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Addressing environmental permit issues prior to closing.

There are five regional water management districts (WMDs) in Florida that, together with the Department of Environmental Protection (DEP), oversee the water resources of the state of Florida. Jurisdiction over water resources is granted to the WMDs and DEP in F.S. Ch. 373, and WMD jurisdiction is divided on a watershed perspective. (1) Pursuant to the authority in Part IV of F.S. Ch. 373, the five WMDs issued rules in Title 40 of the Florida Administrative Code pertaining to environmental resource permits (ERP) for activities in, on, or over wetlands or other surface waters and the management and storage of surface waters. Fla. Admin. Code R. 40E4.011. (2) Prior to October 1995, the permits issued pursuant to Title 40 of the Florida Administrative Code were referred to as surface water management (SWM) or management and storage of surface water (MSSW) permits. The term surface water is very broad and means water upon the surface of the earth whether contained in bounds created naturally or artificially or diffused. F.S. [section] 373.019(16) (2005). Therefore, most properties in Florida either have an existing ERP, SWM, or MSSW permit or require an ERP. (3)

A SWM system may consist of lakes, swales, culverts, canals, pipes, ditches, other works, or even streets. The SWM system includes areas of dredging or filling. (4) Some SWM systems require affirmative acts of operation such as the running of pump stations or the opening and closing of gates that control the discharge of water. But in the majority of cases, the operation of the SWM system does not require an affirmative act. For example, after a rainfall, water may flow by gravity into a lake system or onto swales. Even though no affirmative act is required for operation of the SWM system, a permit is still generally required from a WMD or DEP pursuant to their authority in F.S. Ch. 373. The jurisdiction of the WMDs and DEP is therefore very broad.

Pursuant to F.S. Subsection 373.416(2), permits for operation and maintenance are permanent and are not affected by the sale or conveyance of the system provided the owner in whose name the permit was granted notifies the WMD or DEP of a change of ownership within 30 days of the transfer. It is important therefore that prior to closing on a purchase of property, an investigation be made to determine if the property has an ERP, SWM, or MSSW permit. Attention to environmental permit transfer issues prior to closing will facilitate site development and prevent many future problems. Unaddressed permit transfer issues typically become complicated after a closing. The problems are even greater if the parcel is conveyed to more than one purchaser, or the entire parcel is not conveyed. Prior to closing, parties are generally willing to work together to resolve permitting issues. The same incentive does not necessarily exist after the closing has occurred.

Determining if Property Has a Permit

In the South Florida Water Management District (SFWMD), a notice of permit is filed in the public records of the county in which the property is located providing notification of the existence of ERP and SWM permits for property in excess of 100 acres, having one or more acres of wetland impacts or more than nine boat slips. Fla. Admin. Code R. 40E-4.101(2). The SFWMD is in the process of rulemaking to extend the public notification to additional permits. This notice does not operate as an encumbrance on the property, but instead provides notification that the SFWMD should be contacted to determine the conditions of the permit. This notification provision has existed only since August 2003. Consequently, the SFWMD should be contacted to determine if the property received a permit prior to 2003 or for smaller projects. The other WMDs do not have similar public notice requirements. Consequently, they must be contacted to determine the status or existence of permits.

Permit Transfer Requirements

While WMD permit transfer rules are important, they are not burdensome. The permittee must notify the WMD in writing within 30 days of the transfer of any interest or control of permitted property. The notification itself does not operate to transfer the permit. Fla. Admin. Code R. 40B-4.1130, 40C-1.612, 40C-4.351, 40D-4.351, and 40E1.6105. While notification is not required until after the property transfer occurs, the more prudent course is to address the transfer issues prior to closing.

Transfer of the permit requires a written statement from the proposed new property owner stating that the new owner has received a copy of the permit and an acknowledgment by the new owner that the new owner accepts responsibility for compliance with the permit's terms and conditions. The WMD approves the permit transfer unless the proposed transferee fails to provide reasonable assurances that the conditions of the permit will be met. This is not a burdensome review for the transferee. The WMD determination is limited to a review of the ability of the new permittee to comply with the conditions of the existing permit. For example, in order to demonstrate that it has the legal ability to operate the SWM systems, the proposed transferee must own or have an easement over all the facilities proposed for transfer. The WMD may not review the adequacy of the existing permit conditions. Fla. Admin. Code R. 40E-1.6107(2), and Rule 7.3.1, St. Johns River Water Management District (SJRWMD), Management and Storage of Surface Waters (MSSW) (Applicant's Handbook). (5)

In the SFWMD, until the permit transfer is approved, the original permittee remains liable for compliance with the permit, even if the original permittee no longer owns or controls the land. Fla. Admin. Code R. 40E-1.6107(4) and 40E4.351. Therefore, it is in the best interest of the original owner/permittee to address permit transfer issues prior to the conveyance of the real property in order to avoid continued liability for the proper operation and maintenance of the SWM system.

The SJRWMD rules provide that until the permit transfer is approved, the permittee and any other person constructing, operating, or maintaining the permitted facility shall be liable for permit compliance. Fla. Admin. Code R. 40C1.612. Therefore, until the permit transfer is approved in the SJRWMD, not only will the original permittee be liable for the proper operation and maintenance of the SWM system, but also the new owner, contractor, or operating entity. The Southwest Florida Water Management District (SWFWMD) rules provide that the permittee remains liable for corrective actions required as a result of violations occurring prior to the sale, conveyance, or other transfer of the property. Fla. Admin. Code R. 40D4.351(1)(c).

Transfer of the Permit

The operating entity for the SWM system in many residential developments will ultimately be a homeowners' or property owners' association (HOA). (6) Disputes are common between HOAs and developers regarding the transfer of the permit from the developer to the HOA. Such disputes are reduced if the time frames specified in WMD rules are followed and the permit is transferred when the HOA takes control of the association from the developer.

A registered engineer should certify the project within 30 days of the completion of construction. The certification should be done prior to transferring the permit to the HOA. The engineer's certification acknowledges that the system was constructed in substantial conformance with the plans and specifications approved by the WMD. Rule 10.1, SFWMD Basis of Review for Environmental Resource Permits (B.O.R.); Fla. Admin. Code R. 40C42.028. It is important that the certification be done at the conclusion of construction. If a delay occurs in certification, maintenance issues may develop. For example, side slopes in surface water management lakes may erode and become steep. It is necessary that maintenance issues be addressed before the system can be certified and the permit transferred.

Conversion of Permit from Construction to Operating Phase

A critical prerequisite to conversion to the operation phase is the designation of a responsible operating entity to operate and maintain the system. The entity must have sufficient legal control over all water management facilities authorized in the permit. (7) Fla. Admin. Code R. 40E-4.361(3) and Rule 7.1.1, SJRWMD Applicant's Handbook for Management and Storage of Surface Waters. If the operating entity differs from the original permittee, then the permit transfer rules discussed above must also be complied with.

Within 30 days of the completion of construction of the surface water management system, water management system rules require the permittee to submit a signed and sealed certification from a registered professional indicating that the system has been constructed in substantial conformance with the permit and that the system is ready for inspection by the WMD. (8) Fla. Admin. Code R. 40E-4.361(2) and Rule 10, SFWMD B.O.R. It is not necessary that the entire project be complete before certification, just the SWM system. Consequently, many developers complete and certify the SWM system and then transfer the permit to the HOA, while the developer is still in control of the association. Conversion of the permit to the operating phase while the developer maintains control allows the developer to handle all issues while it has control of the system, thereby avoiding the potential for disputes with the HOA. The HOA also benefits when it takes over control of the association and responsibility under the association documents for operating and maintaining the SWM system because it receives a system that has been certified as being in compliance with the permit.

Conveyance of a Parcel to Multiple Owners or of a Portion of the Parcel

The transfer of a permit is complicated if the parcel is conveyed to multiple owners or only a portion of the parcel is conveyed. If the transferred parcel has an integrated SWM system which serves the entire original parcel, the new owners have three options. First, the permit can be transferred to all the new owners as joint permittees. Second, an easement for the SWM system may be conveyed to a property owners' association or master association in which all new owners are members. Third, separate permits may be obtained.

* Joint Permittees--If the new owners elect to become joint permittees, each owner must agree to be bound by the conditions of the permit. The new owner must exchange cross easements for drainage, when applicable. In the event that one new permittee fails to maintain its portion of the SWM, other permittees must have the ability to enter the other permittees' property and maintain the system. This can be accomplished through cross easements for ingress and egress to land containing the SWM system.

* Property Owners" or Master Association--The new owners may elect to form a master association to operate the SWM system. This requires each of the new owners to transfer an interest in the underlying property to the association. This can be accomplished by transferring title of the underlying property or granting an easement over property containing the SWM system to the association. Fla. Admin. Code R. 40E-4.101.

As a condition precedent to the use of an association, the association requirements set forth by the WMDs must be complied with. Rule 9.2.3, SFWMD B.O.R., contains the general requirements for projects within the jurisdiction of the SFWMD. (9) WMD rules also set forth specific requirements which must be included in the declaration of protective covenants, deed restrictions, declaration of condominium, or other recorded document which sets forth the association's rules and regulations. (10)

* Separate Permits--In order for each purchaser to obtain new separate permits, it will be necessary for the purchasers to work together to accommodate the dependent aspects of the SWM system. For example, if a parcel owned by one new owner flows across the portion of the property of another owner, then a drainage easement may be necessary. Easement issues should be addressed prior to closing, when the serviant owner may have an incentive to accommodate the drainage easement. In the SJRWMD, if the SWM system is not totally independent, the new owners become jointly and severally liable for the entire system.

Consequences of Failure to Timely Transfer Permits

A property owner who fails to transfer the permit remains liable for compliance with the requirements of the permit, even though he or she no longer owns or controls the land or the permitted SWM system. Fla. Admin. Code R. 40C-1.612(5), 40E-1.6107(4), and 40E-4.351. Therefore, if an enforcement action is initiated by the WMD for violation of a permit condition, the original owner will be named in the action. Penalties and costs will normally be assessed against the original owner, since under WMD rules the original owner is still responsible for permit compliance.

When a developer fails to transfer the permit to an HOA at the time the property containing the SWM system is transferred to the association, additional problems arise. Over time, normal wear and tear on the system will occur. One common problem is the erosion of lake side slopes. While the lake side slopes may have satisfied rule and permit specifications when built, the project cannot be certified until the erosion is addressed.

The HOA will be reluctant to accept the permit for the SWM system until all maintenance issues are addressed, even though it may have been in control of the system and responsible for maintenance during the time period when the maintenance issues arose. An original developer which is no longer in control of the property containing the SWM system, may find it very difficult to address maintenance issues. For example, if lake side slope erosion occurs behind residences, the residential owners may object to work which would restore the slopes to a condition which would satisfy permit and rule requirements.

Liability of the New Owner

A new owner who has purchased property but has not accepted the permit is not without exposure. WMD rules are violated if an owner operates the SWM system without a permit. Pursuant to Rules 40C4.041 and 40E-4.041 of the Florida Administrative Code, it is unlawful to operate a SWM system without first having obtained a permit from the WMD.

Operation of a SWM system does not always require affirmative action by the new owner. The flow of rainwater into storm water management ponds is considered operation of a SWM system. Consequently, enforcement action may be instituted against the new owner for operating a system without a permit. The enforcement action may include penalties and costs pursuant to F.S. [section] 373.129 (2005). It is in the best interest of both the original and new property owners to address permit transfer issues prior to or at the time of closing.

Conclusion

It is important to address permit transfer issues prior to closing, or at closing, in order to avoid a multitude of future problems. It is advantageous to the original permittee to finalize the transfer in order to avoid continued liability for property it no longer controls. It is advantageous to the new property owner to address permit transfer issues in order to avoid liability for passively operating the property's surface water management system without a permit.

(1) The division of responsibility between the WMDs and DEP is set forth in the Operating Agreement Concerning Regulation under Part IV, FLA. SWAT. Ch. 373 and AQuaculture General Permits under FLA. SWAT. [section] 403.814 effective December 1998. This agreement is incorporated by reference into the Florida Administrative Code at FLA. ADMIN. CODE R. 40C-4.091; 40D-4.091; and 40E4.091.

(2) Rules of the WMDs are found in Titles 40A through 40E of the Florida Administrative Code. The Northwest Florida Water Management District (NWFWMD) was not required to immediately adopt the ERP program because of limitations on its ad valorem tax base. Because of these financial circumstances, NWFWMD entered into an agreement under which DEP regulates the majority of the surface waters and wetlands in that jurisdiction.

(3) Exemptions from permitting are set forth in FLA.ADMIN. CODE R. 40B-4.1070; 40C-4.051; 40D-4.051; and 40E-4.051.

(4) A surface water management system is defined as a "stormwater management system, dam, impoundment, reservoir, appurtenant work or works, or any combination thereof. The terms 'surface water management system' or 'system' includes areas of dredging or filling as defined by FLA. STAT. [section] 373.403(13) and (14), respectively." FLA. ADMIN. CODE R. 40E-4.021(33). The term stormwater management system is defined as "a system which is designed and constructed or implemented to control discharges which are necessitated by rainfall events, incorporating methods to collect, convey, store, absorb, inhibit, treat, use, or reuse water to prevent or reduce flooding, overdrainage, environmental degradation, and water pollution or otherwise affect the quantity and quality of discharges from the system." FLA. SWAT. [section] 373.403(10)(2005).

(5) The Southwest Florida Water Management District has stricter requirements that in order to transfer an ERP or SWM permit for operation and maintenance, the land use must remain the same.

(6) Other acceptable operating entities are local governmental units; Municipal Service Taxing Units; 298 Water Control Districts; FLA. SWAT. Ch. 190, Community Development Districts; and FLA. SWAT. Ch. 170, Special Assessment Districts. Rule 7.1.1 SJRWMD MSSW Handbook; Rule 9.1, SFWMD B.O.R.

(7) In the SFWMD, operating entities must meet the requirements of [section] 9, SFWMD B.O.R.

(8) Certification must include a certification that the system has been constructed substantially in conformance with the permitted plans and specifications; a certification that deviations from the permitted plans and specifications will not prevent the system from functioning in compliance with rule requirements (FLA. ADMIN. CODE R. 40C-42.028); "as built" drawings for any deviations or changes made during construction (FLA. ADMIN. CODE R. 40E-4.361); and a certification that required mitigation is complete (Rule 10.3, SFWMD B.O.R.).

(9) If the permit is transferred to a master association or property owners' association, the association must have the power to: (a) own and convey property; (b) operate and maintain common property, specifically property containing the surface water management system; (c) establish rules and regulations; (d) assess members and enforce assessments; (e) sue and be sued; (f) contract for services; (g) all the homeowners, lot owners, property owners, or unit owners must be members of the association; and (h) the association shall exist in perpetuity; however, if the association is dissolved, the articles of incorporation must provide that the property consisting of the surface water management system and the right of access to the property containing the surface water management system shall be conveyed to an appropriate agency of local government. If it is not accepted, then the surface water management system must be dedicated to a similar nonprofit corporation.

(10) Rule 9.2.4, SFWMD B.O.R., also requires that the documents include rules and regulations stating: (a) it is the responsibility of the association to operate and maintain the surface water management system; (b) the surface water management system is owned by the association or described therein as common property; (c) that there be a method of assessing and collecting the assessment for operation and maintenance of the surface water management system; (d) any proposed amendment to the association's documents, which would affect the surface water management system must be submitted to the district for a determination of whether the amendment necessitates a modification of the permit; (e) the rules and regulations be in effect for at least 25 years with automatic renewal periods thereafter; and (f) if wetland mitigation monitoring will be required and the operational entity will be responsible to carry out this obligation, the rules and regulations shall state that it will be the association's responsibility to complete the task successfully, including meeting all conditions associated with mitigation maintenance, and monitoring.

Susan Roeder Martin is a senior specialist attorney with the South Florida Water Management District. Prior to joining the SFWMD, she was an attorney and congressional lobbyist/government affairs representative with Florida Power & Light Company. Ms. Martin graduated from the University of Florida College of Law, with honors, in 1983 and received her Bachelors of Science degree from Florida Atlantic University.

This column is submitted on behalf of the Environmental and Land Use Law Section, Robert D. Fingar, chair, and Martha M. Collins, editor.
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Title Annotation:Florida
Author:Martin, Susan Roeder
Publication:Florida Bar Journal
Date:Dec 1, 2005
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