Condemned Beach Houses: How the Law Takes Your Home After Mother Nature Takes Your Land

In the wee hours of the morning of September 13, 2008, a howling Hurricane Ike devastated the Texas Gulf coast, wiping out much of Galveston and nearby communities. For those whose homes somehow made it through Ike's fury, however, there was more than physical devastation to deal with. Many homeowners were about to find themselves on the wrong side of the law. That law was the Texas Open Beaches Act.

Originally enacted in 1959, the Texas Open Beaches Act defines the area between the average low-tide line and the "line of vegetation" (sometimes referred to as the average high-tide line) as "public beach." It then declares that the public has unfettered and unrestricted access to, and use of, this public beach.

Texas Open Beaches Act

In the space of a few hours---during which massive winds, waves and storm surge churned and ate up huge chunks of beachfront---many homeowners in the Galveston area suddenly found their homes on public property. Under the Texas Open Beaches Act, these homes could now be condemned and removed by the state, without full compensation to the owners, for the purpose of preserving the use of Texas' public beaches by the public. California, Oregon and North Carolina have laws that are similar in effect.

The result seems harsh, and even more so when homeowners have been hit hard by a natural disaster that caused wide-spread damage and even loss of life. But homeowners subject to the law were on notice of this particular financial risk of buying oceanfront property. According to Texas officials, quoted in the Los Angeles Times, an explanation of the law was included in the real estate purchase contract, in the deed to the property, and in the terms of the title insurance policies that could be issued for such homes.

Moreover, also according to the L. A. Times, Texas had invoked the Texas Open Beaches provisions on a large scale at least once previously: after Hurricane Alicia slammed into the Gulf coast in 1983. By the time Hurricane Ike hit in 2008, exponentially more homes had been built on the Texas coast than had been there in Alicia's path.

Finally, according to the Surfrider Foundation's State of the Beach Report, on September 12, 2007, a Texas State District Court had upheld the Texas Open Beaches Act and authorized removal of 16 houses on the public beach in Surfside, Texas.

Erosion on the east coast of the United States

The east coast of the United States also experiences substantial erosion. Christina Abel, writing in Shorelines, reports that near Jacksonville, Florida, the beaches of South Ponte Verde and Vilano have had consecutive years averaging 10-20 feet of erosion. Some properties' foundations are so vulnerable, the buildings have been condemned. One homeowner lost 10 feet of backyard beach in a matter of days. Farther north along the east coast, South Carolina and North Carolina beaches shift and sometimes shrink with every storm.

The Outer Banks of North Carolina are beautiful and inspiring, but they also are huge, shifting piles of sand and shell. As barrier islands, the Outer Banks are unconsolidated land masses---that is, unlike volcanic islands and seamounts, they are highly moveable. And move they do.

The most famous example of erosion in the Outer Banks is probably that that led to the $9.5 million project to move the Cape Hatteras lighthouse 2900 feet inland, so as to escape the fate of it falling into the sea. More recently, the house made famous in the 2008 Nicholas Sparks' film, Nights in Rodanthe, was condemned for health and safety reasons following an episode of severe beach erosion.

North Carolina and Oceanfront Setbacks

North Carolina uses oceanfront setbacks to deal with the effect of beach erosion on private and public property. The law states various formulas used to determine if and where, in relation to the oceanfront, homes and commercial buildings can be built or rebuilt.

According to the North Carolina Division of Coastal Management, the higher the annual average erosion rate, the greater the required setback---and the greater the practical likelihood that, if substantial erosion occurs, the home will not be permitted to be rebuilt at all.

If the cost of repairs to a home exceeds 50% of the home's value, the project is treated as rebuilding, rather than repairing the home. To get a rebuilding permit, the home must meet all current setbacks and other regulations. If a homeowner's land is washed out into the Atlantic Ocean, he may not be able to meet those setback requirements. He simply might not own enough land to back up his new home the required distance from the tide line. In essence, then, he cannot rebuild.

How do states "take" a beach house?

The first way states "take" a beach house is through laws, such as the Texas Open Beaches act and North Carolina's regulations on Ocean Hazard Areas. Under these types of laws, the state seizes homes, for example, because they are on public property, or, based on required setbacks, the state does not grant the necessary permits for the homes to be rebuilt after being damaged and subjected to beach erosion.

States also may condemn homes for health and safety reasons, as seen in this typical statute from Kingsville, Texas. In this situation, the title does not transfer to the government, but an order to vacate can be imposed until the deficiencies are fixed. (And, yes, the homeowner must keep paying his mortgage even though his home is condemned.)

Beachfront properties can be condemned under the same criteria as any other home. If the septic system is damaged, for example, or the home is structurally unsound, municipalities will condemn the home. When a home is condemned for health and safety reasons, the homeowner typically receives little or no compensation from the state. (Some homeowners may have success with a claim to FEMA or other federal programs.)

Finally, a state may use its power of eminent domain to "take" a beach house on land that has been subjected to substantial erosion. Eminent domain is the power of a government to acquire private property for a public use, even if the private property owner does not wish to sell.

There are different forms of "takings" under eminent domain and not all apply in the situation of coastal homes on eroded lots. Some jurisdictions, however, have eminent domain powers specifically for this situation. One 2001 law that covers the North Carolina beach communities of Surf City, Topsail Beach, Kill Devil Hills, Nags Head and Kitty Hawk, among others, grants "the power of eminent domain for purposes of engaging in beach erosion control . . . and public beach access."

Is the homeowner compensated if the state takes his home through eminent domain?

Unlike seizure, rebuilding restrictions, and condemnation based on public health and safety, when states exercise powers of eminent domain (typically for reasons other than public health and safety), the private property owner is entitled to "just compensation."

That sounds hopeful until you realize that "just compensation" is determined by the market value of the property. A beach house that has no beach in front of it, and which is completely cut off and uninhabitable, may have no actual market value. Still, questions are never quite that straightforward in law, and the vagaries of litigation sometimes produce curious results.

According to the Surfrider Foundation, in March of 2006, the North Carolina town of North Topsail Beach used its power of eminent domain to order the demolition of eight damaged duplexes. JD News reported that the duplexes were practically standing in the ocean after the 2005 Hurricane Ophelia chewed up the beach. The properties lost at least 60 feet of beach that had been in front of them, and the little strip of beach that was left sunk approximately eight feet, exposing the homes' foundation. No one could live in the homes; there was not even anywhere to park. Utilities were, quite literally, cut off.

The homeowners sued, claiming the properties were worth more than $800,000. North Topsail Beach had offered each homeowner $1,000. In the end, the town and the homeowners agreed to a $1.16 million settlement.

"Your Results May Vary"

While that must have been a happy day for the relieved North Topsail Beach homeowners, the usual warning applies: "Your Results May Vary." Although homeowners whose property has been damaged by beach erosion may receive some compensation from eminent domain, or financial assistance through FEMA or other state or federal programs, there are no guarantees.

Moreover, case studies such as this one---which resulted in the town paying out $1.16 million for uninhabitable private homes then constituting a public nuisance on public property---will lead more jurisdictions to avoid eminent domain in favor of enacting Texas-style "free access to and use of public beaches" type of laws.

Even so, when it seized the 16 Surfside, Texas, homes under the Texas Open Beaches Act, the Texas State Land Commissioner offered financial assistance to the homeowners (which some homeowners turned down, opting instead for litigation). Still, such financial assistance may not be mandatory under the applicable law, and certainly it is unlikely to amount to the value of the home.

Will insurance cover the loss of a home to beach erosion?

Insurance is a private contract and whether a homeowner is entitled to compensation in any given circumstance is determined by the terms of that contract. Certainly, as noted in this example regarding South Carolina law, insurance could compensate homeowners in the case of damage or loss from weather-related beach erosion.

The key questions, according to South Carolina Real Estate Guide, are whether the coverage purchased by the homeowner includes the type of disaster that actually damaged the home and caused the loss. This is another point that appears straightforward, but which actually may be grounds for controversy. For example, in the aftermath of Hurricane Katrina, policyholders, the Broussards, sued State Farm to clarify a question of "wind vs. water damage" coverage. An additional question went to who, the policyholder or the insurer, had to prove the cause of damage.

In general, according to Attorney Paul E. Deloughery, whether insurance will indemnify a homeowner for his loss also depends on whether the policy was for "replacement cost" or "actual cash value." As in eminent domain, determining actual cash value is more likely than not to result in a substantially lower payout than a payout based on the replacement value of the home.

Is buying a beachfront home worth the risk?

That's the easiest question I've had all day: the answer is "yes" . . . and "no." In other words, it really depends on the individual homeowner. It's a balancing act between how much the ocean might be "calling your name" and the degree of risk, and even devastating financial loss, you can tolerate.

The important thing is to make an informed decision. Arm yourself with a thorough understanding of the terms of your real estate purchase contract, the provisions in your deed, the restrictions in your title insurance and the approach your state takes in its applicable laws. With knowledge, planning and appropriate risk management, a day at the beach can still be all it's cracked up to be.

Important disclaimer: The information provided in this article does not constitute legal advice. It is intended and provided for information purposes only. Always consult a qualified attorney regarding your specific questions.

Sources:

"The Texas Open Beaches Act - Applicable Excerpts," Texas Open Beaches.

Michael Graczyk and Cain Burdeau, "Beach erosion from Ike may make homes illegal," Los Angeles Times.

"State of the Beach Report," Surfrider's Foundation.

Christina Abel, "Homeowner Says: 'I'm Really Scared,'" Shorelines.

"Moving the Cape Hatteras Lighthouse," U.S. Department of the Interior National Park Service.

"Rodanthe Beach House Collapses in the Surf," WRAL.

SECTION .0300 - Ocean Hazard Areas (North Carolina).

"Coastal Hazards & Storm Information: What You Should Know About Erosion and Oceanfront Development

." North Carolina Division of Coastal Management.

"North Carolina Beach Erosion: Policies and Guidance," Surfrider's Foundation.

"Coastal Hazards & Storm Information: Rebuilding After a Storm," North Caroline Division of Coastal Management.

"Condemning Property," City of Kingsville, TX.

"Banker's Glossary: Eminent Domain," American Banker.

"Homeowner's Rights," Community Action Network.

"Session Law 2001-36; House Bill 19," General Assembly of North Carolina.

Jerome P. Pesick, "Eminent Domain: Calculating Just Compensation in Partial Taking Condemnation Cases, " Michigan Bar.

"Intelligent Way to Settle Dispute," JD News.

"Will I actually get paid if my South Carolina home is destroyed in a disaster?,"South Carolina Real Estate Guide.

"State Farm® appeals judge's order of punitive damages in Broussard," State Farm.

Paul E. Deloughery, "My house is being condemned," AVVO.