- Posted December 10, 2018 at 8:19 PM
- Categories Eminent Domain and Condemnation, Litigation, Real Estate
Think of your commercial property lease as a boat for a moment, and condemnation by the government as a storm – is your lease ready for a condemnation storm? The most basic level of preparedness, the equivalent of having the right number of reliably functional life jackets, is to have an effective Condemnation Clause in your lease. Just as many boat owners and passengers do not give their life jackets a second thought in advance of a voyage, the same is true of Condemnation Clauses. Then when a condemnation storm unexpectedly hits the property, landlords and tenants reach for the lease only to find they are not adequately covered by the Condemnation Clause, or worse, there is no Condemnation Clause.
Ambiguous Condemnation Clause – A Faulty Life Jacket
Ideally, the Condemnation Clause in a commercial lease will provide clear guidance for the landlord and tenant in the event the property faces eminent domain before the lease expires. What is the difference between condemnation and eminent domain you may ask? While “eminent domain” is the constitutional power of the government to take all or a portion of a privately owned property for public use in exchange for just compensation, “condemnation” is the term used for the act of exercising that power, the process of the taking itself. Unfortunately, not all Condemnation Clauses are clearly drafted, leaving landlords and their tenants to litigate over the ambiguities, where they could otherwise be working together to weather the storm. Taking an adversarial position to resolve ambiguities is costly, time-consuming and can take a toll on valued long-standing business relationships. Better to have condemnation contingencies clearly framed at the outset of the lease.
Condemnation Triggers Lease Termination – Don the Life Jacket
The primary guidance the Condemnation Clause provides landlords and tenants is to affirm the circumstances under which condemnation triggers the lease’s termination; whether the lease will terminate only by a complete taking or also by a partial taking of the property. The Condemnation Clause should also define the apportionment of the just compensation proceeds, if any, between the landlord and tenant. Regardless of whether the tenant is entitled to a share of any proceeds under the lease, the government will still pay the tenant’s relocation expenses, including a portion of the tenant’s resulting increased rent at a comparable new location. The tenant may also be compensated for certain improvements (fixtures) to the property the tenant installed, but cannot relocate to a new space.
Complete or Partial Takings – The Type of Storm Matters
The complete taking of a property through eminent domain will terminate a tenant’s leasehold interest in the property, just as it will terminate the landlord’s ownership interest. A Condemnation Clause will provide how the compensation paid by the government will be allocated between the landlord and tenant.
If only a portion of a property is taken, a good Condemnation Clause will state whether either the tenant or landlord may terminate the lease and under what circumstances. The partial taking may only impact property value, or it could render the property unable to function as currently used, thus triggering lease termination. A partial taking scenario raises many challenging questions that a thoughtfully-drafted Condemnation Clause should address, including: Will the lease continue if there is a partial taking, or will even a partial taking trigger automatic lease termination, making it indistinguishable from a complete taking? Will the lease continue at the landlord’s option, or will the tenant get to decide whether to continue based upon its own assessment of whether its use of the property is significantly impaired? Will there be a pre-agreed rent abatement as incentive for the tenant to remain, or perhaps a pre-agreed apportionment of the just compensation proceeds between the landlord and tenant?
No Condemnation Clause – No Life Jacket
Where there is no Condemnation Clause, the lease is still terminated by operation of law if there is a complete taking of the property, and no further rent is owed by the tenant. However, the question of whether the tenant shares in the condemnation award is left open, which leaves the landlord and tenant to litigate the apportionment of the condemnation proceeds. In a partial taking, the absence of a Condemnation Clause leaves many other unanswered questions, the foremost being whether the lease is terminated or if it may be terminated by either party. There is no reason to allow this degree of unpreparedness, which can be easily avoided with a Condemnation Clause.
Prepare For the Storm Before It Comes
Hopefully the message is clear – if a condemnation storm hits your property, a Condemnation Clause is as imperative to a lease as life jackets are to a boat. However, having one in your lease is not enough; you must also ensure that it is unambiguous and that it adequately addresses the challenging questions raised in the event of a taking.
Because of the competing interests between a landlord and tenant, the terms and conditions of Condemnation Clauses vary widely. What is important is that the impact of a future condemnation be considered when the lease is negotiated.
James (Jamie) Roth is an associate in Miller, Miller & Canby’s Litigation Practice Group where he concentrates his practice on real estate litigation with a focus in eminent domain, as well as business and commercial litigation.
Whether you are a landlord or a tenant, contact Jamie Roth at 301-762-5212 to discuss your Condemnation Clause, or if you have learned that the government may be taking all or a portion of your property. For more information on Miller, Miller & Canby’s Eminent Domain and Condemnation Law Practice and representative cases, click here.
- Posted December 3, 2018 at 3:02 PM
- Categories Litigation, Real Estate, Business & Tax, Maryland Property Tax News
All properties in Maryland are assessed on a three-year tax cycle. If an appeal is not filed at the beginning of the cycle, a property owner loses the right to challenge the full three-year cycle but may still appeal the assessment for the remaining years. This appeal deadline is December 31. By filing a petition for review, a property owner can have a State assessor review whether a reduction is warranted. Typical grounds for requesting a reduction include tenant vacancies, decreases in rental income, sales of comparable properties at reduced values, and elimination of structures or improvements. An appeal might also be warranted where the owner simply missed the February deadline to appeal the assessment for the full three-year cycle.
At the end of December, the Maryland Department of Assessments and Taxation (SDAT) will issue new assessment notices to owners of one-third of all commercial and residential properties in Maryland. In Montgomery County, commercial properties in Kensington, Silver Spring and Wheaton will be reassessed. In Frederick County, commercial properties in Urbana, Ijamsville and parts of Frederick will be reassessed, while in Prince George’s County commercial properties in Greenbelt, College Park, Hyattsville and Riverdale can expect new assessments. Property owners have 45 days from the date of the assessment notice to challenge these new assessments.
Miller, Miller & Canby has been challenging the assessments of various types of properties in Maryland for more than 30 years and has obtained substantial reductions in real property assessments for our clients. We have successfully appealed the assessments on office buildings, retail stores, senior living centers, warehouses, industrial sites, casinos, apartment buildings, golf courses and cemeteries.
Michael Campbell is a partner in the litigation group at Miller, Miller & Canby. In addition to trial and appellate advocacy, his practice focuses on real estate litigation and property tax assessment appeals. Please feel free to contact Mr. Campbell at 301.762.5212 or send him an email for property tax guidance or to help reduce your commercial Maryland property tax assessment. For more information about the firm’s Maryland property tax appeals practice and representative cases, click here.
- Posted November 19, 2018 at 3:14 PM
- Categories 5G Wireless Infrastructure and Small Cells Zoning, Land Development, Real Estate
On October 30, 2018 the Montgomery Council deferred action on Zoning Text Amendment (ZTA) 18-11, Telecommunications Towers – Approval Standards.
Current Montgomery County Zoning Requirement
Montgomery County requires cell towers be at least 300 feet from residential areas. Carriers and wireless infrastructure companies seek an update to the county’s 1990s-era zoning regulations that were aimed at tall, macro sized towers (e.g. 100 feet tall).
Why Montgomery County Needs to Address Small Cells and 5G Wireless
A new September 2018 FCC order takes significant steps toward facilitating small cell deployment and 5G wireless. Click here to view the MM&C blog article on the new FCC Order. State and local municipalities are scrambling to enact legislation to place boundaries on small cell zoning and protect residential communities. Many state and local municipalities are suing the FCC because they believe the order preempts their ability to regulate the placement of small cell facilities. Wireless carriers are also suing the FCC, as they believe the FCC Order did not go far enough to cut regulations and expand the much needed 5G Infrastructure.
According to Council President Hans Riemer, “We need to support the future of wireless while balancing the impact it will have on our communities. The zoning measure that I supported, ZTA 18-11, accomplished both these goals.”
The Montgomery County Council has been working to address the future of wireless infrastructure in Montgomery County over the past few years. The telecommunications industry is running out of capacity on wireless networks in the County due to growing demand and they need to place antennas all over and especially at the street level to meet customer service and capacity demand in and around residential neighborhoods. 5G Infrastructure requires a significant increase in antennas at the street level, as well as on tall existing structures, such as towers, buildings, and water tanks.
Small Cell Antennas are a Key Component of 5G
According to T-Mobile’s website, small cell antennas and distributed network connections are lower power than traditional cell sites, and can handle large quantities of data – as well as large numbers of users. Because they are smaller than traditional cell sites, their antennas and radios can be located closer to the mobile device user. This is key to enhancing a customer’s mobile experience – whether they are texting, sending pictures, streaming live video, or calling 911. Small cells and DAS (Distributed Antenna System) can help improve coverage, especially in hard to reach locations where man-made and natural obstacles to radio waves occur. They target areas with spotty coverage and enable stronger cellular signals. Small cells also help offload capacity challenges that the networks are facing due to significant wireless usage, especially data usage (non-traditional telephone uses such as searching the internet, watching movies, etc.) by customers. A trade off of this smaller equipment on lower structures being placed closer to the residential customer is that the wireless signal does not travel very far from the antennae location and much less than when placed on a taller, macro site location, which necessitates more structures placed closer together.
Montgomery County Council Legislation
The Council successfully established rules for small cell antennas in Montgomery County commercial areas earlier this year. Bill ZTA 18-11 addressed small cell antennas in residential areas. “Unfortunately amendments were introduced that essentially sought to obstruct deployment of wireless infrastructure in the future. This was a real concern because many people want to have good wireless coverage in their neighborhoods, whether to use devices for entertainment and communication, or to call 911, or to work from home, you name it. Our County needs to embrace wireless infrastructure, just as we embrace water, power, and transportation infrastructure”, said Hans Riemer. To read Council President, Hans Riemer’s full statement, click here.
MM&C Telecommunications Attorney, Sean Hughes said “ZTA 18-11 wasn’t a viable solution for small cell zoning in order to provide consumers with the enhanced state of the art wireless connectivity they desire. It would essentially require a conditional use for any small cell short telephone or light pole replacements (e.g. 20-30 feet high) in a residential zone; which is the same process as requesting a traditional macro cell tower site (above 100 feet high).”
In a statement from Montgomery County Executive Ike Leggett, he said “I am very disappointed that the County Council has withdrawn the proposed Small Cell Tower bill from consideration. We have failed to adequately protect our communities and neighborhoods. We now run a much greater risk of the State – and federal government – preempting any local say on the terms and conditions of small cell tower placement in our neighborhoods.”
Rather than approve a bad bill that would set Montgomery County back and invite State and Federal pre-emption, Council President Reimer pulled the legislation. He will work with the newly elected Montgomery County Council in 2019 to revise Bill ZTA 18-11.
The telecommunications land use attorneys at Miller, Miller & Canby are experienced and entrenched in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning attorneys and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords.
Sean P. Hughes is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic. To learn more about the firm’s Land Use and Zoning practice, click here.
Cathy Borten is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, click here.
- Posted October 25, 2018 at 2:19 PM
- Categories 5G Wireless Infrastructure and Small Cells Zoning, Land Development, Real Estate
On Sept 5, 2018 the Federal Communications Commission (FCC) pushed an order to streamline small cell siting. The Commission’s Order states: To meet rapidly increasing demand for wireless services and prepare our national infrastructure for 5G, providers must deploy infrastructure at significantly more locations using new, small cell facilities. Building upon streamlining actions already taken by state and local governments, this Declaratory Ruling and Third Report and Order is part of a national strategy to promote the timely buildout of this new infrastructure across the country by eliminating regulatory impediments that unnecessarily add delays and costs to bringing advanced wireless services to the public.
The Commission’s order limits the fees localities can charge for reviewing small cells in a public Right-of-Way, sets shot clocks on those reviews, and affirms local governments can apply reasonable aesthetic considerations. The order raised concerns, as many localities say the order will deny them the right to effectively govern small cell placement in a ROW.
During the vote, FCC Chairman Ajit Pai stressed how he and Commissioner Brendan Carr, made it a point to discuss the draft order with local governments to get their input. Carr said the order ensures, “No city is subsidizing 5G.” Carr stressed that economists believe the changes will save $8,000 per deployment of each small cell, money that could help bring 5G deployments to more places.
If the U.S. doesn’t act to ease such deployment, other countries will, Carr said. China “wants to lead the tech sector for the next decade. They are moving aggressively to deploy the infrastructure needed for 5G. Everyday, China is deploying 460 cell sites. That is 12 times our pace.”
Click here to read the FCC order. The map below indicates in blue the states where a small cell bill has been enacted. Please note, Maryland does not currently have a small cell bill.
Local jurisdictions in Maryland, including Montgomery County are reviewing how they will handle the FCC Order.
“The FCC order takes significant steps toward facilitating small cell deployment and 5G wireless. Since Maryland has failed to pass any legislation addressing small cells, and Montgomery County recently failed to pass legislation that would allow small cells in residential areas, it will be interesting to see what impact the FCC order has locally”, says MM&C Real Estate Attorney, Cathy Borten.
Montgomery County may join other Washington metropolitan jurisdictions in filing an appeal of the FCC small cells order that set timetables for localities to make siting decisions and capped application fees. “We plan to argue that the FCC has significantly overreached and is seeking to remove local control,” said Montgomery County Council President Hans Riemer (D-At Large). Riemer has said he hopes the council can agree on new county regulations before the FCC order takes effect in January. “I think it would help make the case that local governments can be relied upon to make changes for wireless technology,” Riemer told The Washington Post.
The telecommunications land use attorneys at Miller, Miller & Canby are experienced and entrenched in Maryland, D.C. and Virginia’s 5G Wireless and Small Cells Zoning. Our telecommunications, zoning, land use and real estate attorneys are closely monitoring the impacts of the FCC order and the efforts of local legislatures to craft small cell legislation in order to be able to advise telecommunications carriers and potential landlords.
Sean P. Hughes is an attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications and he has represented clients in land use and zoning matters throughout the Mid-Atlantic. To learn more about the firm’s Land Use and Zoning practice, contact Sean on 301-762-5212.
Cathy Borten is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, land use and zoning and commercial financings and settlements. Cathy has over 10 years' experience in leasing, land use and zoning in the wireless telecommunications industry. Cathy also participated in the drafting of the Montgomery County and City of Gaithersburg original small cell ordinances. To learn more about the firm’s Real Estate practice, contact Cathy on 301-762-5212.
- Posted October 20, 2018 at 9:56 PM
- Categories Land Development, Real Estate, MM&C Happenings, Featured Events
The Maryland DC Wireless Association’s Tenth Annual Golf Tournament took place on September 20, 2018 at the Whiskey Creek Golf Club in Ijamsville, Maryland. It brought together members of the association, as well as friends, colleagues and community members for a relaxing day of golf in support of various worthy charities. Miller, Miller & Canby was a sponsor of this year’s event which donated $50,000 to charity.
Miller, Miller & Canby’s Sean Hughes serves on the board for the Maryland DC Wireless Association and, along with other board members, is involved in testifying and providing key insight for policymakers concerning wireless legislative issues and amendments on the local, state and even federal level, as well as raising funds for charitable causes through events like its annual golf event. Sean played in a foursome with Bob Gough, MM&C Managing Partner and Real Estate Attorney, and two firm clients. Cathy Borten, MM&C Real Estate Attorney, volunteered at the golf tournament.
Each board member is able to direct a portion of the proceeds to a local charitable organization. Miller, Miller & Canby have directed their $5,000 portion to be shared equally to Ride Allegheny and Hopecam. Ride Allegheny is a 310 mile bike ride benefiting Operation Second Chance, which supports Veterans and their families’ immediate financial and emotional needs and interests. Hopecam is a local charity that helps kids with cancer overcome the social isolation of cancer treatment by connecting with their friends and classmates through technology.
Sean Hughes is a telecommunications attorney in Miller, Miller & Canby’s Land Use practice group. His career spans more than two decades of focus in legal and wireless telecommunications. Cathy Borten is an associate in Miller, Miller & Canby’s real estate practice group. She focuses in commercial real estate transactions and leasing, real estate litigation, and commercial financings and settlements.
For more information about Miller, Miller & Canby’s Land Use practice, please click here or contact Sean Hughes or Cathy Borten at 301-762-5212. For more information about Miller, Miller & Canby’s Real Estate practice, please click here or contact Bob Gough at 301-762-5212.
Photo Credit: Mike Keller Photo
MM&C Real Estate Attorney, Cathy Borten and Barb Pivec from Calvert Crossland.
- Posted August 21, 2018 at 7:08 PM
- Categories Eminent Domain and Condemnation, Litigation, Land Development, Real Estate, Press, MM&C Happenings, Publications, Maryland Property Tax News, Featured Events
Best Lawyers® released the 25th Edition of Best Lawyers in America on August 15, 2018. Miller, Miller & Canby’s Jim Thompson and Jody Kline have been recognized on the Best Lawyers list in their respective areas of practice every year since first being named in 2007. Mr. Thompson has been recognized for Eminent Domain and Condemnation Law and Mr. Kline for Land Use and Zoning Law. In 2013, Mr. Thompson was also named a “Best Lawyer of the Year” for his accomplishments. This prestigious award is a testament to their long-standing reputations for their individual legal abilities and professionalism.
Jim Thompson has been a leader in Miller, Miller & Canby's Litigation Group for more than 35 years, concentrating his practice in eminent domain (with partner Joe Suntum) and in real estate valuation litigation, as well as in property tax assessment appeals (with partner Mike Campbell) and general civil litigation. For more than a decade, Mr. Thompson represented Maryland as the sole member in the Owners’ Counsel of America, a national network of property rights attorneys with demonstrated excellence in this area, focusing upon the representation of landowners in eminent domain litigation. Currently Mr. Suntum is the selected member for the state of Maryland. With Mr. Thompson’s breadth of legal experience, proven results, mature judgment, and tenured leadership within the judicial system and the bar, having served as president of the Maryland State Bar Association, he brings the ideal blend of proven trial experience and legal skill to client representations.
Jody Kline has led Miller, Miller & Canby’s Land Development department since 1981, focusing his practice in land use, zoning and subdivision law and representing clients in many of Montgomery County’s planning and economic development initiatives. In addition to zoning and subdivision law, he represents clients in matters related to master planning, zoning text amendments, conditional use permits, building permit issuance, and other administrative and real estate matters related to land use and development. His clients include residential and commercial developers, private individuals, religious institutions, private schools, non-profit entities and municipal corporations and agencies.
Best Lawyers® is the oldest and most respected attorney ranking service in the world. For more than 30 years, the organization as assisted those in need of legal services to identify the attorneys best qualified to represent them in distant jurisdictions or unfamiliar specialties. Best Lawyers lists are published in leading local, regional, and national publications across the globe.
For more information about Jim Thompson and Miller, Miller & Canby’s Eminent Domain and Condemnation Law practice click here or for information about Jody Kline and Miller, Miller & Canby's Land Use and Zoning Law practice click here. View the firm press release by clicking the Download button below.
Maryland general contractors be alert! Effective October 1, 2018, Maryland law imposes new liability on general contractors for unpaid wages on a project. The General Contractor Liability for Unpaid Wages Act (the “Act”) is modeled on a recent District of Columbia law. The law is designed to ensure that subcontractors comply with state wage laws and pay their employees in a timely manner. If the subcontractor fails to pay as required, the general contractor will now be jointly and severally liable for such failure in accordance with Maryland wage & hour laws, which can include punitive (treble) damages and attorney’s fees. The Act also applies to sub-subcontractors on down, which means a general contractor can be liable for wage violations at any tier of a project.
General Contractor Should Include Indemnification Clause in Subcontract
The Act requires the subcontractor to indemnify the general contractor for "any wages, damages, interest, penalties, or attorney's fees owed as a result of the subcontractor's violation," unless indemnification is provided for in a contract between the general contractor and the subcontractor, or if the subcontractor was unable to pay its employees because the general contractor failed to pay the subcontractor as required. An indemnification clause should be written into the subcontract for added security, although this will only be beneficial if the subcontractor is solvent and has the ability to reimburse the general contractor. If the subcontractor goes out of business or declares bankruptcy, the general contractor is fully on the hook for damages.
General Contractor Should be Selective with Subcontractors
In light of this new risk, the general contractor should be selective in awarding projects to subcontractors. The general contractor would be wise to avoid contracting with unknown companies unless a bond or other security is posted by the subcontractor. Additionally, the subcontract should require the subcontractor to produce on demand its certified payroll records to prove compliance with wage laws.
Michael Campbell is a partner in the litigation group at Miller, Miller & Canby. He focuses his practice on commercial, real estate and construction litigation. Please feel free to contact Mr. Campbell at 301.762.5212 or send him an email for an inquiry. For more information about the firm’s litigation practice, click here. For more information about the firm’s business and contract law practice, click here.
Miller, Miller & Canby is pleased to welcome Cathy Borten to the real estate practice group, where she will focus in commercial real estate transactions and leasing, real estate litigation, and commercial financings and settlements.
During the course of her twenty-year career, Ms. Borten has negotiated and drafted leases and amendments for a variety of properties, including shopping centers, government facilities, airports, hotels, hospitals and retail establishments. She has also handled land use and zoning matters, appearing before county and city government bodies and pursuing zoning and text amendments in cities and counties and has represented clients in contested proceedings in both trial courts and in appellate matters. Prior to joining Miller, Miller & Canby, she was a partner in the Law Office of M. Gregg Diamond, P.C., of Bethesda, Maryland. Prior to this, she worked for the City of Gaithersburg, serving as the first in-house counsel for the city. There, she advised the Mayor and City Council and Planning Commission and drafted legislation to address a variety of city matters. She represented the City’s Planning & Code Enforcement Department in code violation proceedings, drafted and reviewed city contracts, and represented and advised city departments. She began her career working as a Law Clerk for The Honorable Paul H. Weinstein in the Circuit Court for Montgomery County, Maryland, after which she worked as an associate for a law firm in Montgomery County, handling matters for a diverse client base that included developers, wireless telecommunications firms and municipalities.
Ms. Borten is licensed to practice law in Maryland and the District of Columbia. She earned her Juris Doctorate, graduating cum laude, from Washington & Lee University School of Law and received her B.A. in Communication Arts from the University of Wisconsin-Madison.
Click the download button below to view the firm's formal press release. For more information about Miller, Miller & Canby’s Real Estate Practice, click here or contact Cathy at 301-762-5212.
- Posted June 1, 2018 at 7:55 PM
- Categories Eminent Domain and Condemnation, Litigation, Real Estate, Press, MM&C Happenings
Miller, Miller & Canby is pleased to welcome James (Jamie) Roth to the firm’s Litigation Practice Group, where he will concentrate his practice in real estate litigation with a focus in eminent domain, as well as business and commercial litigation.
“Miller, Miller & Canby’s litigation practice has a long-standing commitment of serving businesses and property owners in our community,” said senior litigation partner James Thompson. “The addition of Jamie, with his comprehensive public and private sector experience, will help us to further expand the breadth of our services during a critical time of growth in the Washington, D.C. metropolitan area.”
Mr. Roth enjoyed a distinguished career as a successful real estate consultant, including more than twenty years of experience in project management, strategic planning, asset management and risk mitigation.
Prior to joining Miller, Miller & Canby, Mr. Roth was a Senior Consultant for LMI Government Consulting, where he served eleven years as a Real Estate Program Manager to his client, U.S. Customs and Border Protection (CBP), a component agency of the Department of Homeland Security. As an advisor to CBP, Mr. Roth worked closely with realty specialists from the U.S. Army Corps of Engineers (USACE), overseeing the real estate clearance process required for mission critical facility and border security infrastructure construction projects undertaken by CBP's Border Patrol and Air & Marine Program Management Office. In that capacity, he coordinated eminent domain litigation efforts, and supported counsel from CBP, Department of Justice and USACE.
Mr. Roth was awarded a civilian public service medal by Department of the Army for his key role in effecting more than 400 property acquisitions to successfully construct over 600 miles of border fence by 2009. Mr. Roth is also a former U.S. Coast Guard officer. His decorated service included three years as a civil engineer managing the myriad facilities requirements of 24 USCG stations along the Gulf Coast, and three years as Chief Engineer and third-in-command of a 210-foot Cutter in Miami Beach, Florida.
Mr. Roth is admitted to practice law in the state of Maryland. In addition to his law degree from The Catholic University's Columbus School of Law, he holds a MBA from Georgetown University, a B.S. in Civil Engineering from The United States Coast Guard Academy, and is a Certified Project Management Professional (PMP).
Click the download button below to view the firm's formal press release. For more information about Miller, Miller & Canby’s Litigation Practice, click here or contact Jamie at 301-762-5212.
- Posted March 8, 2018 at 4:45 PM
- Categories Litigation, Real Estate, Business & Tax, Maryland Property Tax News
In a case of first impression, the Maryland Tax Court recently considered how to value property subject to a 99-year ground lease with a percentage rent arrangement. The unusual property tax case involved a lease that was entered into by a casino operator and shopping mall owner, in which the casino was responsible for the property taxes. Casinos are highly regulated entities in Maryland, with operators required to obtain approval from the Maryland Lottery and Gaming Control Commission and pay a large licensing fee.
Under the ground lease, the casino was required to pay fixed minimum annual rent plus a variable 1% of annual gross revenues (known as “percentage rent”) generated from gaming and retail sales. The issue before the court was whether the ground lease should be used as the measure to assess fair market value of the land for ad valorem tax purposes. The State argued that the lease must be relied upon under an income approach to value. The casino argued that the ground lease could not be relied upon at all due to its connection to casino revenues. Instead, the casino urged the court to utilize the sales comparable approach as the only reliable measure of land value.
In analyzing the issue, the Tax Court reviewed Maryland and Federal law related to valuing property subject to leases. The general rule is that an assessor must consider the effect of a lease on valuation, but it should not be the controlling document in assessing value. In this case, it was especially true because the ground lease was not a good indicator of property value for these reasons:
The percentage rent provision in the ground lease was speculative and the revenue unknown at the time of execution; and
Including percentage rent in an income approach risks valuing property based on business value instead of property value. Here, approximately two-thirds of the ground rent was derived from the casino business as percentage rent.
The Maryland Tax Court held that such business income was not indicative of property value, particularly since the property cannot be freely sold in its current use due to the special licensing arrangement with the State.
In rejecting the States reliance on an income approach using the ground lease, the Tax Court turned to the casino’s appraisal using a sales comparison approach. The appraisal report listed sales of other properties on which casinos were ultimately constructed – Horseshoe Casino in Baltimore City and the MGM National Harbor Casino on Prince George’s County. The court deemed that sales are the best indicator of land value for the subject property and reduced the land assessment by a whopping $71M for the 2011 tax cycle and $70M for the 2013 tax cycle, which resulted in a massive tax savings for the casino. The case is PPE Casino Resorts Maryland LLC vs. Supervisor of Assessments of Anne Arundel County, Case Nos. 14-RP-AA-0503 (1-2) and 14-RP-AA-1276.
Miller, Miller & Canby has been handling assessment appeals of various types of commercial properties in Maryland for more than 30 years. In 2016, we obtained over $20,000,000 in property assessment reductions for our clients. Our litigation attorneys regularly represent clients at the assessor level, before the Property Tax Assessment Appeals Board (PTAAB) and in the Maryland Tax Court. We have successfully appealed the assessments on office buildings, hotels, casinos, retail stores, industrial sites, warehouses, apartment buildings and land at various stages of development.
Michael Campbell is a partner in the litigation group at Miller, Miller & Canby. In addition to trial and appellate advocacy, his practice focuses on real estate litigation and property tax assessment appeals. Please feel free to contact Mr. Campbell at 301.762.5212 or send him an email for property tax guidance. For more information about the firm’s Maryland property tax appeals practice and representative cases, click here.