permitting or even to meet financing requirements.

Land surveys in Rhode Island are governed by Procedural and Technical Standards prepared by the Rhode Island Society of Professional Land Surveyors and adopted by the Rhode Island Board of Registration for Professional Land Surveyors. (See Standards.)

Those standards set forth the classifications and standards for various types of surveys, from Class I, High Accuracy Survey, to Class V, Control Surveys, with Class I surveys held to the highest dimensional standards of accuracy.

The procedures for each class of survey require the surveyor to review the land evidence records and title documents and to locate on the survey plan easements they find there which impact the property.

A Word About Easements

There are good reasons to be concerned about easements. A lot purchased for development may be impacted by easements which limit development on the lot or even make it undevelopable. For example, if significant underground easements run through the proposed development envelope on the site, the only alternatives may be to relocate the easements or forgo building. And the holder of the easement may prohibit relocation, or the cost of relocation may make the development unfeasible.

Similarly, if others have the right to access the property under an easement, as for example, access to the ocean or another parcel of real estate, those rights may prevent construction of any structures in the easement area.

In order to understand the impact of an easement on the property, in most instances you must be able to locate the easement on a plan of the property.

The Question

Now enter the surveyor and his survey plan. If the survey plan does not show any easements on the property, can you be confident those easements do not exist. “Of course”? or “Not Really”?

Experience has taught me that surveyors are very good at finding easements on their review of land evidence records, at least easements that are labeled easements. Surveyors are also familiar with the various forms of easements recorded against properties in the land evidence records by various utilities over the years. (It is not uncommon to find easements encumbering properties that were recorded over a hundred years ago.)

The Caution

But here is the caution for real estate buyers, investors, and developers. Sometimes easements are very difficult to find in the land evidence records. Sometimes they are literally almost hidden; buried deep within deeds, leases, or other documents pertaining to a parcel of real estate. These illusive easements may be from the days when deeds and other instruments of conveyance were handwritten, and sometimes the penmanship was none too good, making them even harder to find! The easement may be a two or three line reservation or grant in an otherwise long and rambling document.

The simple fact is that surveyors are human, and they sometimes miss these easements.

So what is a property purchaser to do if he wants to be comfortable no easements impact the property he is acquiring?

Practice Tip

Let the surveyor do his work, but at the same time commission a very good title company to do a report of the title to the property. If you are buying the property you will need this title report for title insurance, which any lender will require and which an owner providing cash financing should in any event get for himself even without a lender's mandate.

Before you accept the survey, review it with the title report and ensure that all easements and restrictions noted in the title report are reflected on the survey. Skilled title examiners are used to unearthing even difficult to find easements. This is a check on the surveyor, and if the title examiner finds something the surveyor misses, the information can be provided to the surveyor for a revision to the plan. Conversely, if the surveyor finds something the title examiner misses, you are also protected.

This happens more often than one may think. For example, just last month I was involved in a purchase transaction where the surveyor understandably missed a buried easement, the title company found it, and when plotted the easement did not adversely impact the property.

And hopefully, all will live happily ever after!

A Comprehensive Conference on Offshore Energy Development: Get Current and Get Connected

John M. Boehnert — Mon, 10 Jan 2011 10:00:09 -0500

Those of you now planning your professional development seminars or continuing legal education opportunities for the New Year, consider a comprehensive two day conference to be held in Boston in early March if you have an interest in offshore energy development, coastal regulation, or ocean zoning.

Law Seminars International is sponsoring “A Comprehensive Conference on Offshore Energy Development” to be held at Seaport Boston Hotel on March 3rd and 4^th.

Twenty-four speakers are scheduled for the two full day event, including

state and federal officials influential in offshore alternative energy policy and oversight
· lawyers knowledgeable about the regulatory process, and
· industry executives taking leading roles in the development of offshore energy projects.

I will be speaking on “Zoning the Oceans”, and specifically on Rhode Island’s marine spatial planning initiative, which resulted, after two years and over $8 million dollars, in the Rhode Island Coastal Resources Management Council's (CRMC) recent completion of its Ocean Special Area Management Plan or Ocean SAMP. That plan provides a comprehensive approach to regulation of nearly 1,500 square miles of offshore waters, the most ambitious and comprehensive special area management plan ever produced by the CRMC.

CRMC’s Ocean SAMP has drawn national attention as an innovative approach to zoning extensive ocean areas to foster uses compatible with marine resource protection, and more specifically, to facilitate the development of offshore energy facilities. While the effectiveness of the Ocean SAMP for the entire area sought to be regulated (i.e. federal waters beyond Rhode Island state waters) is pending federal review and oversight, CRMC’s Ocean SAMP is an extremely important effort which requires detailed examination.

In addition to ocean zoning, some of the other topics include

· federal energy policies impacting offshore alternative energy development
· federal policy priorities in regulating offshore energy development
· federal and state policy coordination
· current technological issues in generating offshore electricity
· case study of a recently permitted offshore liquefied natural gas project

Given the rapidity with which federal and state regulations, litigation, and policies have been moving in this area, this conference should provide an exceptional opportunity to “get current” and “get connected”.

Seminar sponsors suggest lawyers, business executives, environmental professionals and government officials should consider attending if they are involved with:

shipping
aquaculture
electric energy generation
natural resource extraction
other uses of the ocean surface and floor

A current program brochure and registration information may be found at: http://www.lawseminars.com/seminars/11OCEANMA.phb

I hope to see you there!

Coastal Permitting and Federal Coastal Zone Management Act Protections for States

John M. Boehnert — Sat, 23 Oct 2010 13:45:20 -0500

I recently had the opportunity to address the fall meeting of the American Bar Association’s Section of State and Local Government Law on a coastal permitting topic that even some federal regulators admit generates misunderstanding.

That topic was protections available to states from activities which could impact a state’s coastal zone management program if such activities require a federal permit.

More specifically, the panel which I moderated was asked to address issues involved in the siting of potentially hazardous facilities, with particular reference to the efforts of Weaver’s Cove Energy LLC to site a liquefied natural gas terminal in southern New England.

(By way of disclosure, I represented Weaver's Cove Energy in its filing with the Rhode Island Coastal Resources Management Council under the Coastal Zone Management Act in regard to activities it proposed to conduct in Rhode Island waters, primarily dredging.)

I don't want to go into that topic in detail, given that I am preparing an article on the federal consistency program under the Coastal Zone Management Act for submission to the Rhode Island Bar Journal. However, I do want to highlight several important considerations, including common misunderstandings, regarding protections that may be afforded states from perceived threats to their coastal zone management program.

Coastal Zone Management Act

Congress enacted the Coastal Zone Management Act in 1972, 16 U.S.C. 1451 et seq., to help facilitate States in protecting their coastal environment, given the increasing pressures for development along the coast. Participation in the program is voluntary, and an important inducement to coastal states to participate is the federal consistency program, pursuant to which states could get something of a veto over the activities of developers and others which require federal permits and which could impact their coastal environment.

That inducement was successful, as today all eligible states participate in the program.

In order to participate in the program, states must develop a detailed regulatory structure to protect and enhance their coastal environment, which program is subject to approval by federal regulators.

Federal Consistency Program

Under the federal consistency program, if an entity is seeking a federal permit for an activity that may affect any land or water use or natural resource of the state's coastal zone, the state has the opportunity to review these activities to determine whether they are consistent with the enforceable policies of the state's coastal management program.

If a state determines such activity is inconsistent with any such enforceable policies, it may make a determination that the activity is inconsistent, and in many cases that activity is prohibited from going forward under the federal permitting scheme.

This is an effective veto by a state of activity requiring a federal permit and is therefore a very important weapon which a state participating in a coastal zone program has the opportunity to wield. But many areas of misunderstandings or confusion can arise in this regard, given that the federal consistency program is extremely nuanced.

Misunderstandings and Confusion

First, although the federal consistency program applies to federal agencies which may be seeking federal permits, as well as to non-federal entities, states have far less protection when the action is proposed to be undertaken by a federal entity.

For example, a non-federal permit applicant must be fully consistent with the enforceable policies of a State’s coastal management program, while a federal agency must only be consistent “to the maximum extent practicable”.

Additionally, if a federal entity disagrees with a state’s finding that the proposed activity is inconsistent with the state’s coastal management program, the federal entity may nevertheless proceed with the activity under the federal permit. The state is left with what may be unpalatable options. One is seeking mediation by the Secretary of Commerce, and another is litigation.

Thus, although Federal entities are subject to the federal consistency program, it would be a mistake to assume that they are treated like any other entity seeking a federal permit.

Secondly, even if the state makes a determination that the non-federal actor’s proposed activity is inconsistent with the enforceable policies of the state's coastal program, the Secretary of Commerce can override this decision by finding that such activities are in fact consistent with the State’s coastal program, or by finding that the activity is necessary in the interests of national security.

Finally, even if the activity is deemed to be inconsistent with the state's coastal zone program, the state may be prohibited under the federal preemption doctrine from preventing the activity, as certain federally-permitted activity is deemed to preamp state laws. For an excellent discussion of preemption under the Natural Gas Act as it pertains to the Weaver's Cove project, see Weaver’s Cove Energy, LLC. v. Rhode Island Coastal Resources Management Council et al., 583 F. Supp. 2d 259 (D.R.I. 2008) and Weaver’s Cove Energy, LLC. v. Rhode Island Coastal Resources Management Council et. al., 2009 U.S. App. Lexis 23491 (1^st Cir. Oct. 26, 2009).

Accordingly, when dealing with the federal consistency program under the Coastal Zone Management Act, one should not necessarily expect consistency.

Developers and Property Owners Benefit From Permit Extensions

John M. Boehnert — Sat, 25 Sep 2010 11:20:53 -0500

Many real estate developers and property owners got a significant break from the General Assembly late last year, when legislation passed to extend the expiration date of a broad range of governmental permits.

And many don't know it!

And the General Assembly recently improved on that substantial benefit.

And many still don't know it!

Because these measures passed with so little fanfare, many are unaware that hundreds of State permits which would ordinarily have expired get a new lease on life.

The first bill extended these permits until June 30, 2011. The second bill extended them even further, given the continuing economic slump.

The Legislature was concerned that because of the economic crisis, banks were not lending and many real estate developers and ordinary property owners were in the position of not having sufficient funds to perform under governmental permits that had been issued to them.

Why Action Was Appropriate

The legislation first enacted says it well:

“The general assembly hereby finds that the current economic conditions in the real estate market demonstrate that there is little or no demand for new construction. In addition, the banking crisis has made it extremely difficult for real estate developers to obtain financing for new real estate construction. Currently there are real estate developers who have expended substantial amounts of money to obtain permits and approvals from various local and state agencies. Many of the permits and approvals will expire prior to an improvement in the economy and the financial and banking industries.”

The General Assembly’s first solution was simple and effective. All permits in effect at the time of passage, November 9, 2009, would not expire until June 30, 2011, regardless of what the permit terms say. (See the legislation.)

But in June of this year the General Assembly acted again, as the economy remained in the doldrums and no doubt there was concern that the original extension of permits may not be sufficient.

First, the new legislation increased the number of permits protected from expiration by providing that it was not limited to permits in effect on November 9, 2009 but also included permits issued after November 9, 2009 and on or before June 30, 2011.

Secondly, the new legislation said that permits in effect on November 9, 2009 "will be recalculated as of July 1, 2011 by adding thereto the number of days between November 9, 2009 and the day on which the permit or approval would otherwise have expired".

This second bill went on to provide that the expiration date of permits issued between November 10, 2009 and June 30, 2011 "will be recalculated as of July 1, 2011 by adding thereto the number of days between the day the permit or approval was issued and the day the permit or approval otherwise would have expired". (See most recent legislation.)

Permits Affected

The legislation extends to permits issued by the Rhode Island Department of Environmental Management, the Rhode Island Coastal Resources Management Council, and by municipalities under subdivision and zoning ordinances. (See DEM’s Emergency Regulations.)

Not just professional developers will benefit from this legislation. For example, if a homeowner has obtained a variance to put an addition on his house, only to find that the local bank will not lend for the project, the homeowner’s permit will remain valid substantially beyond its normal expiration. Hopefully, lenders will then be in a feistier mood and the funds will be flowing.

A Tip of the Hat!

Given how costly it can be to get development permits, this has to be one of the smartest things the General Assembly has done in some time. And they not only did it right once, they actually improved upon it. A tip of the hat to the folks on Smith Hill for this one!

Regulating Waterfront Property in Rhode Island: Ownership Does Not Mean Control

John M. Boehnert — Wed, 01 Sep 2010 11:00:47 -0500

If you own waterfront property in Rhode Island and think you can do with it what you will, so long as you observe zoning ordinances like everyone else, think again.

Coastal waterfront property in Rhode Island is heavily regulated by the Coastal Resources Management Council (CRMC) under a complex set of regulations found in the Rhode Island Coastal Resources Management Program. You ignore that regulatory structure at your peril.

Staying out of Jail

By way of example, some years back one of my law partners came to me with a problem—he had been served with a violation and penalty from the CRMC for “improving” his water view by removing some phragmites and other vegetation. Could I help, he asked?

After ascertaining more of the facts, I said he had a problem, but at least he hadn’t hired a bulldozer to tear up the coastline. There was a long pause and then he said, “Well, I did rent a Bobcat”.

I said I could probably keep his wife out of jail but he had better pack his toothbrush!

Of course, no one went to jail, but he did pay a fine, and the last I heard CRMC was discussing restoration of wetlands with him.

Now, if a lawyer who should know better can get himself into this kind of trouble, you can imagine what else may be going on along our coastline.

Here is the reality:

If you own waterfront property, you are subject to increased regulations which can be stringent and may control everything from whether you can have a dock to where you can build a patio to what bushes or trees you could prune or remove.

CRMC Buffer Regulations

As for the coast, the CRMC regulates activity within 200 feet of the inland edge of a coastal feature, which includes the open ocean, coastal wetlands, tidal inlets, bays, coves, and tidal rivers. And if a coastal feature, such as a tidal inlet, runs not just along the property’s outer boundary but onto the property, jurisdiction is effectively more extensive.

If the CRMC buffer regulations apply to your property, there is little you can do in the buffer area without getting CRMC permission. (RICRMP Section 150. Coastal Buffer Zones) The buffer regulations typically apply to new residential development (for example, the construction of a house on a vacant lot), commercial and industrial development, energy related activities and certain public infrastructure.

The regulations create a buffer zone on applicable properties, the size of which is based on the size of the property and the type of water (one of six categories linked to the condition of the abutting shoreline). For example, a 10,000 to 20,000 square foot lot on Type 1 waters may have a 25 foot buffer zone, while an 80,000 square foot lot on Type 1 waters may have 150 foot buffer zone. (Variances may be granted from these requirements at the discretion of the CRMC.)

Assuming say, a 75 foot buffer zone from the most inland edge of the tidal feature on a property, the property owner would be prevented from altering this buffer in anyway, except in compliance with the regulations. The following would generally apply in a buffer zone:

· Maintenance of vegetation in its natural, undisturbed condition
· The planting of native vegetation if CRMC decided that was required
· The filing of a plan for CRMC approval if you wish to prune or trim vegegtation
· Restrictions on what you can do in the buffer zone.

The purpose of the buffer zones is to protect water quality, coastal habitat, scenic and aesthetic quality, historic and archaeological resources and to foster erosion control and flood control.

Given these protections, the regulations for buffer areas are stringent.

Regulatory Restrictions

For example, pathways which provide access to the shoreline “are normally considered permissible” provided they are less than or equal to six feet wide and follow a winding path that minimizes erosion.

And if you want to actually see the water, from your new house, “selective tree removal and pruning and thinning of natural vegetation may be allowed within a defined corridor in order to promote a view of the shoreline” but “only the minimal alteration of vegetation necessary to obtain a view shall be acceptable to the Council”.

And if you actually want to enjoy that waterfront, well, “minor alterations of buffer zones may be permitted along the shoreline if they are determined to be consistent with the Council’s requirements. These alterations may include maintaining a small clearing along the shore for picnic tables, benches, and recreational craft (e.g. dinghies, canoes, day sailboats, etc.). Additionally, the CRMC may allow small, non-habitable structures including storage sheds, boat houses and gazebos…..where appropriate.”

Note the repeated use of the word “may”. The regulations give CRMC a good deal of discretion to protect the values served by buffer zones.

At this point, if you are feeling pretty good since you own waterfront property that is not subject to the buffer regulations because, for example, your house was constructed before the regulations were applicable to new residential construction, don’t get too comfortable. You could actually do something that would result in the buffer regulations being imposed on your property!

More specifically, if you expand the square footage of the foundations of your structures on your property by more than 50%, you would be subject to the buffer zone requirements. The regulations are a bit complicated in this area, so this requires some attention.

When considering expansion, weigh the benefits of the increased structure you want against the restrictions of imposing the buffer regulations on your property, and determine what is more important to you.

And for all of you who thought your house was your castle, well it is, but if that castle is waterfront property, you may be the lord but not necessarily the master of all you survey!

Balancing Waterfront Property Rights: A Tale of Two States

John M. Boehnert — Sat, 14 Aug 2010 12:16:31 -0500

A recent Massachusetts Supreme Judicial Court decision on waterfront property rights dramatically illustrates the different approaches taken by the high courts of Rhode Island and Massachusetts in weighing the interests of public and private property rights at the waterfront.

In Massachusetts the scales are tipped decisively in favor of public rights while in Rhode Island the scales are more evenly balanced, at least where filled tidal land is at issue.

Filled Tidal Land

Filled tidal land is land created by the placement of fill below mean high tide. Much of this filling is historic, before the advent of modern day regulation of the shoreline. For example, in Rhode Island such filling proliferated in the 18^th and 19^th century, and even earlier. Much of downtown Providence and areas along Narragansett Bay and the Providence River are filled tidal land, as are areas along the waterfront on Acquidnick Island, particularly in Newport.

And the filling of Back Bay, the home of Fenway Park, was completed in the late 19^th century.

The Arno Case

In Arno v. Commonwealth, the plaintiff Joseph Arno, the owner of filled tidal land in Nantucket, sought to uphold two lower court rulings, one from the Land Court and one from the Superior Court, that found that despite the arguments of the Commonwealth, certain of Arno’s land was not encumbered with requirements allowing certain public rights on the land under the Waterways Act, by virtue of its having been filled tidal land.

The procedural history of the case is complicated, as are the facts, given disagreement over what high water line was at issue and disagreement over the impact of the Attorney General’s involvement in the case in 1922 on behalf of the Commonwealth. (For help in sorting this out, see the excellent brief submitted on behalf of Mr. Arno by Gordon M. Orloff, Esq. and Gareth I. Orsmond of Rackemann, Sawyer & Brewster, P.C.)

The lower courts found that the process of registering the land under the Registration Act demonstrated that no conditions subsequent were imposed on the filled tidal land under the Waterways Act. The high court disagreed, holding that only the legislature, and not the attorney general or the land court, could release any restrictions under the public trust doctrine which benefited the public, and the legislature had not done so.

The Public Trust Doctrine

The public trust doctrine differs from state to state but generally imposes restrictions on land below mean high tide for the benefit of the public, in Rhode Island for the purposes of fisheries, commerce and navigation and in Massachusetts for public purposes including navigation, fishing, and fowling.

In Massachusetts these restrictions for the benefit of the public have generally been found to apply to filled tidal land, as the Arno case demonstrated.

And the restrictions were not minor in nature. For example, under the license that Arno required to develop these filled tidal lands, most of the proposed facility’s ground floor was required to be a “facility of public accommodation” with public restrooms, and public easements allowing passage for any lawful public purpose. That would certainly be considered an intrusive infringement on “private property” rights.

The Rhode Island Experience

Rhode Island has chosen another course. While the State of Rhode Island argued in a 1995 case that only the legislature can extinguish public trust rights in filled tidal land, and must do so by a deed or an equivalent action, the Rhode Island Supreme Court rejected this approach. Greater Providence Chamber of Commerce v. State, 657 A.2d 1038 (R.I. 1995). (See my blog postings of July 3, 2010 and July 24, 2010 below for further discussions on the Rhode Island experience.)

The Rhode Island Supreme Court rejected this approach because it recognized that historically there had been a great deal of filling along the coast, and that much of this was for the benefit of commerce and navigation, such as piers, warehouses, factories, etc. It recognized that this was done in good faith by riparian landowners, exercising clearly-recognized riparian rights, it was often done at considerable expense, and it was often a type of “private” public works projects”, as they were building infrastructure to support commerce.

But the Rhode Island Supreme Court also looked to judicial precedent and found decisions in the 19^th century supporting the view that when land is created by placing fill below mean high tide, the public trust rights are extinguished in the filled land but the public rights remain in the “new” shoreline. See for example Allen v. Allen, 32 R.I. 166 (1895). In other words, the public did not lose its rights to the shoreline, but these rights were necessarily moved seaward.

In essence, the Rhode Island Supreme Court, both in the 19^th century and in the 20^th century, was balancing private property riparian rights with public trust rights. In doing so, Rhode Island's high court brought more certainty to property rights.

The Essence of Property Law

And as my real property law professor bellowed in opening his lecture in my first law school class on the first day of law school:

“Property law loves certainty. Property law loves certainty.”

As my professor went on to explain, private property ownership is central to our free enterprise system, and it is absolutely essential that property owners and prospective purchasers know and understand precisely what rights they have and do not have with regard to their property.

One would think Mr. Arno is no exception. After all, he bought land whose title was registered in the Land Court in 1922, after the involvement of the Attorney General on behalf of the Commonwealth. He certainly thought his land was free of the significant encumbrances urged by the Department of Environmental Protection for the benefit of the public, and two lower courts took the same view.

So much for certainty!

Moving the Ocean Away from Waterfront Property Owners

John M. Boehnert — Sat, 24 Jul 2010 12:25:49 -0500

Last month the U.S. Supreme Court spoke in an important waterfront property rights case, and whenever that happens, Rhode Island, being the Ocean State, had better listen. See Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection et al.

At issue in that case was whether a taking of waterfront property rights had occurred, and whether such a taking could occur by court order as opposed to legislative fiat. The Court did agree that no taking had occurred, but the Court couldn’t agree on much else, with a plurality opinion dueling with two concurring opinions on the judicial takings issue.

I will focus on the waterfront property rights issue, and suggest that you read the excellent positing on Dean Patty Salkin’s Law of the Land blog (June 23, 2010) for a thoughtful discussion of this interesting, and as yet inconclusive, judicial takings issue.

(For those not familiar with littoral and riparian rights jargon, reviewing my immediately prior posting on “Riparian Rights in Little Rhody and Beyond” may be helpful, as I define some of the terminology used by the Supreme Court in its opinion.)

What was at Issue in Florida?

In Florida, as in Rhode Island, the State owns all land below mean high tide, meaning the submerged ocean bottom as well as the land exposed at low tide. This leaves to the waterfront property owner all land above mean high tide.

(In Rhode Island, mean high tide is “the arithmetic average of high-water heights observed over an 18.6-year Metonic cycle” and “is the line that is formed by the intersection of the tidal plane of mean high tide with the shore”. State v. Ibbison, 448 A. 2d 728, 730 (R.I. 1982). A Metonic cycle is the period which begins and ends when a new moon occurs on the same day of the year as it did at the beginning of the last cycle. Id.)

At issue in the Florida case was a statute which allowed municipalities to petition the state to renourish beaches eroded by wave, and presumably wind, action. If the state agreed to renourish the beach, it would establish an “erosion line” which for the purpose of the case at issue was determined to be the mean high tide line. The state would them place fill seaward of this line, thereby creating new land.

Under Florida’s view, the newly created land was owned by the State.

Concerns of Waterfront Property Owners

It does not take an overactive imagination to guess the reaction of the “former” Florida waterfront property owners. It probably went something like this.

“I bought waterfront property, I enjoyed waterfront property, I paid taxes on waterfront property, and now I no longer have waterfront property because of the State’s actions. Instead, I have property abutting dry land owned by the State. I think my property rights have been taken, and no one has paid me for them. Isn’t that unconstitutional?”

Good question.

No Taking

The answer, according to the U.S. Supreme court is “No”. In essence, the Court said, your facts are right but your conclusion is wrong.

Property owners argued they were denied two property rights attendant to waterfront ownership status—to receive accretions to their property (i.e. additions of land occurring over time) and to have their property contact the water.

Not so fast, said the Supreme Court. The Court found that waterfront property owners did not trump the rights of the State to create land by placing fill below (i.e. seaward) of mean high tide, and the Court pointed to the doctrine of avulsion under Florida law, where the sudden creation of additional land at the shore (as opposed to the long term creation of such additional land by accretion) did not change the waterfront property owner’s property line.

In other words, land which may be created by a storm dumping sand and rocks below mean high tide is land owned by the state; the property owner’s boundary does not change.

In its review of Florida law, the Supreme Court found no exception to this rule when the state itself created the avulsion by adding fill below mean high tide. That is, a sudden change in the mean high tide by artificial means (i.e. placing fill below the high tide line) has the same result as a sudden change in the line resulting from natural means (i.e. a storm), and the waterfront property owner is the loser, so to speak, in each instance.

Applicability to Rhode Island

Because the State also owns all property below mean high tide in Rhode Island, one may be tempted to argue that the same result of "no taking" would apply in Rhode Island.

While I have not considered this issue in any depth, I would raise some cautions to this conclusion.

First, Rhode Island has well-settled historic case law, recently confirmed, that a waterfront property owner who extends his property seaward by placing fill below mean high tide owns title to that property in fee simple, provided such filling was done with express or implied state approval or with state acquiescence. Allen v. Allen, 32 A. 166 (R.I. 1895); Greater Providence Chamber of Commerce v. State, 657 A.2d 1038 (R.I. 1995). These cases of course refer to historic filling prior to the creation of Rhode Island’s Coastal Resources Management Council.

This case law could be used to argue that unlike in Florida, in Rhode Island an artificial avulsion does in fact extend the private property line seaward.

The counter to this may be that this occurs only in the historic cases, prior to the current coastal resources management statutes and regulations, when it is the landowner filling for the purpose of extending his shoreline, as historically this was done for purposes of creating wharves and docks, facilitating commerce, and for establishing other businesses and residences.

The property owner may make a counter-argument that whether or not the property line moves depends on (i) who is filling below mean high tide and (ii) why is the fill being placed below mean high tide. And perhaps where this argument leads is that to the extent it is the State doing the filling, there must be compelling reasons to find that a waterfront property owner no longer has waterfront property as a result of the filling, giving the Rhode Island Supreme Court’s historic sensitivity to balancing the rights of waterfront property owners with the rights of the public and the State.

Such an approach would be entirely consistent with Rhode Island’s historic Public Trust Doctrine case law, although the impact of Rhode Island’s Coastal Resources Management Program remains to be seen.

However, if no one draws a line in the sand, we may never have to address the issue!

Riparian Rights in Little Rhody and Beyond

John M. Boehnert — Sat, 03 Jul 2010 14:50:13 -0500

Rhode Island is the Ocean State, and if anyone doubts the interest of Rhode Islanders in waterfront property rights, perhaps getting caught in this Holiday weekend’s beach traffic will convince them otherwise.

Rhode Island’s Public Trust Doctrine

I learned firsthand the intense interest of Rhode Islanders in access to the shore when some years back I brought a major Public Trust Doctrine case to the Rhode Island Supreme Court, asking the Court to decide the ownership rights of land created by the placing of fill below mean high water at the shoreline. Greater Providence Chamber of Commerce v. State, 657 A.2d 1038 (R.I. 1995).

At issue in that case was title to millions of dollars of filled tidal land, which is land created by the placing of fill below mean high water to extend out the shoreline into the bay or ocean. The State claimed ownership to this land under Rhode Island’s Public Trust Doctrine based on a then-recent court decision, Hall v. Nascimento, 594 A. 2d 874 (R.I. 1991), which found, in dealing with one small cottage property, that since the State owned all land below mean high tide under the Public Trust Doctrine, land created by the placing of fill below mean high tide was also owned by the State.

Under the Public Trust Doctrine, the State owns all land below the high water mark in a proprietary capacity for the benefit of the public, to preserve the pubic rights of fishery, commerce and navigation in such waters. Nugent ex rel. Collins v. Vallone, 161 A. 2d 802, 805 (R.I. 1960).

The decision in Hall raised concern throughout the State, as over our history Rhode Island waterfront property owners had created thousands of new acres of waterfront land by filling below mean high tide throughout the State. This was done to create wharves, docks, land for business operations and residences.

After Hall, the State claimed it owned all this land, on which private property owners had been paying taxes for years, and, adding salt to the wounds, the State wanted to charge the “former owners” a license fee to continue to use and occupy the land they thought they owned.

In the Greater Providence Chamber of Commerce case, which I brought on behalf of the Chamber, Narragansett Electric Company, Providence Gas Company, and the Rhode Island School of Design, the Court cleared title to this filled land in favor of the private property owners against claims by the State of State ownership. In doing so, the Court established a test to clear title to hundreds of millions of dollars of other filled tidal land throughout Rhode Island.

That experience, and subsequent experience dealing with waterfront property rights and disputes, convinced me how important waterfront property rights are here in Rhode Island, whether to beach goers or property owners.

Understanding the Terminology

Accordingly, I will be spending several postings in this blog to discuss a United States Supreme Court case issued last month which addressed waterfront property rights in Florida, and to discuss its impact on Rhode Island waterfront property rights. That decision implicated the Public Trust Doctrine and an alleged state taking of waterfront property rights without paying just compensation, and it raised the intriguing question of whether or not there could be a “judicial” taking of private property rights (i.e. a taking by a court decision as opposed to by legislative or regulatory activity). Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection et al.

In this first article, I wanted to set the stage for that discussion by addressing some of the terminology of waterfront property rights, as it is somewhat arcane, and it is a necessary precursor to understanding the issues raised in the Florida case, as well as the issues we face here in Rhode Island which may arise not just from State actions but from natural forces.

Riparian versus Littoral Rights

In the first instance, let me “clarify” my headline in this blog. Riparian rights customarily refers to rights pertaining to rivers and streams, and littoral rights refers to property rights pertaining to ocean waters. However, since the Rhode Island Supreme Court has used the terms interchangeably, I do so here as well. (And there is some basis for their doing so, as in Rhode Island we have tidal, brackish rivers, we have freshwater marshes and we have saltwater marshes.)

Accretion and Alluvion

Accretion is the addition of sand, sediment or other unconsolidated deposits (known as alluvion or alluvium) to waterfront land, which occurs gradually and imperceptivity over time.

Reliction

Reliction is when land which was once submerged becomes dry land by the waters receding.

Avulsion

Avulsion is the process of a sudden and perceptible change in the boundary of waterfront land, either through the addition of land that expands the size of the parcel or through formerly upland property being submerged, diminishing the size of the upland parcel.

Erosion

Erosion is the natural and generally gradual process of reduction of the shoreline by weathering and transporting of solids by the actions of wind, water, ice, etc.

As a generalization, when there has been a sudden and perceptible change in the shoreline, as by avulsion or reliction, the property boundary does not change, but remains as before (i.e. the mean high water mark, if in Rhode Island). When there has been a slow or gradual change in the shoreline, as by accretion or erosion, as a generalization the property line does change, with the landowner either losing property (erosion) or acquiring more property (accretion).

These concepts will be discussed in more detail in the next posting when examining the Supreme Court’s decision in the Beach Renourishment case.

But for now, it is time for me to head to that shoreline, and hopefully avoid the worst of the beach traffic!

Is "Right To Dry" Wrong To Try?

John M. Boehnert — Sat, 19 Jun 2010 16:26:23 -0500

With near double digit national unemployment, the collapse of the housing market throughout the country, and soaring state deficits, you might think that State government would be too busy to worry about you and your laundry.

Well, think again.

Last month Maryland passed “Right to Dry” legislation, preventing condominium, cooperatives and homeowner associations from prohibiting homeowners from installing clotheslines on their property. In doing so, it joined a handful of states that have in some way addressed this issue.

Yes, clotheslines. Remember them? They were everywhere before the advent of dryers.

And here in Rhode Island, Right to Dry legislation was introduced in the General Assembly but did not come to a vote before the Legislature adjourned for the year. Right to Dry legislation was also introduced in neighboring Connecticut but I understand it too died in the legislature.

The so-called “Right to Dry Movement” is proposing legislation in the various states that would prohibit municipal government, homeowner’s associations, condominium and cooperative associations, deed restrictions and covenants running with the land from preventing outdoor drying of clothes through the use of clotheslines or drying racks. For websites supporting Right to Dry, see www.laundrylist.org and www.right2dry.org.

Florida’s Right to Dry statute, FSA Section 163.04, serves as the basis of the model legislation advocated by Project Laundry List. The Florida statute prohibits municipal governments and various homeowner associations from prohibiting the installation of solar collectors, clotheslines or other energy devises based on renewable resources.

The Maryland statute is more limited than Florida, pertaining only to clotheslines and only to single family property, meaning less than five dwelling units, and it allows for reasonable restrictions to be placed on the clotheslines.

A few other states have joined the laundry wars. For a thumbnail summary of legislative enactments as of last summer, see my good friend Dwight Merriam’s News Brief in Zoning Practice. (Scroll down as the article starts on the lower right.)

Many who support Right to Dry legislation do so for reasons pertaining to energy efficiency and promotion of renewable energy, and many are concerned about curbing greenhouse gas emissions, and therefore arguably reducing their adverse impact on climate change.

(I am not qualified to wade into the debate on greenhouse gas emissions and its asserted causal link to climate change, but I would note two thoughtful articles for readers interested, after the “Climategate” hubbub, in whether there is in fact a scientific “consensus” on this issue. Please see conservative columnist John O’Sullivan’s article and Jay Richard’s article in the American Enterprise Institute Journal.)

Many who oppose Right to Dry legislation do so because it is feared the open air drying of laundry could have a negative aesthetic impact on the property and thereby reduce property values. Someone’s El Grande boxer shorts blowing in the breeze may not exactly dress up the neighborhood, so to speak.

In commenting on the proposed Rhode Island Right to Dry legislation in an op-ed piece in the Providence Business News, I noted that my primary concern with this type of legislation is that it abrogates private property rights.

For example, several of these statutes flatly tell property owners what they must allow on THEIR property. And this is despite the fact that buyers in shared ownership communities, such as condominiums, are almost always given notice prior to their purchase of the restrictions governing their new home. If those restrictions are so onerous or so offensive, do not buy the property, or buy the property and seek to convince your co-owners that the restrictions should be changed.

But should a minority of property owners really be running to the legislature to try to get lawmakers to effectively abrogate rules and regulations enacted or preserved by a majority of property owners to protect their property interests? Did majority rule and private property rights fall off the Constitutional bus somewhere?

One view may be that “Right to Dry” legislation is “Wrong to Try” and should have a “Right to Die” in the legislatures where it is pending.

EPA'S ALL APPROPRIATE INQUIRIES RULE: WHY IT MAY BE INAPPROPRIATE FOR YOUR TRANSACTION

John M. Boehnert — Wed, 09 Jun 2010 12:38:25 -0500

In preparing to give a seminar on environmental issues in real estate and business transactions at the upcoming Rhode Island Bar Association Annual Meeting, I decided I had to address EPA’s rule establishing what constitutes all appropriate inquiries (AAI) for property acquisitions, given its importance in claiming defenses to liability under the federal Superfund statute.

In doing so, I knew I would have to spend almost as much time discussing why simply following the rule may not result in adequate inquiries for many types of transactions.

Importance of the Rule

The final rule promulgated by the EPA became effective November 1, 2006, 40 CFR Part 312, and established standards for what constitutes a satisfactory investigation of real estate prior to its purchase for purposes of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C 9601 et seq., also known as the Federal Superfund Law.

The importance of the All Appropriate Inquiries Rule (AAI Rule) is that it allows a property owner to qualify for certain defenses under CERCLA, such as the innocent landowner defense and the contiguous property owner defense, as well as to qualify to be a bona fide prospective purchaser (BFP). In the first two instances, if the investigation shows no contamination, the prospective purchaser can acquire the property and qualify to assert the defenses as to contaminants covered by CERCLA if subsequently discovered. Similarly, it allows a prospective purchaser to qualify as a BFP to acquire contaminated property under the statute.

Following the AAI Rule is also required if one seeks to use brownfields grant funds to address contamination on a site.

What the Rule Requires

The Rule establishes a number of requirements, including

Qualifications (education and experience) for those conducting the investigation
Requirements for federal, state, local and tribal records review
Visual inspection of the property
Interviews with owners, operators, and occupants
Review historical sources of information
Search for environmental clean-up liens
Assessment of purchase price to fair market value if property not contaminated
Identification of missing data gaps

Under the AAI Rule the inquiries must be conducted within one year of acquisition, and certain information must be refreshed or updated after 180 days.

The standards for inquiry are met by two site assessment protocols adopted by the American Society of Testing and Materials, ASTM E1527-05 and E2247-08 (for forestland and rural property).

Limits of AAI

So should a purchaser simply rely on doing an approved AAI site assessment in acquiring property, secure in the knowledge that it is learning everything it needs for a thorough environmental due diligence inquiry.

The answer is “No”!

The reason is that the AAI requirements do not include a number of inquiries that a prudent purchaser may want to make. These include but are not limited to matters pertaining to

Asbestos
Wetlands
Lead
PCBs
Mold and indoor air quality
Radon
Health and Safety
Indian artifacts and cultural resources

An environmental site assessment should be tailored to the specific transaction and the information a purchaser needs to discover about a property. This will take into consideration a number of factors, including whether an ongoing business operation is being purchased, whether the deal is a stock acquisition or an asset acquisition, whether the site is known to be environmentally-impacted, whether construction is anticipated on the site, etc.

The Bottom Line

Depending on your circumstances and your need for CERCLA defenses, you certainly may want to include the AAI considerations, but it may well not be the most APPROPRIATE inquiry nor ALL the inquiry you need to make.

The Land Only Condominium: Little Known and Less Understood

John M. Boehnert — Sat, 29 May 2010 15:43:34 -0500

Some time ago I was walking a development project with the chief surveyor for a large engineering company, showing him the unit boundaries I wanted established for a client’s proposed land only condominium project.

After about a half hour of pointing out boundary and overhang issues to him and discussing the location of common elements, he asked: “So what’s a land only condominium anyway?”

And this was a surveyor and engineering firm that had done extensive condominiums projects!

I have had similar questions from lawyers, even experienced real estate lawyers.

The land only condominium is indeed neglected.

Defined

It is not surprising, as the Rhode Island Condominium Act makes little mention of land only condominiums, beyond their definition. R.I.Gen.Laws 34-36.1-1.03(17)

“Land only units shall mean units designated as land only units on the plats and plans which units may be comprised entirely or partially of unimproved real property and the air space above the real property. The boundaries of a land only unit are to be described pursuant to Section 34-36.1-2.05(a)(5). Land only units may, but need not, contains a physical structure. The declaration may provide for the conversion of land only units to other types of units and/or common elements provided the conversion shall be effective only upon the recording of an amendment to the declaration which amendment will include new plats and plans identifying any portion of the land only unit converted to another type of unit and/or common element.”

Essential Attributes

There you see the essential attributes of a land only unit:

It need not contain a physical structure, but it may
It may subsequently be converted to a conventional condominium or common elements
The air space above the land is included in the unit

Land only units are also mentioned in the section of the Condominium Act addressing the creation of condominiums, R.I. Gen. Laws 34-36.1-2.01( which will be discussed in more detail below) and they are mentioned sporadically elsewhere in the Act.

For all its obscurity, it is a powerful and versatile tool for real estate development.

Consider two representative projects where I have found land only units extremely useful.

Representative Project—Mill Site

A client purchased a large mill site it wanted to develop, but was unsure it had the interest in developing the entire project. The site consisted of numerous buildings, some connected but most stand-alone structures, and some open space for new building construction. The client was looking for a way to have the flexibility to develop the site in part and perhaps sell off the site in part for development. However, the local land use regulations prohibited subdivision of the property.

A land only condominium was the solution.

First, under Rhode Island law a condominium is not a subdivision. McConnell v. Wilson, 543 A.2d 249 (RI 1988)

Secondly, each building and buildable parcel was designated as a land only unit. Unlike a conventional condominium, which cannot be declared until the buildings are substantially complete, the land only unit can be declared as it stands, and buildings either later constructed on the unit or rehabilitated on the unit become part of the unit. ) R.I. Gen Laws 34-36.1-2.01(b) The owner could develop three or four units and sell off the remainder of the units to other developers for development.

Representative Project—High Rise Urban Development

A client was interested in buying an unimproved parcel in a downtown condominium project and constructing a high rise office building. However, the condominium was designed as a conventional condominium, meaning the client could not “buy” the condominium until after it constructed the building and it was substantially complete. That’s a risky situation to structure, particularly given the vagaries of conventional financing for such an expensive project. Complicating the issue was the fact the condominium was a leasehold condominium—meaning it was subject to a long-term ground lease.

Again, the solution was restructuring the condominium regime to have the portion being purchased by my client be a land only condominium, which can coexist in the same condominium regime with a conventional condominium. R.I. Gen Laws 34-36.1-2.01(b)

Under the new structure, financing was provided and the project successfully completed, with the client having ownership of the condominium pad site from day one.

A Little Respect Please

So, the next time you hear someone reference a land only condominium, please treat it with a little respect!