I Want to Purchase and Then Develop a Property that has Wetlands - What Next?

Wetlands Create Risk for the Buyer Because of Caveat Emptor

As my colleague Jim Lang’s article explained, Virginia is a “caveat emptor” state, meaning that the responsibility falls on the buyer to investigate and discover any defects in real estate property before completing a purchase.  With limited exceptions, the seller is not required to disclose issues which could affect the buyer’s ability to use the property for the buyer’s intended purpose.  That article explained how the concept of caveat emptor applies to riparian rights.  In this article, I will explain how the same concept applies to environmental laws such as wetlands regulations.

As explained in another of Mr. Lang’s articles, wetlands are highly protected and regulated by several different agencies including the Virginia Department of Environmental Quality (DEQ) and, in many cases, the U.S. Army Corps of Engineers (“the Corps”).  Before placing any fill material into a wetland, a property owner must obtain a permit from the Corps and/or the DEQ. This requirement is applicable to virtually any type of construction occurring in wetland areas.  

If the regulatory agencies agree to allow filling of the wetlands, they often time require, as part of the permit process, that the property owner mitigate the loss of wetlands. As Mr. Lang explained in one of his webinars, this is most commonly done by purchasing “wetlands credits,” which is a per-square foot fee used to pay for creation of new wetlands in a designated restoration area.  Wetlands mitigation credits are very expensive. For example, credits in a tidal area can cost approximately $500,000 per acre, or more – and that is assuming that credits for tidal wetlands are even available in your area.  Credits for non-tidal wetlands are more widely available and range from $55,000 to $100,000 per acre.      Obviously, a potential purchaser of real estate would be well-advised to find out whether a lot s/he intends to purchase contains wetlands before proceeding to closing. This is especially true when purchasing an undeveloped lot for the purposes of constructing a home.

Shutterstock: June J

How do I know if there are federally-protected wetlands on the property?

It is important to understand that wetlands are regulated separately by both federal and state governments. This article will focus on federal regulation.  For an example of how state regulations may be enforced, see my previous article explaining how our waterfront law team assisted a property owner in resolving a state wetlands violation.

In order to know whether a permit is required, the landowner must first find out whether there are wetlands on the property. The only way to know whether wetlands are on your property -- and if so, exactly where those wetlands are located – is to obtain a wetlands delineation from a qualified expert. A wetlands delineation involves scientific sampling of the soil, vegetation, and hydrology. These data points are used to create a map showing where the wetlands are located.  As is true in any profession, some wetland delineators are better than others.  We are familiar with the wetland delineators in Hampton Roads and provide referrals on request.

It is critical to understand that while wetlands maps are available to the public, these are not accurate. In most cases the maps are outdated, and do not account for the fact that wetlands are dynamic.  The same is true for wetlands boundaries depicted on older construction documents or real estate plats.  Before building, you must ensure that you have a current delineation to show where the wetlands are actually located.

There are several ways to go about this.  One is to request that the Corps perform a wetlands delineation on the property.  Another option is to hire a private wetlands consultant to perform the delineation.  I will briefly discuss the pros and cons of each option later in this article.

Assuming that wetlands exist on the lot, the next step is to determine whether those wetlands are federally-regulated. Not all wetlands fall under the authority of the federal government.  The U.S. Supreme Court’s 2023 decision in the case of Sackett v. EPA sharply curtails the U.S. Army Corps of Engineers’ ability to regulate certain types of wetlands.  Mr. Lang published an article that explains how the Sackett precedent is being applied in Virginia. To determine whether federally-regulated wetlands are present, you must request and obtain a Jurisdictional Determination (JD) from the Army Corps of Engineers.  As is explained more fully below, the wetlands delineation obtained from your consultant is oftentimes helpful to you during the Army Corps’ JD process.  But the US Army Corps JD controls, not the wetlands delineation prepared by your consultant.  The good news, however, is that in 2016 the U.S. Supreme Court, in the case of Hawkes v. US Army Corps of Engineers, held that land owners have a right of immediate federal court review of an Approved JD issued by the U.S. Army Corps of Engineers.  Mr. Lang’s article describes the importance of the Hawkes case to landowners who believe the US Army Corps of Engineers overreached, to the detriment of the landowner, in the JD process.

Is it better to hire a private environmental consultant or to have the Army Corps perform the delineation?

As explained above, wetlands delineations can be performed (when requested) by the Corps, or they can be done by a private consultant.  The major advantage of having the delineation performed by the Corps is that Corps performs the delineations free of charge, whereas private delineations typically cost several thousand dollars (the cost varies depending on the complexity and size of the particular area to be delineated). However, one potential disadvantage is that Corps typically takes a wide view of its authority.  This appears to be true even after the landmark U.S. Supreme Court decision in Sackett v. EPA, although the limit of federal wetlands authority is currently being tested in a Virginia federal court case described here. 

The other option is to hire a private consultant to perform the delineation.  Our waterfront law group routinely works with several of these professionals. In many cases, a private consultant yields results somewhat more favorable to the landowner, although of course these experts are bound by the ethics of their profession to perform the survey accurately.  Another advantage is that private consultants can usually perform a delineation quickly, whereas the Corps can take many months – and sometimes years – to complete the work.

Once the delineation is complete, the private consultant will submit the results to the Corps. It is important to understand that the delineation reached by a private consultant has no legal authority until it is accepted by the Corps with a Jurisdictional Determination. In some cases the Corps will perform a site visit, agree with the consultant, and issue the JD. However, in many cases the Corps will disagree, maintaining that the consultant’s delineation under-represents the amount of wetlands present on the property.  A period of “negotiation” between the consultant and the Corps then ensues, ultimately resulting in a JD. Although the Corps does not take the consultant’s delineation at face value, in most cases the negotiation results in a JD which is more favorable to the landowner than would have been the case if the Corps had performed the delineation on its own.

Image credit: Shutterstock

What is the effect of a No Permit Required letter from the Army Corps?

As explained above, a delineation performed by a private consultant has no legal standing unless ratified by the Corps with a Jurisdictional Determination.  Notwithstanding this fact, in some cases the Army Corps will review the delineation submitted by the consultant and issue a “No Permit Required” letter. 

Landowners are strongly advised not to rely upon a “No Permit Required” letter.  This is because, when the Corps issues a “No Permit Required” letter, it does so with strong caveats explaining that the letter has been issued based only upon the documents submitted by the consultant with no ratification by the Corps.  The letter explains that if the Corps later determines the delineation to be inaccurate, it may rescind the letter.  In short  -- and to put it bluntly – a No Permit Required letter from the Corps means almost nothing.   

How should a No Permit Required letter impact my decision to buy real estate?

As explained in the first part of this article, it is the buyer’s responsibility to determine whether the real estate s/he wants to purchase is fit for the intended purpose. In most cases the buyer will have a “due diligence” period in which to make this assessment, after which time the deal becomes final. Reliance upon a “No Permit Required” letter in making a decision to proceed to closing is highly risky, and not recommended.

For example, consider a situation in which a perspective buyer desires to purchase an undeveloped lot near a river. The buyer enters into a contract to purchase the lot with a 60-day due diligence period.  Understandably concerned that there may be federal wetlands located on the property, the buyer asks the seller to hire a private environmental consultant to perform a delineation, and the seller agrees.  The wetlands consultant performs a delineation and finds very little jurisdictional wetlands on the property. The consultant submits the delineation to the Corps, and the Corps issues a No Permit Required letter.  All of this occurs within the due diligence period.

Relying upon the No Permit Required letter, the buyer proceeds to closing.  A few months later, he submits development plans for a single-family home.  He is shocked to learn that the Army Corps has reviewed the plans, determined that wetlands are present on the lot, and rescinded the No Permit Required letter.  In a case like this, the buyer (assuming he still wants to build on the lot) may be required to pay for very expensive wetlands mitigation which he did not anticipate when making the decision to purchase the land.  Worse, the buyer may learn that wetlands are present at the property to such an extent as to render the lot unbuildable. 

This scenario is just one example of the issues which can arise with wetlands and/or waterfront property.  If you are considering purchasing real estate on, or anywhere near, a waterbody, you would be well served to consult a experienced riparian rights/environmental attorney before making the purchase. 

Shutterstock: Zhao Jiankang

Conclusion

The attorneys on our Waterfront Property Law Team have strong connections and significant legal experience.  As you can tell from the time a few years ago when one of our attorneys stripped off his shoes and got in the water to fend off a criminal enforcement action being filed against our client, we go the extra mile for our clients, if that is what is needed to get the job done.    

Contact Bryan if you would like to see him publish more information on the law of wetlands. Of course, you can always contact Bryan for his advice and assistance in connection with needs specific to your particular situation.