By: Marc B. Bergoffen

Bregman, Berbert, Schwartz & Gilday, LLC

Things certainly have been interesting in the world of real estate law; and depending on one’s particular area of practice, the recession has either been a positive or a not-so-positive thing. Hopefully, the economy will improve along with the summer weather we are having. In this summer edition, we feature articles on wind farm leasing, a recent bankruptcy case affecting real estate, a new statute affecting construction retainage, as well as others. We hope you enjoy this edition and if you have a topic of interest, please feel free to submit an article for the next edition.

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John J. Delany of Linowes & Blocher in Bethesda has been selected as the 2008-2009 recipient of the Distinguished Maryland Real Property Practitioner. Mr. Delaney has been practicing in the area of real property and land use law for over forty years. He is respected as an authority on zoning and land use law, and is an expert in land use regulation and regulatory takings. He is an accomplished lecturer and author in the land use and planning areas. Prior to practicing law, he served as a lieutenant in the United States Army. Mr. Delaney’s professional and civic affiliations include the American Institute of Certified Planners, the American Planning Association, the National Association of Homebuilders, the Board of Directors of Gonzaga High School, and the Maryland Smart Growth Commission. Please join us in extending our warmest congratulations to Mr. Delaney on this recognition.

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By: Douglas M. Bregman, Esq.

The increasing use of windpower is not just a lot of hot air. Obtaining the land on which to place the turbines can be a clouded undertaking. This article will present some information which can provide some shelter from the storm.

The installed wind energy capacity was enlarged in 2008 alone by 50% in the United States2. In fact, in the last two years the quantity of commercially produced wind energy increased to be more than twice that which was generated in the prior 25 years. At this point, the United States is the world leader. This growth has also sparked technological improvements.

Despite these improvements, the rapid increase in wind energy capacity investment is currently somewhat on the wane. The reason for this is almost strictly due to the lull in the availability of financing. Wind energy lenders such as Wachovia, Lehman Brothers and AIG are now out of business or not lending in the field.

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By Morton P. Fisher, Jr.

Florida Department of Revenues vs. Piccadilly Cafeterias, Inc., 128 S.Ct. 2326 (2008)

Bankruptcy lawyers and real estate lawyers with bankruptcy background know that under Section 1146(a) of the Bankruptcy Code there is an exemption from stamp taxes and other recordation charges for a transfer under a plan confirmed under Chapter 11 of the Code. 11 U.S.C. § 1146(a) (2000).

In many situations, properties are conveyed prior to final confirmation of a plan which is eventually confirmed.

Piccadilly, a natural cafeteria chain, requested and received court approval to sell substantially all of its assets and sought exemption from stamp taxes. In February, 2004, the Bankruptcy Court approved the proposed sale at auction and ruled that the transfer of the property was exempt from stamp taxes under Section 1146(a) [formerly Section 1146(c)] of the Bankruptcy Code.

In March, 2004, Piccadilly filed a plan and in July filed an amended plan. In October, the plan was confirmed but before final confirmation, Florida filed an objection seeking a declaration that $39,200 in stamp taxes were not exempt because the transfer had not been “under a plan confirmed” under the Bankruptcy Code.

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 TDR’S AND §1031’S

By David T. Wagner

With the recent release of Private Letter Ruling 200805012 (“PLR”) on February 1, 2008, the Internal Revenue Service (the “Service”) has signaled a willingness to treat transferable development rights (“TDR’s”) as real property for purposes of effecting a tax-deferred exchange under IRC §1031. While TDR’s also exist in numerous Counties in Maryland, this article seeks to review the analysis of the PLR, which was founded upon the underlying state and county law, and determine whether the application of Maryland and Montgomery County law would produce the same result.

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By Lauren M. Lyon-Collis

During construction of a development project, the owner typically retains a percentage of each progress payment otherwise payable to the contractor. The retained funds are usually released upon substantial completion, with the owner holding back 150% or 200% of the amount necessary to complete “punch-list” items. The industry standard is to retain 10% of the amount of the progress payment otherwise payable. The purpose of this practice is to ensure that if a contractor fails to complete the work correctly, or at all, the owner may use the retained funds to do so.

A recently-adopted Maryland law limits those amounts that may be retained by an owner to guarantee completion of a construction contract. As of October 1, 2008, owners will only be able to retain up to 5% of the amount of each progress payment for certain construction contracts in Maryland. The new law does not apply to contracts under $250,000 or contacts funded through the Department of Housing and Community Development. State regulations presently impose this cap in certain state construction contracts. The new law also applies to the retention of funds by a contractor to guarantee a sub-contractor’s completion of a construction contract.

The new law attempts to balance the interests of contractors and owners, but, in the end, may be unsuccessful. For example, the new law immediately benefits contractors who may need to advance a portion of their own funds to complete the final stage of a project. The change in the law means that an additional 5% of the contract value could be available, lessening the financial impact in those instances when a contractor must pay “out of pocket” in order to complete a construction contract.

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By David H. Fishman
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
Baltimore, MD

March 17, 2009

This report attempts to gather all reported cases and important unreported cases decided by the Maryland State and Federal courts in the past calendar year in the area of “traditional” real estate law. Detailed treatment is given to cases with something interesting or amusing to say. Cases in the areas of zoning, land use, insurance and torts usually are not included. The year 2008 was marked by several important discussions of areas which have not been talked about for many years, as well as a couple of cases of first impression. Of particular note is the Wildwood Medical Center case, which is a good discussion of the law of partnership property, and the Gables on Tuckerman Condominium case, a definitive opinion about condominium casualty insurance. Both are worthy of close study. An amusing case was Royal Investment Group in the Court of Special Appeals, where a prospective purchaser of property demolished the improvements on the property and built a new house, but never went to closing.

As might have been expected, foreclosure cases got a lot of attention in 2008, continuing into early 2009. Most of the problems mentioned in the cases will be handled by the new legislation passed by the 2008 session of the General Assembly and the 2009 changes to the Maryland Rules, which go into effect on May 1. In 2007, The Baltimore Sun made something of a crusade out of the case of Mr. Atta Poku, neglecting to recite most of the facts bearing on the equities in the case. This vividly illustrates the famous quip by the late A.J. Liebling that, “Freedom of the press is guaranteed only to he who owns one.” The case was ended by the Court of Appeals’ decision on January 10, 2008, which denied Mr. Poku’s claims. And in February, the Court of Appeals decided in Griffin v. Bierman that the Maryland notice requirements are constitutional, thus forestalling what would surely have been hundreds of cases by foreclosed mortgagors claiming that the notices they received did not meet constitutional muster.

The new statutes of 2008 would not change the result in the Poku case, but will have a definite impact on a number of situations which have been litigated in the past. The requirement for attempting to get actual notice to the record title owner and to the occupants of foreclosed properties will be much greater in the future.

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