How Wetlands And Contamination Affect The Use, Development And Value Of Land. Gregor I. McGregor, Esq. McGregor & Associates

Transcription

1 How Wetland And Contamination Affect The Ue, Development And Value Of Land Gregor I. McGregor, Eq. McGregor & Aociate 2005

2 The author thank hi law clerk Brian Falk (2005)

3 PRESENTATION OUTLINE Overview of wetland and floodplain law Overview of property contamination/cleanup Maachuett court cae on wetland Maachuett court cae on contamination Concluion

4 OVERVIEW OF WETLANDS AND FLOODPLAIN LAW

5 DEVELOPER? WHO IS AFFECTED? BUILDER? LANDOWNER? CONTRACTOR? MUNICIPALITY? ABUTTOR? LENDER? TENANT? FACILITY OPERATOR? LANDLORD?

6 FIRST, DOES THE PROJECT INVOLVE WORK REGULATED BY A FEDERAL, STATE OR LOCAL WETLANDS PROTECTION PROGRAM? REMOVING FILLING CONSTRUCTING DREDGING GRADING ALTER (broadly defined)

7 SECOND, WILL THE WORK AFFECT A PROTECTED RESOURCE? Protected Reource Include: WETLANDS = area inundated or aturated by urface or ground water at a frequency and duration ufficient to upport (and normally do upport) prevalent vegetation typical of aturated oil condition (33 CFR 328 (b) ) Vegetated Wetland (marhe, wamp, bog) Coatal Wetland (alt marhe, tidal flat, etuarie, dune, beache) FLOODPLAINS Area Prone to Flooding Area Affected by the Tide or Coatal Flowage OTHER WATER RESOURCES CAUTION: Working definition of wetland and floodplain are merely rule of thumb and may vary between different tatute and bylaw. River, Stream, Lake, Pond, Ocean

8 THIRD, DOES THE PROJECT HARM PUBLIC INTERESTS IN THE RESOURCES? Flood Control Recreation Storm damage prevention Agriculture Shellfih Public or private water upply Preventing pollution Navigation Fiherie Example: In Englih, wetland are natural ponge. Wetland tore urface water and releae it during time of low flow. They aborb flood water and reduce damage elewhere. They are alo natural food factorie and produce nutrient. They are alo natural houing. Ground water upply Aquaculture Wildlife and it habitat Other

9 STATE WETLANDS PROTECTION Wetland Protection Act Baic Procedure Notice of Intent (NOI ) Order of Condition (permit) Requet for Determination (RFD) Reource Area Protected Work Regulated/ Exemption Wetland Value Protected Time Period and Deadline Appeal to the DEP DEP Inland, Wetland Regulation DEP Coatal Regulation DEP Adminitrative Regulation Adjudicatory Hearing Regulation Riverfront Area Regulation What i the Riverfront Area? Alternative Tet Minimize Impact Tet Denely Developed Area Previouly Developed Area Exemption Wildlife Habitat Regulation Peticide on Right-of-Way Coatal and Inland Wetland Retriction Act Chapter 91 Waterway and Tideland Licene

10 STATE WETLANDS PROTECTION (cont d) Coatal Zone Management (CZM) Ocean Sanctuarie and Ocean Mineral Extraction Scenic River Sewage Dipoal & Solid Wate Septic Sytem Solid Wate Facilitie Water Pollution Control NPDES Permit Storm Water Management Section 401 Water Quality Certification Program Groundwater Dicharge Permit Inter-Bain Tranfer Approval Underground Water Source Standard Drinking Water Standard Waterhed Protection Program Aquifer Land Acquiition Water Supply Grant Groundwater Quality Standard Water Conervation Grant Water Management Act EOEA GIS Program/ Biomap Natural Heritage Program Maachuett Environmental Policy Act (MEPA) EOEA Wetland Retoration

11 FEDERAL WETLANDS AND FLOODPLAIN PROTECTION Army Corp of Engineer Section 404 Permit Federal Wetland Regulate Filling and Dicharge Nationwide and Regional Permit Maachuett Programmatic General Permit Activitie Covered By the PGP PGP Categorie and Condition Individual Permit Alternative Tet Permit Procedure/ Hearing Exemption EPA Review and Veto Delegation to State Enforcement

12 OTHER FEDERAL WETLANDS AND FLOODPLAIN PROTECTION River and Harbor Act 1899 Regulate dredging, tructure and water coure change ( 9, 10, 13) Executive Order on Wetland and Floodplain FEMA Flood Inurance Program Superfund/ Brownfield Endangered Specie Act

13 LOCAL WETLANDS PROTECTION 1. Wetland and Floodplain Zone Floodplain zoning in Maachuett held legally valid in Turnpike Realty Co. v. Dedham, 362 Ma. 221, 284 N.E.2d 891 (1972), cert. Denied, 409 U.S (1973). Wetland zoning upheld in Golden v. Board of Selectmen of Falmouth, 358 Ma. 519, 265 N.E.2d 573 (1970). Waterhed and Aquifer Zone Site Plan Review Zoning Growth Control Phaed Growth Control Tranferable Development Right (TDR ) Moratoria Other Subdiviion Control Land Acquiition Conervation Retriction Real Etate Tax Break Home Rule Bylaw Cluter and Planned Unit Development (PUD)

14 HOME RULE WETLANDS BYLAWS Overview Local permit program adminitered by the Conervation Commiion Ue general bylaw and ordinance authority in G.L. c and Home Rule Amendment to the Maachuett Contitution, Article II and LXXXIX Typical Municipal Bylaw Juridiction and procedure imilar to Wetland Protection Act but may clarify and expand juridiction and requirement beyond Act Uually fewer exemption than thoe lited in Wetland Protection Act Mot bylaw allow public hearing on an application to be combined with Wetland Protection Act hearing 3. Enforcement Typical ceae and deit order, ite inpection, and permit revocation Traditional remedie for injunction in Superior Court under the Citizen Suit Statute, G.L. c. 214, 7A, and criminal proecution Bylaw following the MACC model include the ticketing approach outlined in G.L. c. 40, 21D

15 Legal Apect HOME RULE WETLANDS BYLAWS (cont d) Incorporate feature of the Maachuett Wetland Protection Act, G.L. c. 131, 40 and add tougher procedure and tandard Upheld in Lovequit v. Conervation Commiion of Denni, 379 Ma. 393 N.E.2d 858 (1979) Quai-Judicial Proce Find the relevant fact Apply the tandard ConCom promulgate it own written rule under bylaw Hearing and Permit Hear evidence at public hearing and decide baed on record Set condition which can be tricter than Act Power to Deny If applicant fail to meet burden of proof, refue reaonable ConCom information requet, meet performance tandard, or meet condition adequate to protect value Any deciion mut be upported by ubtantial evidence, after proper procedure, and not be an uncontitutional taking of property

16 HOME RULE WETLANDS BYLAWS (cont d) Conervation Commiion Entertain application Hold public hearing Iue deciion Enforce bylaw and Act Hearing and Permit Promulgate own regulation with ubmittal requirement, deign pec, and performance tandard Thee may go beyond DEP regulation Fewer contraint on continuing hearing Deciion baed on the document record at the hearing

17 HOME RULE WETLANDS BYLAWS (cont d) Burden of Proof Applicant ha burden of proving that the work propoed will not harm the interet protected by the bylaw. Appeal to Court/ DEP A local deciion rendered by the ConCom under a local bylaw i appealable by certiorari. The tatute of limitation for uch a court complaint i 60 day. Review i on the record, not de novo. There are no new witnee. Appeal to the DEP i due a uual within 10 day of the date of iuance of the ConCom deciion. An applicant eeking a permit who challenge a ConCom deciion mut be ucceful in both the DEP and Superior Court. A project opponent need to be ucceful in only one forum. Plaintiff in court trie to prove legal error apparent on record caued manifet injutice.

18 PROPERTY CONTAMINATION

19 HAZARDOUS WASTE Thee word can pook buyer, eller, bank, invetor, landlord, tenant, and broker Developer diappear from the landcape when they ee ign of hazardou wate Buine expanion are cancelled for the fear of dicovering or diturbing pat contamination Government agencie which acquire property by purchae, eminent domain, condemnation, tax title, gift, or otherwie, get cold feet when wate i found before the purchae and ale Thi fear of liability i natural, conidering that innocent landowner can be liable for acquiring contaminated land even if they were not aware of the contamination at the time of acquiition

20 SUPERFUND LIABILITY Nature of the liability Liability may attach to any contaminated real etate, not jut federal Superfund ite Strict, joint, and everal, and retroactive liability CERCLA (Comprehenive Environmental Repone Compenation Liability Act) 42 U.S.C All Potential Reponible Partie (PRP) Generator Tranporter Arranger of tranport, treatment, or dipoal Dipoer Owner Operator Pat or preent

21 STATE REQUIREMENTS Maachuett Superfund Statute, M.G.L. ch. 21E, 1-18 State can implement tricter tandard MA petroleum product MA, NH, CT Superlien againt land or buine revenue NJ & CT Site aement are required prior to tranaction involving indutrial property

22 CONTAMINATION IS MANAGEABLE The preence of contamination need not render property unuable or unellable Someone need to take charge and manage the problem Partie to a tranaction can find many way to hold the deal together Contaminated real etate can be bought and old without unreaonable fear of liability It i very poible to make money buying and elling dirty property

23 INFORMATION AS INSURANCE Almot every piece of municipal, indutrial, agricultural or commercial real etate ha ome contamination Commercial building Warehoue Farmland Factorie Vacant land Since 1980, 44,418 federal ite have been aeed, with 11,312 ite preently active on the Superfund lit

24 FIND THE CONTAMINATION It i naïve to buy a cheap aement in the hope that it will be clean ASTM tandard et a framework for conducting Phae I and Phae II environmental ite aement

25 DO CAREFUL SITE ASSESSMENTS A properly done ite aement hould include: Permit and enforcement hitory Surface and Topography groundwater flow Building and utility layout Geologic etting Preence of tank and piping Prior wate dipoal Condition of all building and tructure Prior ue, indutrial, commercial or agriculture

26 STRUCTURE TRANSACTIONS TO REDUCE RISK Deciion to purchae or develop land or facilitie hould be baed on the nature and cope of contamination, anticipated cleanup cot, activity and ue limitation, and potential future liability Control liability Delay the cloing or acquiition until cleanup i complete Depoit purchae money in ecrow until the property or operation i clean Peronally do the cleanup, deducting cot from the purchae price Contract cleanup dutie between buyer and eller, uing a formula Carve off the contaminated area Do not own or operate the dirty ite, buy only the clean portion Purchae or leae le than fee interet in property, uch a an eaement, the air right, or the upper floor Leae the clean part of the ite or building Loan operating fund, taking back principal and interet

27 DISTANCE BUYERS FROM THE CONTAMINATION Utilizing different buine entitie may enable ophiticated purchaer to minimize liability Limited partnerhip may allow limited partner to avoid liability by taying out of day-to-day management activitie Subidiarie may provide liability protection Generally, parent corporation will not be held liable for the action of ubidiary corporation, which are financially independent and make uncontrained buine deciion Liability chiefly arie from ownerhip and management Remember, corporate officer and employee engaged in illegal toxic wate dipoal may be peronally liable, even when acting on behalf of the buine

28 CONTRACTS CAN PROVIDE ADDED PROTECTION Contract enable the partie to hare and hift the financial burden of cleanup cot through indemnification agreement But, Superfund tatute provide that the fundamental legal liability remain and cannot be hifted Common liabilitie can be allocated among private partie only Court have refued to recognize and enforce indemnification agreement between partie and the government

29 CONTRACT TO COVER THE ESSENTIALS Purchae money holdback Government liaion Condition of property Management of the cleanup Liability releae Reimburement formula Cooperation in defene Warrantie and repreentation Purchae price adjutment Circulation of progre report Cooperation on inurance claim Government cleanup order Ecrow depoit Contingencie about future claim Covenant not to ue Arrangement againt third party claim Cot-haring arrangement

30 CREATIVE FINANCIAL ARRANGEMENTS Lender are protected from owner/operator liability where they do not exercie deciion-making control or actively manage the facility prior to forecloure Careful bank protect againt potential liability through their own requirement: Site aement Conditioning loan on cleanup Indemnity claue Notification requirement

31 LEGAL CLAIMS AND DEFENSES CERCLA etablihe ome tatutory defene and limitation Act of God Act of war Third party act or omiion Innocent purchaer defene A propective purchaer mut make an appropriate and detailed prepurchae environmental invetigation Other CERCLA exemption Involuntary tranfer exemption De micromi party exemption Municipal olid wate generator Contiguou landowner

32 INSURANCE COVERAGE Old Comprehenive General Liability (CGL) policie may provide cleanup fund and other repone cot due to their long tail coverage Houehold, vehicle, umbrella, or other peronal inurance may alo provide ome coverage Contractor may have liability inurance Conultant may have error and omiion coverage Need to ubmit a ophiticated tatement of claim: Date of contamination Nature of contamination Repone action Cleanup cot Appraial Exitence of policie Legal bai for believing coverage exit Amount of claim to date

33 MANAGE PROPERTY PROACTIVELY Contamination problem do not get better after the deal, unle dealt with Recruit a team of engineer and environmental cientit Deignate a reponible manager Document completion of the cleanup Do periodic environmental audit to tay in compliance Superfund hazardou ubtance Maachuett Oil and Hazardou Material (OHM) Reource Conervation and Recovery Act (RCRA) Toxic Subtance Control Act (TSCA) Federal Inecticide Fungicide and Rodenticide Act (FIFRA) Solid wate Abeto Radon PCB LUST Lead Paint Ureafromaldehyde Foam Inulation (UFFI)

34 SUE THE RESPONSIBLE PARTIES For cleanup cot-recovery, Valid federal or tate, property damage, peronal Superfund or common law injurie, breach of contract, claim may lie againt: fraud, mirepreentation, or compliance with government Conultant Contractor regulation Generator Dipoer Preent Former operator Tenant operator Tranporter Former ite Partner owner Ar r a ng e r Parent Preent ite corporation owner

35 MASSACHUSETTS COURT CASES ON WETLANDS Donlon v. Board of Aeor of Holliton, 389 Ma. 848 (1983). Richard v. Board of Aeor of Nantucket, 59 Ma.App.Ct (2003). Epahbodi v. Town of Sudbury, 1998 WL (Ma.Super., 1998). YMCA of Quincy v. Sandwich Water Ditrict, 16 Ma.App.Ct. 666 (1983). Quet Enterprie, Inc. v. Town of Wetford, 15 Ma.L.Rptr. 81, 2002 WL (Ma.Super. 2002).

36 Donlon v. Board of Aeor of Holliton, 389 Ma. 848 (1983) Taxpayer atified burden of preenting peruaive evidence of overvaluation with repect to lot between.41 and.45 acre in ize, which were almot excluively overlaid by protected wetland. The Supreme Judicial Court held that it wa unfair to ae uch lot a buildable. The appellant atified their burden of preenting evidence of ov e r va l ua t i ona ndt h ede c i i ono ft h eboa r dt o u t a i nt h ea e or valuation wa not upported by ubtantial evidence. The aeor had tetified that the wetland compoition of the even lot in quetion did not affect their valuation.

37 Richard v. Board of Aeor of Nantucket, 59 Ma.App.Ct (2003) Taxpayer claimed land wa overvalued becaue of wetland preent. There wa no tetimony a to the effect on the value of potential inability to replace or expand the exiting tructure. Appeal Court ruled that property already improved with a home wa not overvalued even though there were wetland on the property.

38 Epahbodi v. Town of Sudbury, 1998 WL (Ma.Super., 1998) Although the Superior Court aumed there wa ome reduction in land value due to wetland on the property, the taxpayer failed to etablih with a degree of reaonable probability what the reduction wa. Thi wa duei npa r tt oe xp e r twi t ne t e t i mon yc onc e r n i ngt hedi mi n ut i on in value of the property. The Court oberved that, ince the expert ued an income approach to bae hi opinion of the diminution in property value due to preence of wetland, it wa not very helpful. The Court concluded that diminution in value cannot be determined with one figure derived from the comparable ale approach and the other figure derived from an income approach.

39 YMCA of Quincy v. Sandwich Water Ditrict, 16 Ma.App.Ct. 666 (1983) acre of a 525 acre campite owned by the YMCA wa taken by eminent domain by the Sandwich Water Ditrict. The portion of the campite taken by the ditrict wa undeveloped and wooded and had acce only by dirt road. Prior to the taking, the land had been teted for well ite by a private conulting firm, and the ditrict contemplated locating three well on the property, each capable of pumping 700 gallon per minute. The trial court ued the gro income approach to determine the value of land. The Appeal Court ruled that net income hould have been ued intead. Th eap pe a l Cou r tr e i nf o r c e dt h er ul et h a t : Thema r ke tva l uet o which the petitioner i entitled hould be made up of the value in the market of the land apart from it pecial adaptability for water upply purpoe, plu the um a purchaer would have added to that value on t hec ha nc et hel a ndmi gh tbe o meda yu e da awa t e r up pl y.

40 Quet Enterprie, Inc. v. Town of Wetford, 15 Ma.L.Rptr. 81, 2002 WL (Ma.Super. 2002) Quet, a developer, ought to recover from the Town of Wetford on the ground that the Town, by the application of it wetland bylaw to l ot9oft hepl a i nt i f f ubd i v i i on,a c c ompl i h e dar e gu l a t o r yt a k i ng and mut compenate plaintiff for the fair market value of the property. Superior Court held and Appeal Court affirmed that the court mut conider a parcel a a whole and not a individual lot. Therefore, lot 9 ha ome value even if it i not a buildable lot o there wa no regulatory taking of that particular lot merely becaue there were wetland. Quet alo ought to recover baed on it invetment-backed expectation. The price paid by Quet hould have reflected the limitation impoed by the Bylaw, o recovery on that theory wa barred. The Court alo held that a reduction in the number of houe that an owner may build i a diminution in value and not a taking.

41 MASSACHUSETTS COURT CASES ON CONTAMINATION Reliable Electronic Finihing Co., Inc. v. Board of Aeor of Canton, 410 Ma. 381 (1991). Flanagan v. Board of Aeor of Worceter, 57 Ma.App.Ct (2003). Hill v. Metropolitan Ditrict Commiion, 439 Ma. 266 (2003).

42 Reliable Electronic Finihing Co., Inc. v. Board of Aeor of Canton, 410 Ma. 381 (1991) Taxpayer appealed from a deciion of the Appellate Tax Board denying an abatement of local real etate tax aeed againt contaminated property. The Supreme Judicial Court held that the taxpayer failed to prove the anticipated cot of cleaning up the ite on the date of aement or the effect that the contamination had on the fair cah value of the property and, thu, failed to meet it burden of proving that it wa entitled to abatement of local real etate taxe.

43 Flanagan v. Board of Aeor of Worceter, 57 Ma.App.Ct (2003) Taxpayer appealed a deciion of the Appellate Tax Board that refued to abate hi real etate taxe due to property contamination. The Appeal Court affirmed thi deciion. Taxpayer aerted that hi implementation of a groundwater treatment ytem wa a remediating meaure due to the contamination. The board found, however, that thi ytem wa neceary anyway due to the manufacturing buine operated on the property. A a reult the taxpayer failed to meet burden of quantifying the advere effect of contamination or remediation on the value of hi property. Even if taxpayer had etablihed the effect of the exiting contamination on the fair cah value of the property, he till failed t oe t a bl i ht ha tt hea e or v a l u a t i o ndi dno tt a k et ha ti nt o account, or otherwie wa incorrect.

44 Hill v. Metropolitan Ditrict Commiion, 439 Ma. 266 (2003) Maachuett court have yet to pecifically delineate the cope of permanent v. temporary damage, but the deciion in thi cae provided a template for the practical application of the temporarypermanent model for determining damage. The Supreme Judicial Court focued on the actual, phyical harm to the property and the real impact, if any, on it ue ariing out of the contamination. Thi method wa ued a oppoed to determining the harm through economic loe aociated with it ue. The Court found no evidence demontrating that the contamination to the property wa not reaonably curable or remediable. The analyi in thi deciion ugget that it will be rare for a pr op e r t yo wn e rt or e c ove r t i gma da ma ge. I n t i gmac a e, intead of focuing on the impact of contaminant on the property and aking whether they are temporary or permanent, the claimed perception of potential buyer i looked at to ee if thoe perception will be permanent.

45 CONCLUSION A careful real etate appraier or tax aeor undertand the impact of wetland and contamination on market value, and o applie etablihed appraial method to that calculation. The proper focu i on demontrable impact in the real etate market, which appraier and aeor mut take into account.