August 30, 2016: With Fallbrook Golf Course’s owner facing foreclosure and the property under threat of imminent development, Gird Valley, Inc (owned by Fallbrook residents Jade and Julie Work) move the property into escrow. They commit to using Conservation Easements to protect the property from development.
Benefits for landowners of conservation easements. Land Trust Alliance.
Income tax incentives for land conservation. Land Trust Alliance.
Private lands conservation: Conservation easements. The Nature Conservancy.
Trump’s golf courses expose conservation quagmire. By James Moorhead, LandThink, Mar. 28, 2016.
IRS tees off on golf courses’ green tax claims. By Richard Rubin, The Wall Street Journal, Jan. 4, 2016.
Kiva Dunes Conservation LLC et al. v Commissioner of Internal Revenue. Memorandum findings of fact and opinion, June 22, 2009.
Gird Valley was homesteaded in the late 1800s. It has been home to cattle ranchers, beekeepers and avocado farmers who created the course on the agricultural land below the frost line in the 1960s. Neighborhoods were built around this Open Space which serves as the cornerstone of Gird Valley. In more recent years, vineyards have been developed. Fallbrook Winery, the largest winery in San Diego County, is situated on the western ridge of Gird Valley.
The historical zoning on the property is Agricultural with special use permits for operation. The Fallbrook Golf Course consists of 116 acres made up of 9 tax assessors’ parcels but it is only 2 legal parcels. Six of the 9 tax assessors’ parcels are designated for use as “Recreational-Vacant Land” and three parcels as “Golf Course.” Any change in use will require a zoning change and subdividing the property in compliance with the Subdivision Map Act. Development will be incredibly difficult to accomplish for a variety of reasons but this does not mean the property is 100% safe from development.
The property is also contiguous with a 47.74-acre Open Space preserve valued for its wildlife habitat and owned by the Fallbrook Land Conservancy which has done a Habitat Assessment. A substantial population of birds and wildlife species are resident on the preserve and the golf course, in Live Oak Creek and in the three ponds in the valley. The area is a wildlife corridor and the fairways are resplendent with many ancient live oaks, sycamores and other native species. Additionally, the parcel that lies west of Gird Road is bordered on both the north and the south by historically significant structures.
Golf course land supports many community and natural benefits which are recognized in a growing body of case law and with substantial IRS tax benefits. Follows a few items of interest on these subjects:
IMPLIED RESTRICTED COVENANTS:
First example: Ute Park Summer Homes Ass’n v. Maxwell Land Gr. Co., 1967, The Supreme Court of New Mexico
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In Ute Park Summer Homes Association v. Maxwell Land Grant Co., 1967, the developer simply promised to build a Golf Course and distributed maps containing an area marked “golf course.” The simple existence and use of the map was found to be enough evidence for the Court to find an easement and stated,
“[W]here land is sold with reference to a map or plat showing a park or like open area, the purchaser acquires a private right, generally referred to as an easement, that such area shall be used in the manner designated. As stated, this is a private right and it is not dependent on a proper making and recording of a plat for purposes of dedication.” 77 N.M. at 734, 427 P.2d at 253.
The Map was not recorded, there were no recorded covenants, yet, The New Mexico Supreme Court held that lot owners still had a legal right to use of the area as a golf course, and an implied easement had been created. This right, the court held, came into existence because of maps and representations of the developer’s agents. Silverstone Ranch showed an abundance of smaller maps, a big one in the sales office, many news interviews, advertisements and articles, etc. There are numerous examples of these in the case of the Silverstone Ranch Golf Course Community.
Second example: Shalimar Ass’n v. DOC Enterprises, Ltd., 688 P. 2d 682 – Ariz: Court of Appeals, 1984
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The Judge in ‘Shalimar’ actually cites ‘Ute Park’ in a case where the ‘new owners’ of golf course sought to simply develop it without regard for the equitable rights of the neighbors. Quoting from the first page of the Decision,
“OPINION – FROEB, Judge.
This case involves an attempt by the new owners of a golf course to develop the property for other purposes. No specific restriction as to the use of the land was ever placed of record with the county recorder. The surrounding homeowners brought this action to have the court declare and enforce against the new owners an implied restriction limiting the use of the property to a golf course. We hold that a covenant restricting the use of the property is implied from the facts and circumstances and is enforceable against the new owners because they are not bona fide purchasers without notice.”
Again without a recorded document the courts even found a covenant enforceable against the subsequent or ‘new’ owners, who simply ‘should have’ known it was a Golf Course, and the implied restriction would apply.
Third example: Skyline Woods Homeowners Association Inc v. Broekemeier, 2008, Supreme Court of Nebraska
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In 2004, in the U.S. Bankruptcy Court in Nebraska. The homeowners in the Skyline Woods development were not included in the Skyline Country Club creditor’s matrix, and their claimed restrictive covenants were not specifically raised. On February 9, 2005, the bankruptcy court entered an order approving the sale of the golf course property to Liberty, which is owned and operated by David A. Broekemeier and Robin Broekemeier. In 2005, Skyline Country Club issued a warranty deed to Liberty, conveying the property “free from encumbrance except covenants, easements and restrictions of record.” In 2006, the HOA sued, won, and prevented, “any actions that would interfere with or damage the golf course or prevent the property from being used as a golf course.”, sounding very similar to the order in the Silverstone Golf Course case.
In 2007, the district court granted partial summary judgment in favor of HOA on the issue of whether restrictive covenants “limiting the use of the property to that of a golf course” ran with the land. The court also concluded that the bankruptcy order did not sell the property free and clear of the restrictive covenants, as the restrictive covenants are third-party property rights belonging to Homeowners.
The Nebraska Supreme Court stated, that in Wessel v. Hillsdale Estates, Inc.,1 they were faced with actual express protective covenants by the developer to preserve land for a park for the surrounding homeowners’ enjoyment, but the amount of land was in dispute. They concluded that the amount of land used to build the park had to be in accordance with the buyer’s expectations, stating,
“A restrictive covenant is to be construed in connection with the surrounding circumstances, which the parties are supposed to have had in mind at the time they made it; the location and character of the entire tract of land; the purpose of the restriction; whether it was for the sole benefit of the grantor or for the benefit of the grantee and subsequent purchasers; and whether it was in pursuance of a general building plan for the development of the property.”2
1 Wessel v. Hillsdale Estates, Inc., 200 Neb. 792, 266 N.W.2d 62 (197S)
2 id. at 80l, 266 N.W.2d at 68 (quoting Lund v. Orr, 181 Neb. 361, 148 NW.2d 309 (1967).
‘Skyline’ cites both ‘Ute Park’ and ‘Shalimar’, and in analysis of the Bankruptcy sale, the Court found, “that the bankruptcy sale has no effect on implied restrictive covenants and that as such, Liberty and the Broekemeiers are still bound by them.” Subsequent owners are bound by, and the sale in Bankruptcy had no effect on, the Implied Covenants. The Court also noting that,
“In In re Rivera,3 the court concluded that covenants running with the land are property interests that cannot be removed in a discharge because to do so would be taking a property interest away from a third party and giving the debtor a property interest which the debtor never had.”
3 In re Rivera, 256 B.R. 828 (M.D. Fla. 2(00).
In conclusion, the Court stated,
“we affirm the order of the district court that the implied covenants require that the property is to be used only as a golf course. As to maintenance, the golf course shall be maintained according to standards (I) through (7) of the June 13, 2006, joint stipulation of the parties. Accordingly, we modify the district court’s order regarding the required standards of maintenance.”, acknowledging not only the covenants, but the right to proper maintenance of the Golf Course!
Third example, on Appeal : IN RE: SKYLINE WOODS COUNTRY CLUB, Debtor. Mid-City Bank, et al., Appellants. v. Skyline Woods Homeowners Association, et al., Appellees, United States Court of Appeals, Eighth Circuit, 2011
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On Appeal , in the Eighth Circuit, the Court wrote:
“Before LOKEN, ARNOLD, and BYE, Circuit Judges. Anna M. Bednar, Robert Frederick Craig, Robert F. Craig, P.C., Omaha, NE, for Appellants. Robert J. Bothe, Michael Thomas Eversden, McGrath & North, Omaha, NE, for Appellees. If so authorized, the purchaser of real property from a bankruptcy estate acquires title to the land “free and clear of any interest” identified in 11 U.S.C. § 363(f). After an affiliate of Liberty Building Corporation (“Liberty”) purchased the Skyline Woods Golf Course in Douglas County, Nebraska, from the estate of a Chapter 11 debtor, residents of the surrounding planned community sued the purchasers to enforce express and implied restrictive covenants. The Supreme Court of Nebraska held that the bankruptcy sale did not extinguish equitable interests in having the property maintained as a golf course. Skyline Woods Homeowners Ass’n, Inc. v. Broekemeier, 758 N.W.2d 376, 392-93 (Neb.2008). Liberty and its secured lender, Mid-City Bank, now appeal the bankruptcy court’s denial of their motion to reopen the closed bankruptcy proceedings in order to declare the Supreme Court of Nebraska judgment void and to enjoin the residents from enforcing it. We conclude denial of the motion to reopen was not an abuse of discretion because, in a reopened bankruptcy proceeding, the state-court judgment would be entitled to the full faith and credit mandated by 28 U.S.C. § 1738. Accordingly, we affirm.”
In review of Skyline 2, “Finality of ‘Free and Clear’ Sale Orders by Bankruptcy Courts”, April 28, 2011, George W. Shuster, Jr., Katelyn R. O’Brien, John D. Sigel wrote,
“It is interesting to consider that the 8th Circuit’s approach to this issue reaches a similar result to the decision of the 9th Circuit Bankruptcy Appellate Panel in the much-discussed Clear Channel case of several years ago.15 In Clear Channel, the 9th Circuit BAP held that an aggrieved junior lienholder could challenge the effect of the “free and clear” provisions of a sale order, notwithstanding Section 363(m), because a challenge to the “free and clear” provisions was not an attack on the sale order itself. In Skyline Woods, the 8th Circuit seems to be saying that a party may obtain a state court judgment that “free and clear” provisions of a sale order are not applicable to it, because such a judgment is not the result of an appeal of the sale order, but rather an interpretation of the sale order. These two decisions arise in different procedural contexts, with the 9th Circuit BAP allowing a challenge to “free and clear” language on appeal because the language is not integral to the sale order, and with the 8th Circuit allowing a challenge to the application of the “free and clear” language because the challenge goes to the “merits” of the sale order. But in each case the “free and clear” language was successfully challenged notwithstanding Section 363(m)’s apparent finality.
The Bottom Line
Purchasers rely on a bankruptcy court’s “free and clear” order when purchasing property. Many purchasers may anticipate that, if the sale order is later challenged, they can return to the bankruptcy court and resolve the dispute in a favorable forum. Mid-City Bank v. Skyline Woods Homeowners Association illustrates that when purchasers buy free and clear under Section 363 of the Bankruptcy Code, they should consider, among other risks, the risk that a non-bankruptcy court will decide issues of whether the sale was “free and clear,” and that its decision will be adverse to and binding on the purchasers.”
In this line of Golf Course specific cases, as with the bulk of the Case Law, the courts have consistently found that Planned golf Course Communities have a Restrictive Easement, and the Homeowners who bought based on a Golf Course being the center piece of the Community have an ‘equitable servitude’ on which to rely on, that the Dedicated or Promised Golf Course/Open space would remain as such.
In the case of Silverstone Ranch, there is more than an implied easement, but rather an Express Written Agreement that establishes the Restrictive Covenant. We can also see that such Restrictive Covenants have been upheld by the Courts in a post Bankruptcy Sale ‘Free and Clear’.
Riverview Community Group v. Spencer & Livingston
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Slip opinion, Supreme Court of the State of Washington, Nov. 20, 2014.
WA Supreme Court: Implied equitable servitude may keep the golf going. By Justin Walsh, Issaquah Law Goup, Nov. 20, 2014.
Washington Supreme Court holds that developer’s statements 25 years ago could limit future use of property. By Phillips Burgess PLLC, Nov. 20, 2014.
Homeowners hit hole in one – developer double bogies. By Schlemlein Goetz Fick & Scruggs PLLC.
Can I get a mulligan? By James D. Howsley, Jordan Ramis PC, spring 2013.
Heatherwood Holdings, LLC v. HGC, Inc.
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Case file, US Court of Appeals for the 11th Circuit, Mar. 27, 2014.
Fore! Eleventh Circuit upholds implied restrictive covenant for subdivision golf course. Georgia Law Review, May 20, 2014.
Implied restrictive covenant prevents conversion of golf course to residential lots. By Roger D. Winston et al., Ballard Spahr, LLP, Aug. 5, 2014.
Sales free and clear: What about restrictive covenants? By Vicki R. Harding, Esq., Oct. 7, 2014.
GOLF COURSES AND WILDLIFE CORRIDORS
Avian diversity on golf courses and surrounding landscapes in Italy. By Alberto Sorace and Marta Visentin, Landscape and Urban Planning, 81 (2007) 81-90.
Inter-reserve distance. By Craig L. Shafer, Biological Conservation 100 (2001) 215-227.