City of Gaithersburg Considers Changes to Small Cell Regulations


While some communities are re-inventing themselves as smart cities, many other small towns are busy deciphering what 5G means to them. Bringing 5G capabilities to an area means either new telecommunications towers or small cell deployment and all the financial implications of each.

The September FCC 5G and Small Cell Order is trying to help wireless companies speed deployment of 5G capabilities. The order states that local government cannot prohibit wireless telecommunication services. Local governments are trying to ensure their regulations do not run afoul of the FCC requirements and their regulations do not have the effect of prohibiting wireless telecommunication services to their residents.

Gaithersburg, Maryland City Council members discussed potential changes to small cell tower ordinances for local right-of-ways at a public hearing on January 7, 2019. New changes in FCC regulations and the telecommunications industry spurred on the proposed revisions that would allow developers to increase the size of cell tower equipment housing. Crown Castle and AT&T have been in communication with local government to discuss the possible changes. According to Deputy City Manager Dennis Enslinger, the current size regulation for cell tower equipment is 2.8 cubic feet, and with the changes it would increase to 12 cubic feet.

Council Member Ryan Spiegel will soon become president of the Maryland Municipal League and the City of Gaithersburg Council, where he has expressed the importance of this issue, and continuing to regulate small cell installation.

The public record on the potential ordinance changes will be open until January 31, and the Council will re-address the issue in mid-February.

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. Click here to view all MM&C articles related to this topic.

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.

 





Property Owners Have Until Early February to Appeal New Maryland Property Tax Assessments


At the end of December, the Maryland Department of Assessments and Taxation (SDAT) issued new Assessment Notices to owners of one-third of all commercial and residential properties in Maryland.  For instance, in Montgomery County, commercial properties in Silver Spring and Wheaton were reassessed.  In Frederick County, commercial properties in Urbana and parts of Ijamsville and Frederick were reassessed.  In Prince George’s County, commercial properties in Greenbelt, College Park, Hyattsville, Oxon Hill, Temple Hills and Riverdale were reassessed.

Property owners have 45 days from the date of the Assessment Notice to challenge these new assessments.  Based on the notices we have seen this cycle, the appeal deadline is February 11, 2019, although this could vary depending upon the notice date.  The “first-level” appeal takes place at the local Assessment Office.  If the assessor refuses to reduce the assessment, the owner may file a further appeal to the county’s Property Tax Assessment Appeals Board (PTAAB).   This Board will consider the evidence and issue a written decision, usually within two weeks.  If the property owner is still dissatisfied, another appeal may be filed to the Maryland Tax Court.

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.  Our litigation attorneys regularly represent clients before the local Assessment Office, PTAAB and the Maryland Tax Court.  We have successfully appealed the assessments on office buildings, retail stores, senior living centers, warehouses, industrial sites, casinos, apartment buildings and cemeteries.  Let us help you reduce your Maryland property assessments in 2019.

Michael Campbel
l 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.
 





Court Denies Stay Action on FCC Order to Speed Deployment of 5G and Small Cells


Many local governments were caught off guard by the September FCC Order to ease siting of small cells. The National League of Cities (NLC) and a group of local governments and associations brought their case to court and requested a stay for the looming January 14, 2019 implementation date.

Several localities sought judicial review of the order. A judicial panel consolidated the petitions and assigned them to the U.S. Court of Appeals for the Tenth Circuit. In addition to NLC, other parties joining the stay request were: the U.S. Conference of Mayors, National Association of Counties, National Association of Regional Councils, National Association of Towns and Townships and the National Association of Telecommunications Officers & Advisors.

NLC claims the FCC overreached when it voted to impose shot clocks for siting applications and cap application fees for municipalities and other localities concerning wireless infrastructure siting in public rights-of-way.

When evaluating a stay request, the Tenth Circuit Court considers whether the applicant’s arguments are likely to succeed, whether the party would be “irreparably injured” without a stay, and where the public interest lies.

The Tenth Circuit Court concluded the motion failed to satisfy these factors. As for the parties’ arguments that easing small siting rules would hurt property values and create traffic hazards, the court said even the NLC conceded the order, “does not compel any locality to authorize any particular facility,” states the decision signed by Donald Stockdale, Chief of the Wireless Telecommunications Bureau.
The FCC said it followed Congress’ lead by articulating, “specific standards for resolving concrete disputes over whether states’ or localities’ fees” are consistent with its rules. Most of the order is slated to become effective January 14, 2019. The order acknowledged that “some localities will require some time to establish and publish aesthetics standards,” and therefore the aesthetics standards will not take effect until 180 days after Federal Register publication.

According to the FCC Order, for localities that choose to impose aesthetic standards on small cell deployment, they must be:

  1. Reasonable;
  2. no more burdensome than those applied to other types of infrastructure deployments;
  3. objective; and
  4. published in advance.

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.
 





December 2018 Legal News & Notes


The December 2018 issue of Miller, Miller & Canby's Legal News & Notes quarterly email newsletter announces five attorneys as Maryland Super Lawyers, Maryland Property Tax Appeals Approaching Deadline, IRS Gives the Green Light for Gifting, the Importance of a Condemnation Clause in Commercial Leases, Montgomery County Council Defers Action on Small Cell Tower Bill for 5G Infrastructure, Why It's Important to Have an Advanced Medical Directive, Lessons Learned from Actor Wesley Snipes Offer In Compromise Case with the IRS and much more.  Click here to view newsletter.





Truly the Season of Giving: IRS Gives the Green Light for Gifting


As explained in a prior article, the sweeping tax reform bill, commonly known as the Tax Cuts and Jobs Act of 2017 (TCJA), temporarily doubles the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption from $5 million to $10 million (adjusted for inflation after 2011). For 2018, the exemption is $11.18 million per person.  The exemption will increase to $11.4 million in 2019. This doubled exemption will adjust for inflation each year and will remain in effect until December 31, 2025. If Congress doesn’t act before 2026, the law will sunset and the exemptions will revert back to the $5 million level (adjusted for inflation).

Shortly after passage of the TCJA, questions arose regarding taxpayers who utilize the doubled exclusion during their lifetime and then die in 2026 or later, when the exclusion reverts to the former $5 million (adjusted for inflation). This could lead to inconsistent tax treatment arising as a result of the temporary nature of the increased exemption amount. Therefore, the statutory sunset of the higher exemption amount and reversion to the lower amount could retroactively deny taxpayers who die after 2025 the full benefit of the higher exclusion amount applied to previous gifts. This scenario has been dubbed a “clawback” of the exemption.

“Clawback” Example
Jim is about to retire and has an estate worth $15.18 million. In 2018, Jim decides to gift $11.18 million to Dynasty trusts for his 3 grandchildren. Jim will rely on the remaining $4 million, social security payments, and his pension to get him through his retirement years. Jim would owe no gift tax in 2018 because his combined gift and estate tax exemption is $11.18 million.

Jim then dies in 2026, when the combined gift and estate tax exemption has reverted back to $5 million (adjusted for inflation). We can assume that the inflation adjusted exemption amount will be about $6 million in 2026. If Jim still has $4 million in assets at death, his gross estate would be $15.18 million after adding in the $11.18 million taxable gift that Jim made in 2018. Would Jim’s estate owe tax on $9.18 million, the difference between his taxable estate ($15.18 million) and the 2026 exemption amount ($6 million)?  If yes, then Jim’s estate would be hit with an estate tax bill of approximately $3.67 million! On November 23, 2018, the IRS published proposed regulations to address the “clawback” problem.  The Regulations indicate that the IRS will not seek to “clawback” into the estate the taxable gifts that the decedent made when the exemption covered those gifts.  These proposed regulations apply to gifts made after 2017 and the estates of persons dying after 2017.

So, in Jim’s example, his estate would not owe estate tax on the amount he gifted in 2018.  Of course, in 2026, he would not have any remaining exemption to use for his $4 million in assets, so his estate would owe tax on the entire $4 million remaining at death – a tax bill of about $1.6 million. It is easy to see that these new Regulations are quite favorable to the taxpayer!

Estate Planning Opportunities: What Clients Need to Know
With the uncertainty of “clawback” soon to be removed, we recommend that clients with taxable estates consider making large gifts to reduce the size of their estates and take advantage of the increased federal exemption amounts. This is especially important for clients in Maryland and the District of Columbia. These jurisdictions have stand-alone state estate taxes with exemption amounts lower than the federal exemption, and do not impose a gift tax; which makes these gifts of even greater importance.

However, prior to making any gift, it is vital to conduct an analysis of the income tax consequences of the gift. This is crucial because a recipient of gifted assets takes the donor’s basis for federal income tax purposes (a “carry-over basis”). Whereas, the basis of assets which are subject to the federal estate tax, and received as a result of a person’s death, is equal to fair market value at the date of the decedent’s death (a “stepped-up basis”).

Finally, clients should know that time is of the essence and should consider taking advantage of the increased exemption amount sooner rather than later because Congress could change the law again prior to the sunset date and those who have not used the larger exemption amount will have lost the opportunity to do so. Keep in mind also that large gifts often take some time due to planning, appraisals, and preparation of trusts and other documents.

David A. Lucas
is an Attorney in Miller, Miller & Canby’s Estates & Trusts and Business and Tax Practice Groups. David is committed to providing his clients with a well-crafted estate plan so they may avoid probate, protect their assets and legacies, and provide for the security of their loved ones. He takes a special interest in ensuring that the dreams parents have for their children and grandchildren are not lost to taxes, poor planning, or procrastination. He speaks frequently on a variety of estate planning topics to both the general public and private groups.

David has focused his practice on helping families preserve their financial wealth and legacies for future generations through the use of Trusts, Wills, Powers of Attorney, Advance Medical Directives, Living Wills, and other estate planning strategies.

Contact David
to discuss your estate plan to take advantage of the laws available today and ensure flexibility for future changes. For more information on Miller, Miller & Canby’s Estates & Trusts Practice, click here.





MM&C’s Joe Suntum and James Roth Set to Speak at ALI’s Eminent Domain and Land Valuation Litigation


Two of Miller, Miller & Canby’s eminent domain attorneys will join the national Eminent Domain and Land Valuation Litigation 2019 Conference as presenters. The annual conference is the country’s preeminent gathering of eminent domain professionals. The conference brings together “national experts on the cutting edge of eminent domain and related topics under one roof," said planning co-chair, Robert H. Thomas.

Mr. Suntum will speak to “Tips and Traps for the New Eminent Domain Lawyer”. Mr. Suntum is a principal at Miller, Miller & Canby with decades of trial experience, and he is the firm’s eminent domain practice group leader. He is the Owners’ Counsel of America member attorney for the state of Maryland.  The Owners’ Counsel is a national network of seasoned eminent domain attorneys; membership is selective and restricted to only one member attorney per state.  Mr. Suntum is a nationally-recognized speaker on topics related to eminent domain and condemnation and lectures extensively throughout the country for a variety of legal and educational organizations.

Mr. Roth will address “Fence and Wall Condemnations.” Prior to becoming an attorney and joining Miller, Miller & Canby, Mr. Roth spent over a decade consulting U.S. Customs and Border Protection (CBP) to manage land acquisition required for numerous facilities and border infrastructure construction projects, including some 600 miles of fence construction initiated under the Bush administration.  In that role, he supported attorneys from the U.S. Department of Justice, U.S. Army Corps of Engineers and CBP in the litigation of over 300 eminent domain cases across the U.S./Mexico Border.

In addition to private practitioners, faculty will include law professors, government officials and members of the judiciary.  

Other conference highlights will include:
• Navigating displacement of immigrant and refugee
communities
• A look at the Supreme Court's revisit of ripeness
• Flood, wildfire, and other inverse cases
• Proving just compensation for loss of access and damages
• Correcting misconceptions about eminent domain in the media and social platforms
• Pipelines, challenging the take, and compensation pitfalls

The 2019 conference will be held in Palm Springs, California, January 24-26.  For more information click here.

For more information about Miller, Miller & Canby’s eminent domain practice, click here, or contact Joe Suntum or James Roth at 301-762-5212.





Actor Wesley Snipes Shows Us How Not To Settle an IRS Debt: The Importance of a Tax Attorney


Wesley Snipes Tax Case
Normally, U.S. Tax Court memorandum decisions do not garner media attention.  Typically, they involve issues of substantive or procedural tax disputes – not exactly drop-what-you’re-doing subject matter or material. However, last month, the Court was hit with a dose of celebrity, and in turn, some publicity. Indeed, movie fans of the late-1990s/early-2000s vampire hunter trilogy, Blade, likely found themselves confounded when the actor behind the title character and protagonist re-emerged into the headlines, but not for cinematic achievement or accomplishment. Instead, Wesley Snipes made news for losing his Tax Court petition.

Specifically, Mr. Snipes had racked up quite a tax debt with the IRS – to the tune of $23.5 million. Unable to pay the full amount, he submitted an offer in compromise (OIC) to the IRS, which was rejected and led him to Tax Court. For reference, an offer in compromise is a request submitted to the IRS where a taxpayer desires to settle a tax liability for a lesser amount than is owed. Mr. Snipes submitted his OIC as a doubt as to collectability submission.  In other words, he did not challenge the validity of his tax liability, but contended that the IRS would never fully collect the full amount, making it in their best interest to settle for a lesser amount. Indeed, his contention was clearly reflected on his OIC submission wherein he sought to settle his tax debt for $842,061, or less than 4% of his underlying tax liability.  

Given the staggering discrepancy between Mr. Snipes’ attempted OIC and his tax debt, it would seem as though the IRS’ rejection was a mere formality and that he should stop watching late night tax relief infomercials. However, the IRS’ rejection was not based on such a discrepancy.  Instead, the IRS bases its OIC decisions on the taxpayer’s quantifiable financial disposition, or what a taxpayer can afford to pay.   

Why OICs Are Rejected
Indeed, a taxpayer’s ability to pay will focus on their income/assets versus their expenses. While there are a variety of reasons that the IRS rejects OICs, the primary ones are for understating the value of assets/income and overstating expenses. For Mr. Snipes, he was caught attempting to move assets out of his name before and during his initial appeal, and he apparently didn’t do a particularly good job of it. The IRS attributed those assets to him as part of his overall net worth, and therefore concluded he was able to pay substantially more than he offered via his OIC. The IRS scrutinizes both the assets/income and expenses categories – especially if the expenses far exceed the taxpayer’s income or their assets appear to be substantially understated or they are out of line with income and lifestyle (see Wesley Snipes example).

In addition, the IRS will reject an OIC for failure to comply with specific procedures and guidelines or for a lack of cooperation with such procedures and guidelines. While the IRS will generally permit you to re-submit an OIC if it is rejected on procedural grounds, this will only delay and complicate the process, whereas a lack of cooperation can lead to an outright rejection.  When taxpayers are under IRS levy or garnishment, or are saddled or threaten with a federal tax lien, any delay or complication can impose unnecessary hardship and disruption.  

Accordingly, it is essential that the procedures and guidelines are followed precisely. For example, both Form 656 (Offer in Compromise) and Form 433-A or -B (Collection Information for Individuals and Businesses, respectively) must be fully completed and submitted. Taxpayers will oftentimes neglect to submit one of them due to the redundancy of information requested on these forms. In addition, taxpayers must fully complete the forms – especially the Form 433, which amounts to a full and exhaustive financial disclosure form. If incomplete, inaccurate or insufficient, the IRS will either reject the OIC or request further substantiation – which will lead to delays and complications. Taxpayers must also submit both the application fee and the initial offer payment. Taxpayers confuse the application fee as being the same as the initial offer payment, and vice versa. They are separate and they are both required.

How an Experienced Tax Attorney Can Help
An experienced tax attorney guides clients through this process so that an offer has the highest probability of being accepted and the debt resolved. Specifically, the information contained on Form 433 will dominate the IRS’ OIC analysis. Form 433 can be confusing and its rules/instructions can be complicated and deficient. In addition, different taxpayers have different circumstances which can necessitate experienced and professional assistance.

Some questions to consider include:
•    What if the liable taxpayer is married to an innocent spouse?
•    How are joint and separate assets as well as shared expenses reported?
•    How are fluctuating expenses calculated?  
•    Is an anticipated inheritance reportable?
•    Should trust distributions be reported?
•    How should you report the value of stocks?  
•    What about the value of life insurance?  

Taxpayers do not want to get caught misstating the value of assets/income, or the amount of expenses – such figures are subject to substantiation, at the IRS’ request. A misstatement can cause an OIC to be rejected, or (maybe worse) can put a taxpayer in a Wesley Snipes situation where they are deemed more wealthy than they, in fact, are. Accordingly, there are strategies for when and how to complete Form 433 that an experienced tax attorney can provide.

In addition, experienced tax attorneys can provide advice relating to penalty abatement. In limited circumstances, the IRS will agree to abate accrued penalties (and in very limited circumstances, grant interest waivers). This can drastically lower a taxpayer’s total balance due, and potentially make an OIC more palatable for the IRS to accept.

Not every taxpayer is a good candidate for an OIC. An experienced tax attorney will analyze the taxpayer’s situation, discuss alternatives, and determine the best strategy tailored to client needs.  Indeed, for some taxpayers, an installment agreement may make more sense or have a greater likelihood for approval. In addition, currently not collectible status may assist certain taxpayers as it will “pause” IRS collection activity for a limited period of time. However, before making any submissions, it is advisable to seek professional advice. In the event an OIC has already been submitted, and rejected, taxpayers have appeal rights at their disposal (see Wesley Snipes example) where a tax attorney can provide assistance.  

Chris Young
is an associate in the Business & Tax practice at Miller, Miller & Canby. He focuses his practice on tax controversy work and helping clients deal with new tax regulations. He may be reached at 301-762-5212 or at clyoung@mmcanby.com.  View more information about Miller, Miller & Canby's Business & Tax practice by clicking here.





Five Miller, Miller & Canby Attorneys Named 2019 Maryland Super Lawyers


Miller, Miller & Canby is proud to announce the following five attorneys have been named to the 2019 list of Super Lawyers for the State of Maryland:  James Thompson, Jody Kline, Donna McBride, Diane Feuerherd and Callie Carnemark. Mr. Thompson has been named to the prestigious list every year since 2007, Mr. Kline every year since 2008 and Ms. McBride every year since 2014. Ms. Feuerherd and Ms. Carnemark are named to the “Rising Stars”, recognition for attorneys under the age of 40.
 
James (Jim) Thompson
has led Miller, Miller & Canby's Litigation Group for more than 25 years, concentrating his practice in eminent domain and real estate valuation litigation, as well as in property tax assessment appeals. For more than a decade, Mr. Thompson represented Maryland in the Owners’ Counsel of America, a national network of property rights attorneys with demonstrated excellence in this area. In 2018, Mr. Thompson was recognized with the President's Citation for Outstanding Service by the Montgomery County Bar Association. He was also selected as the Senior Lawyer of the Year by the Maryland State Bar Association.

Jody Kline
has been at the forefront of 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.

Donna McBride
, a partner in Miller, Miller & Canby's Litigation practice, focuses her practice in litigation in the following areas:  business and commercial, employment, estates and trusts, personal injury and insurance, and real estate.  In addition to her extensive background as a trial lawyer, Ms. McBride is a co-chair of the Maryland State Bar Association’s Judicial Selections Committee and is a member of the Standing Committee on Practice and Procedures, where she was appointed to serve a second 5-year term beginning in 2018. She is also a member of the Trial Court's Judicial Nominating Commission, the Montgomery County Inn of Court, a former co-chair and current member of the Maryland State Bar Association's Judicial Selections Committee and has volunteered as a mediator for the District Court since 2008. In 2018, she was elected to serve as Treasurer for the Montgomery County Bar Association.

Diane Feuerherd
is an associate in the firm’s Litigation practice. She has briefed and successfully argued cases before the Court of Special Appeals and the Court of Appeals, including a notable representation of a commercial developer challenging the validity of Montgomery County’s Rain Tax.  Ms. Feuerherd is active in state and local bar associations, including:  the Maryland State Bar Association, where she was named a Fellow of the prestigious Leadership Academy and now serves on the Judicial Appointments Committee; the Bar Association of Montgomery County; and the Montgomery County Inns of Court. In 2016, she was appointed to a social media workgroup for the Judicial Council, which is a policy advisory body to the Maryland Judiciary. She has also worked with the Finding Justice Project, a committee of the Women's Bar Association Foundation, to research and memorialize the history of women lawyers. 2019 is the fourth year in a row that she has been recognized as a Super Lawyers Rising Star.

Callie Carnemark
is an associate with the Litigation Practice Group, focusing her practice on real estate and business litigation as well as the firm’s appellate practice. She is a member of the Montgomery County Inns of Court, the Montgomery County Bar Association, the Maryland State Bar Association and the Montgomery County Women’s Bar Association. She is a graduate of the 2017 Class of the Montgomery County Bar Association Leadership Academy. 2019 is the first year Ms. Carnemark is being honored as a Super Lawyers Rising Star.

These five attorneys join other Miller, Miller & Canby attorneys previously named Super Lawyers including Joe Suntum, who practices in the field of eminent domain and commercial litigation, and Pat McKeever, whose practice focuses in real estate law.

Super Lawyers, part of Thomson Reuters, is a research-driven, peer influenced rating service of outstanding lawyers who have attained a high degree of peer recognition and professional achievement

The annual selections are made using a patented multiphase process that includes:
•    Peer nominations
•    Independent research by Super Lawyers
•    Evaluations from a highly credentialed panel of attorneys

The objective of Super Lawyers is to create a credible, comprehensive and diverse listing of exceptional attorneys to be used as a resource for both referring attorneys and consumers seeking legal counsel. The Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country, as well as the Maryland Super Lawyers Digital Magazine.

Learn more about Miller, Miller & Canby by visiting millermillercanby.com
 





Is Your Commercial Lease Boat Ready for a Condemnation Storm?


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.
 





Deadline Approaching to Reduce Property Taxes in Maryland


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.
 





Previous Entries / More Entries