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Posts from November 2012.

On October 3rd, the United States Supreme Court heard an unusual takings case, one brought by one public entity against another. Arkansas Fish and Game Commission v. United States involves the state’s claim for damages for loss of timber in its Dave Donaldson Black River Wildlife Management Area in northeastern Arkansas by flooding authorized by the federal Corps of Engineers over a six year period. The flooding was authorized to enable farmers on other parts of the Black River more time to harvest their crops. Not only was timber lost, but the area became less attractive to duck hunters and bird watchers.

The Corps argued that its temporary release program did not constitute a taking and that a contrary determination would endanger flood control programs across the country. The state won its case in the trial court, securing $5.7 million in damages, but a divided Federal Circuit reversed that ruling, finding no taking because the flooding was temporary and not inevitably recurring. The US Supreme Court granted certiorari and will rule by next June.

In their arguments before the Supreme Court, the advocates had very different views of the policy implications of their positions – and those of their opponents. The Deputy Solicitor General argued that riparian ownership entailed certain flooding risks and that the Corps required broad discretion in dealing with flood waters without being troubled by takings claims. The implicit suggestion was that federal or state governments would not build dams if by doing so they would be liable to one or another landowner for the consequences of flooding. On the other hand, the State of Arkansas argued that the practical difference between permanent or recurring flooding and the six years of flooding in this case that caused root rot and loss of timber and habitat values was imperceptible. A landowner would have been entitled to damages had her lands flooded permanently or every year as part of a government project.

Another issue in this case was that of damages. The timber and habitat at issue would have been subject to natural flooding. Thus, if the Supreme Court finds a taking, would the state be entitled to any flooding damages or merely those which were the result of the releases in this case – which would be an evidentiary nightmare for the state. Further, what would be the implications of a positive takings outcome for the state on future dam projects? Justice Scalia, the Lex Luthor of planning, observed during oral argument that the issue was whether the landowner or taxpayers absorbed the loss. If it will be taxpayers, then future congressional authorizations of these public works projects must then account for possible claims. Should the farmers or utilities, or city dwellers who benefit from these projects be required to pay the unknown amounts of these losses? It is no longer adequate to say “the government” will do so and it is unlikely the federal government will provide a blank check to underwrite these losses.

However, allocation of loss is not the issue before the court. Rather, it is whether the federal government is liable to a takings claim as a result of discretionary water releases where it must choose and balance damage done to multiple parties. The Corps chose to give farmers more time to harvest their crops at the expense of flooding state timberlands for a longer time. Would the Corps also be liable if it decided to preserve the timberlands and allow earlier flooding of the farmlands? If so, it appears that no public works good goes unpunished.

 

It is not uncommon for property owners to believe that government actions have taken or significantly decreased their property values to the extent the actions constitute a “taking” of the property, i.e. “inverse condemnation.”  In some cases this condition may be the result of “condemnation blight.”  What isn’t common is for a court to agree. 

The seminal case in Oregon is Lincoln Loan Co. v State Hwy Comm’n, 274 Or 49 (1976), where the Oregon Supreme Court determined the plaintiff had at least pled sufficient allegations to claim condemnation blight.  The allegations included the State having sent letters to neighbors and tenants of its intent to take the property, the State condemning and destroying nearby properties, giving the plaintiff’s tenants notice they would have to move and filing condemnation actions.  Given all this, the Court concluded the plaintiff had pled sufficient allegations to constitute condemnation blight.

In a recent case in Linn County, Hall v. State of Oregon by and through the Oregon Department of Transportation, 252 Or App 649 (Oct. 10, 2012), a property owner claimed ODOT had committed condemnation blight.  The property owner plaintiff in Hall owned land near an I-5 interchange that was in the preliminary planning phase by ODOT. It is common, and in this case was required, that the government set out options as part of the planning process.  One of the potential options of ODOT was to close the interchange, thereby landlocking the property.  In accordance with federal planning requirements, ODOT informed the plaintiff owner, the general public and affected governments of all of its potential options for the interchange, including the option to close it.  ODOT held public meetings in furtherance of the planning process, and when the closure option was shown as being unpopular, ODOT revised the closure option with a more delayed process.  Notwithstanding, the plaintiff sued ODOT, claiming its actions constituted an inverse taking because of the “blight” it caused to plaintiff’s property.

I attended the ICSC (International Conference of Shopping Centers) Law Conference last month in Orlando, Florida, along with my GSB partner, Rob Spitzer. Fortunately, Hurricane Sandy stayed off the coast of Florida during our stay, and the conference was a great success. Unfortunately, Sandy continued north, took a sharp left turn, and introduced itself to the East Coast. Perhaps it was a coincidence, but several of the presentations at the ICSC Law Conference included a discussion of damage and destruction provisions found in retail leases.

Damage and destruction provisions in retail leases are often overlooked by the parties at the time the lease is negotiated. Frequently appearing towards the end of a lengthy lease document, the damage and destruction provisions are often considered to be less important than the key business terms of the lease, such as the commencement date, base rent, rent escalations, common area maintenance expenses, parking and restrictions on assignment and subletting. However, because a disaster like Hurricane Sandy, or any other event which causes damage or destruction to a shopping center, will be a significant disruption to the tenant’s business and the parties’ relationship, it is important the damage and destruction provisions be considered at the outset of the lease negotiations.

The typical retail lease will require the landlord to restore the leased premises in the event of damage or destruction. The landlord will often condition that obligation on the receipt of insurance proceeds or provide for a right to terminate the lease if the damage is substantial or the lease is near the end of the term. However, there are several other issues that the lease should address, including (1) whether the tenant is entitled to rent abatement pending restoration, and if so, whether additional rent (pro rata share of CAM charges) is abated in addition to base rent; (2) whether the tenant will have additional time after the landlord restores the leased premises to complete tenant improvements and stock inventory before rent re-commences; and (3) whether the tenant should have a right to terminate the lease if the damage is near the end of the term or if the landlord has not restored the premises within a specified period of time. Related to these issues are the insurance provisions of the lease, which should be drafted to work in concert with the damage and destruction provisions, so that adequate insurance proceeds are available to the landlord to restore the property and to the tenant to restore the tenant’s property.

While events such as Hurricane Sandy are infrequent, parties to a lease should not wait until such an event occurs to review the damage and destruction provisions of their lease.

The U.S. Green Building Council is currently accepting public comments until December 10, 2012, on its draft of LEED v4 that will aim to establish LEED certification for the hospitality industry, as well as data centers, retail, and healthcare uses. This post discusses a few of the categories that will be considered for applicants seeking to obtain LEED certification for such uses.

LEED (Leadership in Energy and Environmental Design) is a voluntary, consensus-based, market­-driven program that provides third-party verification of green buildings. For commercial buildings and neighborhoods, to earn LEED certification requires that, a project must satisfy all LEED prerequisites and earn a minimum 40 points on a 110-point LEED rating system scale. The main credit categories are sustainable sites, water efficiency credits, energy and atmosphere credits, materials and resource credits, and indoor environmental quality credits.

Here is a brief overview of some of the credits that are proposed for hospitality, data centers, retail, and healthcare uses.

Planning for green vehicles will gain you points on your application for LEED certification. As currently draft, here’s how:

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