Breaking: US Supreme Court overturned the EPA's air quality rule

 
The US Supreme Court overturned today the air quality rule that was issued by the Environmental Protection Agency (EPA) under the Obama Administration, holding that the EPA did not properly consider the costs of the regulation.

Click here to read The Hill's article on the decision issued today.
Click here to read the Court's opinion.
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Remembering Kelo v. City of New London -- 10 Years Later

Last week marked the 10th anniversary of the US Supreme Court’s 5-4 decision known as Kelo v. City of New London.  In that decision the Supreme Court ruled private economic development is a public use under the 5th amendment to the US Constitution. This decision allows governments at all levels to take people’s private property, including their homes, businesses and farms, and hand that property over to another private party to develop in a way more the that government’s liking with the expectation it will raise more tax revenue or create jobs.

Public reaction against the decision was strong.  I’m letting my own personal opinion show through here, but this cavalier approach to eminent domain shows a tremendous disrespect by governments for its citizens and their property and livelihood, combined with a bit of economic elitism.  This is exacerbated by the need for governmental agencies to obtain a valuation of the property that works within their limited tax dollars.  All around it leads to private citizens losing their property for objectionable reasons and receiving compensation that’s often on the low end of its fair value. If a small business is involved, the compensation for moving that business to a new location is frequently inadequate.

In the first 5 years after Kelo, approximately 43 states passed some level of reform to curb at least the excesses of eminent domain unleashed by Supreme Court’s decision.  Here in Ohio, the Ohio Supreme Court in 2006 issued its decision in City of Norwood v. Horney (110 Ohio St.3d 353) which essentially reversed the application of Kelo in the state of Ohio, and held that economic development, in and of itself, does not satisfy the public use requirement of the Ohio Constitution.

In 2007, Ohio’s legislature passed S.B. 7, which amended Ohio’s eminent domain law. S.B. 7 provided a comprehensive definition of ‘blight’ that narrowed its application and curbed some of the worst abuses of blight studies employed by some local governments.

S.B. 7 also put into place new pre-appropriation requirements and procedures for appropriation proceedings, and provided for additional compensation to landowners, along with provides for their costs and potentially attorney fee awards.

While many property rights groups and others feel that Ohio’s amendments to its eminent domain law were insufficient, these changes, when combined with the Norwood decision, constitute progress in the right direction.

As for the property taken by the City of New London, Connecticut as a result of the Kelo decision, what happened to it?  The houses were torn down except for Ms. Kelo’s house, which was moved at private expense. The land remains vacant and undeveloped, occupied only by some feral cats. The original development plan that triggered the eminent domain action and lawsuit was poorly planned and feel apart. After 10 years, there is finally some development planned for the condemned property--a park is planned for the parcel that was Ms. Kelo’s house.
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Integrating “Livability Principles” in Brownfields Redevelopment

Reprinted with permission from Kara A. Allison, APR, of Hull & Associates, Inc.

Have you applied for federal brownfields funding lately? Perhaps you’ve noticed an increasing emphasis on incorporating sustainable concepts, equitable development, and other livability-focused activities into these funding proposals. It’s a shift in approach designed to support growing stronger, more sustainable communities nationwide, and if you want to secure federal funding for your future brownfields projects it’s time to start paying attention to the details now.

The Partnership for Sustainable Communities – an interagency partnership formed in 2009 between the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Transportation (DOT), and the U.S. Environmental Protection Agency (EPA) – works to coordinate federal housing, transportation, water, and other infrastructure investments to make neighborhoods more prosperous, allow people to live closer to jobs, save households time and money, and reduce pollution. The partnership agencies incorporate six principles of livability into federal funding programs, policies, and future legislative proposals – which we’re now seeing with increased frequency in federal brownfield funding applications.

So just the very nature of even implementing a brownfields project puts a community on the right path to incorporating the “livability principles” identified by the Partnership for Sustainable Communities, right? Not quite. But here are a few ways to start thinking about how to encompass every aspect of the Livability Principles in planning your next brownfield redevelopment project:

  • Provide More Transportation Choices – Set your local brownfields task force loose on researching information for an infrastructure assessment study to help make recommendations for improved and additional community transportation alternatives, including ways to increase walkability in target corridors and neighborhoods.
  • Promote Equitable, Affordable Housing – Include recommendations in remedial action plans about whether assessed sites could be used to improve and grow the community’s stock of affordable, energy-efficient housing, particularly for sites assessed within any neighborhood improvement areas.
  • Enhance Economic Competitiveness – Focus on and conduct assessments at key sites, which will increase opportunities for economic competitiveness by identifying brownfields for future cleanup. Market restored properties to new and expanding businesses which will in turn create both construction and permanent jobs in the community. 
  • Support Existing Communities – Use outreach activities and public meetings in the targeted community to leverage information and gather input into the brownfield redevelopment process. Include local organizations, residents, and businesses from the impacted neighborhoods to support your grassroots, early brownfields planning initiatives.
  • Coordinate and Leverage Federal Policies and Investments – Apply for and leverage multiple sources of federal, state, and local grant funding for brownfields. Use logical steps in layering the available sources of public funding (planning, assessment, cleanup, and reinvestment) to help secure and attract private funding to keep growing investments in your local brownfields initiative.
  • Value Communities and Neighborhoods – Begin assessing brownfield sites in the most impacted core of your community. It not only provides the ability to restore a sense of community pride in the targeted corridor, but within the community as a whole. An added bonus: you’ll see a ripple impact on the greater regional area and the opportunity to leverage broader support for your local community brownfield initiative.
HULL & Associates, Inc. is a project development and consulting firm specializing in the Alternative Energy, Brownfields, Environmental, Shale Oil & Gas, and Waste Management markets, with seven offices strategically located in Ohio, Pennsylvania, and Indiana. Re: Brownfields, Hull’s more than 25 years of experience includes successfully securing and leveraging funding, assessment, remediation and redevelopment projects. Kara A. Allison, APR, is HULL’s Brownfields Market Leader.


Want to know more? Contact Kara at 614.793.8777 or kallison@hullinc.com.

Featured Resource: Ohio Board of Building Standards

Featured Online Resource

As I’ve noted in prior posts, the State of Ohio has an incredible amount of information available online.  Today’s article covers the Ohio Board of Building Standards (the “BBS"), which is under the purview of the Department of Commerce.  The BBS is comprised of 15 members appointed by the Governor and confirmed by the Ohio Senate.
 
As stated on its web site, the BBS has three main functions:

  • The formulation, adoption and amendment of building, mechanical, plumbing, elevator, boiler and pressure piping codes;

  • The certification of municipal, county and township building departments to exercise enforcement authority and to accept and approve plans and specifications, and make inspections and to inspect power, refrigerating, hydraulic, heating, oxygen and other gaseous piping, and liquefied petroleum gas piping systems; and

  • Conducting hearings and investigations as deemed necessary or desirable in the discharge of its duties.
 
The BBS web site contains numerous resources, including the following:
 
 
Codes, covering variety of information related to Ohio’s commercial and residential building codes, including online access to Ohio current building codes and rules and amendments.
 
Certifications, such as links to apply for various certifications, renewing certifications submitting assessment reports, obtaining continuing education and accessing certification rules. Also includes a link to Ohio’s current list of certified county, city and township building departments.
 
Resources, such as links to enforcement summaries, testing requirements, checklists, Attorney General opinions and court cases, BBS memos and interpretations, BBS publications, BBS newsletter and proposed rules.
 
Industrialized Units, including links to instructions for the electrical submittal process for IU plans, Ohio listed IU manufacturers, program news and updates, and electronic submittal of IU plans for BBS review.
 
There is a tremendous amount of information available on the BBS web site that would be useful for building departments, others working in the construction industry and anyone conducting research in this area.
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Watch Your Language with Condemnation Clauses in Commercial Leases

(“Say what you mean, precisely, or a judge will decide what you meant” #9)



As established in other “Watch Your Language” articles for this Blog, as a general rule, courts will uphold language in commercial agreements (including leases), unless it is contrary to statutory law or public policy. Because of this judicial deference to “commercial language”, you must say what you mean, precisely, or a judge will decide what you meant. Failure to follow this axiom left the tenant in Rite Aid of Ohio, Inc. v. Monroe/Laskey Ltd. Partnership, 2009-Ohio 519 (6th Dist. Ct. of App., Lucas Cty.) without a right to terminate its lease after the City of Toledo took a potion of the real property owned by the Landlord, by eminent domain.

In this case, the appellant-tenant, Rite Aid of Ohio, Inc., entered into a commercial lease with appellee-landlord, Monroe/Laskey Limited Partnership ("Monroe/Laskey"), for lease of real property located at 3466 West Sylvania Avenue in Toledo, Ohio.  A number of years later, a portion of the property under the lease was taken by the City of Toledo under eminent domain for use in a road improvement project. Specifically, the City of Toledo took .0861 acres of land from the real property set forth in the legal description exhibit to the lease. This land was a 3,200 square foot strip fronting Sylvania Avenue that resulted in a loss of 5 of 107 parking spaces and a change to a nearby roadway resulting in a limitation of available egress from the site.

In 2007, Rite Aid brought a declaratory judgment action in the Lucas County Court of Common Pleas to declare its right to terminate the lease. The trial court ruled that the terms of the lease did not provide Rite Aid with a right to terminate the lease.

At issue was construction of Article 23 of the Lease, establishing when termination after a condemnation is permitted, and Article 1, establishing the definitions of “Premises” and “Property”.

Article 23 provides, in pertinent part: “In the event that the entire Premises shall at any time after execution of this Lease be taken in public or quasi-public use or condemned under eminent domain, then this Lease shall terminate and expire effective the date of such taking… Tenant shall [also] have the right of termination of this Lease …… if , as a result of such eminent domain proceeding or other governmental or quasi-public action: (i) Any portion of the Premises shall be taken and the remaining portion shall be unsuitable for Tenant's continued business operations, determined in Tenant’s sole business judgments; (ii) The total number of parking spaces established for the Premises shall be reduced by twenty percent (20%) or more, or Tenant, its customers, agents, employees and visitors are for more than thirty (30) days denied reasonable access to the Premises or parking areas."

"Premises" is defined in Article 1 of the lease as "[a] certain free-standing, one story storeroom (hereinafter known as 'Premises') to be constructed at 3450-3466 Sylvania Avenue." Article 1 defines "Property" as the "real property upon which the Premises are located" as described in the legal description attached to the lease and marked Exhibit "A."

The trial court basically held that there was no right to terminate pursuant to Article 23(i), of the lease because such provision expressly provides that the tenant may only elect to terminate the lease based upon a taking of any portion of the "premises," and since no part of the Rite Aid building itself, was taken, no portion of the premises was taken (recall that Article I defines the premises to be the building only). The trial court further held that there was no right to terminate pursuant to Article 23(ii), because the five parking spaces taken represented 5%, not the 20% of parking taken which was required to trigger the Article 23 (ii) termination right.

At the court of appeals, Rite Aid argued that the term "premises" should be interpreted as including the land upon which the building is located. It claimed that limiting the term "premises" to the building was ridiculous and that Rite Aid had a leasehold interest not only in the building but also the surrounding land. It argued that a premises is a “building along with its grounds, as provided in a definition from Black's Law Dictionary.”

The landlord countered that the lease was clear and unambiguous in treating the terms "premises" and "property" differently and that the trial court was correct as to the meaning of the terms. The landlord further argued that the lease consistently distinguished between the word “premises” and “property”, and that if they were intended to mean the same thing, there would have been no reason for an Article 23 (ii) regarding parking spaces and access.

The court of appeals had no problem affirming the trial court’s holding in favor of the appellee-landlord. It cited numerous decisions of established contract law, basically providing that while contracts need to be construed to ascertain and give effect to the intent of the parties to a contract, such intent must be presumed within the language used in the written instrument. In other words, "[w]hen the language of a written contract is clear, a court may look no further than the writing itself to find the intent of the parties.”

Applying the law to the facts, the court of appeals established that the lease (contract) clearly provided that a partial taking of the building (defined as the “premises” under the lease) was necessary under Article 23(i) for the tenant to have a right to terminate the lease, and since the eminent domain did not take any part of the Rite Aid store building (and the requisite 20% of parking spaces was not taken under Article 23(ii), the tenant had no right to terminate pursuant to the lease.

In a second assignment of error, Rite Aid argued that a constructive taking occurred in terms of a non-physical, substantial interference with the leasehold interest. The court of appeals disagreed, stating that considering damage to business operations generally to prove a constructive taking of the building as a basis for a right to terminate under the lease would be inconsistent with the plain meaning of the lease contract, and that where a contract is plain and unambiguous between sophisticated business entities, it does not become ambiguous by reason of the fact that in its operation it may work a hardship upon one of the parties.


What are the morals of this story? Presumably, the tenant intended a greater right of termination in the lease than that interpreted by the Court. Perhaps there would have been a different outcome had the non-discussed termination language in Article 23 (ii) of the lease (i.e. “…denied reasonable access to the Premises or parking areas for more than thirty (30) days”) read “…denied reasonable access to and egress from the Premises”. In other words, “Say what you mean, precisely, or a judge will tell you want you meant.”  Ohio commercial lease and contract cases are replete with these warnings to “watch your language.”

Another moral of this story is “do sweat the (seemingly) small stuff”. Have your entire lease reviewed by a legal professional. While condemnations/eminent domain proceedings may not occur often, if they do, your only protection (or non-protection) will be the applicable lease language that is often ignored at the outset.

 First, clearly spell out when the condemnation provision applies. The “condemnation clause” should apply: to the acquisition of property for any public or quasi public purpose or use under any statute; to the right of eminent domain under any statute; or to the purchase by any governmental authority or public authority in lieu of the exercise of the right of eminent domain.

Second, clearly delineate the circumstances under which the lease can be terminated if only part of the property or premises is taken. Usual standards or termination triggers include determinations of: (i) whether the remaining property not taken is tenantable or still usable for the reasonable operation of tenant’s business, (ii) whether a specific percentage of the leased premises or property (building and/or land area) is taken, (iii) whether ingress/egress has been impaired, and (iv) whether a certain amount of parking has been taken. The condemnation clause should also specify who decides whether the partial taking is sufficient to terminate the lease – landlord, tenant or an independent third party.

Finally, the condemnation clause should (1) specify when the termination becomes effective and the date through which rent must be paid; and (2) address the respective rights of the landlord and tenant in the event the taking of part of the property does not result in the termination of the lease (e.g., apportionment of rent, restoration of premises, apportionment of the condemnation award).

Many disgruntled tenants having to live with lower sales volume due to partial takings, and many disgruntled landlords abating rent and restoring tenant improvements have one thing in common; they forgot to watch their language with condemnation clauses in commercial leases.


U. S. Supreme Court Issues Decision in Favor of Bank of America in Chapter 7 Lien Stripping Case

The U.S. Supreme Court issued its decision today in the consolidated cases of Bank of America, N.A., Petitioner v. David B. Caulkett, and Bank of America, N.A., Petitioner v. Edelmiro Toledo-Cardona, declining 9-0 to void the junior mortgage liens on the respondents’ homes when the senior lienholder’s debt exceeds the property’s value. This decision reverses the judgments of the Eleventh Circuit.

The facts in each of these cases are essentially the same. The debtors, respondents David Caulkett and Edelmiro Toledo-Cardona, each had 2 mortgages on their respective homes. The petitioner, Bank of America, holds the junior mortgage lien on each of the homes. The junior mortgage liens are completely underwater as the amount outstanding on the senior mortgage liens exceeds the current value of the homes. The debtors moved to have the junior mortgage liens voided, i.e., ‘stripped off”, under §506(d) of the Bankruptcy Code.

Section 506(d) states that “[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.” Therefore, the secured claim can be stripped off only if its right to repayment from the debtors is not an allowed secured claim. With minor exceptions that do not apply in these cases, a claim filed by a creditor is deemed “allowed” under Section 502 of the Bankruptcy Code if no interested party objects or, if an interested party objects, the bankruptcy court makes the determination that secured claim should be allowed. The parties in these cases had agreed that Bank of America’s claims were “allowed” claims. Their disagreement was over whether Bank of America’s claims were “secured” claims as defined under §506(d) of the Bankruptcy Code.

A straight reading of §506(d) of the Bankruptcy Code would tend to support the debtors’ construction of a secured claim. However, back in 1992, in Dewsnup v. Timm (502 U.S. 410), the Court came to a different interpretation that defined the term “secured claim” under §506(d) to mean a claim supported by a security interest in property, regardless of whether the value of that property would be sufficient to cover the claim. This interpretation essentially limited §506(d)’s application to voiding only those liens where the claim it secures has not been allowed. 

To remain consistent with its prior decision, the Court reversed the lower court decisions and refused to void Bank of America’s junior mortgage liens. The Court noted that it was not being asked to overrule its decision in Dewsnup and noted to decide as requested by the debtors, it would in the same term having more than one definition and would leave an “odd statutory framework in its place.” One has to wonder what the Court’s decision would have been if it was in fact asked to overrule Dewsnup.

The end result is Bank of America’s junior liens remain in place on the homes.  Bank of America won the battle in protecting its future interest as a junior lien holder. However, if the bankruptcy courts were to grant a motion for the senior lenders to proceed with foreclosure actions, Bank of America’s junior liens could still be stripped if the winning bids at sheriff’s auction are not high enough to cover both the senior and junior liens.
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Ohio Supreme Court Holds Local Zoning Ordinance Regarding Abandonment of Mobile-Homes To Be Unconstitutional

A recent Ohio Supreme Court decision reminds local goverments that their zoning laws cannot be used to unconstitutionally deprive property owners of their property rights.  In State ex rel. Sunset Estate Properties, L.L.C. v. Lodi (Slip Opinion No. 2015-Ohio-790), the village of Lodi, Ohio learned this the hard way.

When zoning codes are updated over time, as happens frequently, current uses may not conform to the new zoning code, but are grandfathered in and classified as "legal nonconforming."  Local governments know that over time these nonconforming uses will cease and the property can be redeveloped into a conforming use.  It is critical for property owners to be aware of what will constitute an abandonment or discontinuance of the current property use, as at that time the "grandfathered" status is lost and future use of the property must conform to the current zoning code.

In the above cited case, Lodi had passed a zoning law that steps could be taken when the nonconforming use stops for 6 months or more, and the nonconforming use cannot be reestablished. The last sentence of that ordinance was specific to mobile homes and stated that the absence or removal of an individual mobile home from its lot means the use have has been discontinued from the time of its removal.

This created an issue for mobile home parks that were grandfathered in as legal nonconfirming uses, where the owners of the property might have lots or mobile-homes on the lots are are not leased for 6 months or more. When a tenant was found for the lot, Lodi would refuse to reconnect water and electrical services to the new tenant's mobile home, citing the last sentence to its zoning code.

R.C. 713.15 contains a general provision regarding nonconforming uses, providing 2 years as the default time frame in which a nonconforming use would be considered discontinued or abandoned and therefore no subject to reestablishment. The Revised Code however, allows for municipalities to establish a short time frame of anywhere from 6 months up to 2 years.  Zoning ordinances contemplate a gradual elimination of the nonconforming use within the zoned area and generally, this will be found to be constitutional so long as it accomplishes this result without depriving a property owner of a vested property right.

The Ohio Supreme Court, in striking the last sentence from Lodi's zoning code as being unconstitutional, held that "The plain language of the last sentence of the [Lodi] ordinance imputes a tenant's abandonment of a lot with a mobile-home park on the park's owner. In so doing, the provision impermissibly deprives the owner of the park of the right to continue the use of its entire property in a manner that was lawful prior to the establishment of the zoning ordinance."

This decision reminds us that municipalities must take care to balance their desires to improve property values and encourage development with the vested property rights of property owners. While zoning codes will typically be upheld, there is a limit as Lodi learned the hard way.
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