Napa’s New Winery Compliance Rules Preceding Strict Enforcement

Earlier this month, the Napa County Board of Supervisors completed their review of the Agricultural Protection Advisory Committee’s (APAC) recommendations to improve agricultural protection, primarily by imposing new restrictions and limitations on wineries (See approved list of Board actions on APAC recommendations). One of the recommendations approved by the Board was to implement a phased, self-certification compliance program in order to assure wineries are complying with the terms of their use permits and provide greater consistency in how the County enforces code compliance. The Board still needs to formally approve the specifics, but staff anticipates the new three-phase program would go into effect in early 2018.

Phase One: This phase will require all wineries to report their annual production and grape sourcing data to the County. To properly ascertain this data the County will evaluate a winery’s production reports to the Alcohol and Tobacco Tax and Trade Bureau and California Department of Food and Agriculture. The County has taken the position that production related information is confidential and not subject to Public Records Act requests; however, it is likely that certain members of the public will continue their cries for greater code compliance and transparency and seek access to any available data.

In preparation for Phase One, wineries should review the County’s definition of “Production” and its own operations to determine whether they are in compliance with their use permit production limits (See Napa County worksheet regarding interpretation of winery production) and, if applicable, the 75% grape sourcing rule (See Napa County Code § 18.104.250 [“at least 75% of the grapes used to make the winery’s wine . . . shall be grown in Napa County”]). It is important to note that these production calculations are not based on maximum allowed production, but rather on the actual amount of wine made.

Phase Two: The second phase would encourage wineries to meet with County officials for a voluntary review of their use permit. According to the County, the purported purpose of the review is to: “(1) streamline existing use permit conditions of approval; (2) determine existing vested rights; (3) clarify the scope of permitted activities; and (4) consider alternative measures to accommodate marketing activities.” The exact meanings of the stated purposes are difficult to understand right now and the County has not defined any of the terms. However, officials have stated that the reviews would not involve any change to a winery’s legally established vested rights.

How one defines “vested right” could potentially result in disagreement between winery owners and County staff.  For example, staff could take the position that if a winery has not fully utilized its permitted production the winery would have vested rights only to that amount actually produced.  Determinations of vested rights is highly fact-specific so it is difficult to make any general conclusions, but this could be a significant issue for some wineries that currently feel they are not at risk because they have not reached their visitation or production limits. We also anticipate other issues will arise related to interpreting a winery’s historic use permits as the County’s forms and standards have changed over time.

During Phases One and Two, the County will continue to its current practice of randomly auditing 20 wineries per year. Each year the County audits wineries and reports the results of those audits to the Board of Supervisors at the end of each year.  Again, it is unclear how the County the audit may evolve based on the new compliance process.

Phase Three: County officials plan to transition to a practice of strict code enforcement whereby the County will require violators to immediately comply with all applicable requirements. In the past, the County has allowed wineries not operating within the conditions of their use permit to continue such activities if that winery seeks a use permit modification to come into compliance. But now some decision makers have stated that those days “of forgiveness” are over.

While the proposed self-certification program may not go into effect until 2018, Napa County’s wineries should understand the terms of their use permit and any applicable vested rights.

For more information about this and other land use issues, please contact Tom Adams or Jeff Dodd from DP&F’s Land Use Group.

Napa Lot Line Adjustments and Involuntary Mergers

By Tom Adams and Mark Phillips

The Napa County Public Works Department is in the process of preparing amendments to the Subdivision and Zoning Ordinance as it relates to lot line adjustments and certificates of compliance. The changes originally proposed by staff were minor and did not warrant comments. However, during the “stakeholder” review of the changes, the Napa County Farm Bureau suggested that Napa County take this opportunity to amend the merger ordinance to implement the Napa County specific enabling legislation in the Subdivision Map Act (“Map Act”) the state approved in 1997 in recognition of Napa’s extraordinary agricultural land value.

Under the Map Act, Napa County can adopt an ordinance that would authorize the County to require the “merger” of an undeveloped “substandard parcel” as a condition for issuance of a permit or development approval for a contiguous parcel located in the agricultural zoning district and held in common ownership on or after January 1, 1998   A “substandard parcel” is one  that does not meet the current minimum parcel size; generally 40 acres on the valley floor and 160 acres everywhere else.  There are certain exemptions under the Map Act for:

  • Parcels that were created before 1/1/1997 that have been recognized by a certificate of compliance or conditional certificate of compliance.
  • Parcels created by a recorded subdivision or parcel map on or after 12/29/1955.
  • Parcels lawfully created by Record of Survey prior to 2/27/1969.
  • Parcels that have had a consolidated legal description that includes the merger of any underlying parcels that may exist.

(See Government Code Section 66451.22)

County staff is recommending that the Napa County Board of Supervisors refer this request to its legislative subcommittee for consideration. Given the impact that this could have on property values if the County decides to adopt these provisions, property owners should be advised to contact legal counsel to take the necessary steps to confirm that they either meet the exceptions or take other actions necessary to prevent or decrease the likelihood of being subjected to involuntary merger in the future.

Napa Lot Line Adjustments and Involuntary Mergers

By Tom Adams and Mark Phillips

The Napa County Public Works Department is in the process of preparing amendments to the Subdivision and Zoning Ordinance as it relates to lot line adjustments and certificates of compliance. The changes originally proposed by staff were minor and did not warrant comments. However, during the “stakeholder” review of the changes, the Napa County Farm Bureau suggested that Napa County take this opportunity to amend the merger ordinance to implement the Napa County specific enabling legislation in the Subdivision Map Act (“Map Act”) the state approved in 1997 in recognition of Napa’s extraordinary agricultural land value.

Under the Map Act, Napa County can adopt an ordinance that would authorize the County to require the “merger” of an undeveloped “substandard parcel” as a condition for issuance of a permit or development approval for a contiguous parcel located in the agricultural zoning district and held in common ownership on or after January 1, 1998   A “substandard parcel” is one  that does not meet the current minimum parcel size; generally 40 acres on the valley floor and 160 acres everywhere else.  There are certain exemptions under the Map Act for:

  • Parcels that were created before 1/1/1997 that have been recognized by a certificate of compliance or conditional certificate of compliance.
  • Parcels created by a recorded subdivision or parcel map on or after 12/29/1955.
  • Parcels lawfully created by Record of Survey prior to 2/27/1969.
  • Parcels that have had a consolidated legal description that includes the merger of any underlying parcels that may exist.

(See Government Code Section 66451.22)

County staff is recommending that the Napa County Board of Supervisors refer this request to its legislative subcommittee for consideration. Given the impact that this could have on property values if the County decides to adopt these provisions, property owners should be advised to contact legal counsel to take the necessary steps to confirm that they either meet the exceptions or take other actions necessary to prevent or decrease the likelihood of being subjected to involuntary merger in the future.

Drafting Easements Agreements – Practical Considerations and Potential Pitfalls

Paul Carey, a partner in the Litigation department presented on the practical considerations and potential pitfalls of drafting easements in an online webinar designed to educate the legal community.

View Presentation

Drafting Easements Agreements - Practical Considerations & Potential Pitfalls

Napa River’s Low Surface Flow Levels May Affect Napa Wineries & Vintners

Napa County’s agricultural water users rely on both groundwater and surface water flow to provide frost protection and irrigation. Similar to other areas of the state, it is anticipated that Napa vineyard owners will rely on groundwater resources to make up any shortfalls in surface water availability.

Many vintners rely on the surface flows from the Napa River for frost protection, which is a court-adjudicated river. Each party holding water diversion rights under the 1976 court decree is allotted a certain amount of water from the river during a court-defined “frost season” (March 15-May 15). According to the decree, water right holders must cease all diversions from the river when flow levels drop to 10 cubic feet per second (cfs) or less. Napa has a watermaster, appointed by the State Water Resources Control Board, who oversees all diversion activity from the Napa River.

DP&F has collected data from the California Dept of Water Resources (CDWR) and discovered that the Napa River has never dropped below 10 cfs since CDWR began to collect the data in 1993; however it was very close in 1994, 2004, and, most notably, in 2013. (To review the Napa River’s cfs history since 1993, click here.) Due to the low precipitation we have experienced to date and a forecast calling for more sunny days, it is possible that river flows will not meet the 10 cfs level after March 15, requiring the Napa River Watermaster to stop all diversions. Consequently, property owners may have to rely more heavily on groundwater for frost protection and other water needs, to the extent it is a viable option.

For more information, please contact Tom Adams at tadams@dpf-law.com or Jeff Dodd at jdodd@dpf-law.com.

Napa County Winery Audits: What are the odds?

Each year Napa County sends out notices to 20 wineries that they have been selected to be subject to the annual winery audit for compliance with their individual use permits.  The County sent out its most recent notice on January 17, 2014 asking for information about annual production, visitation and custom crush activities.  The letter requests that the information be submitted within 20 days of receipt of the letter, so most of the wineries will have already responded by now.  Planning staff will compile the information and present it to the Planning Commission this summer.
After the Commission considers and discusses this year’s audit they will select a new list of 20 wineries for next year’s audit.  The names of the audited wineries are kept confidential.
Some winery owners may wonder what the chances are they will be picked for an upcoming audit.  With over 430 permitted wineries and only 20 selected to be analyzed, some owners may be comfortable that the chances are fairly slim.  Actually, they should not get too comfortable, because once selected for an audit, a winery is exempt from future audits for the next 7 years.  That means that 140 wineries are ineligible for being audited in any given year, which increases the chance of the remaining wineries to be chosen.  On average, about one out of every 14 wineries will be chosen to be audited in any given year.

St. Helena City Council Rescinds Amendments to Small Winery Ordinance

St. Helena’s City Council unanimously voted to approve an emergency ordinance repealing recently passed amendments to the Small Winery Ordinance. We wrote about this matter earlier in the week. Tuesday’s vote prevents the amendments from being put on the November ballot as a referendum item, and effectively reopens debate regarding the proposed amendments.

 

A video of Tuesday’s meeting is available on the City Council website.

 

St. Helena City Council Will Consider Rescinding Amendments to Small Winery Ordinance

St. Helena’s City Council will hold a hearing on Tuesday, February 11 to consider repealing amendments to the Small Winery Ordinance approved just a few weeks ago after a months-long process.
From May – August 2013, the St. Helena Planning Commission held four hearings to consider amending provisions of the St. Helena Municipal Code that govern small wineries, and ultimately recommended that the City Council adopt an ordinance to amend the Municipal Code.  The City Council also held a number of hearings starting in September 2013 to consider amendments to the Municipal Code.  On December 10, 2013, the Council introduced the proposed amendments, and on January 14, 2014, the Council approved them by a 4-1 vote.  The amendments (contained in Ordinance Nos. 2014-1 and 2014-2) were to go into effect 30 days thereafter. 
During the Council’s January 28, 2014 meeting, opponents of the Ordinance urged the Council to rescind the Ordinance and stated that they were circulating a referendum petition to place the Ordinance on the November ballot as a referendum item.   If the petitioners gathered the required number of signatures, the Ordinance will be suspended pending the outcome of the November vote.
Last week, St. Helena’s interim planning director submitted a staff report recommending that the Council repeal the Ordinance and “reopen the review process to encourage an even broader community involvement and attempt to find new alternatives addressing most if not all concerns of the public.”  The Staff Report as well as the amendments approved on January 14, 2014 can be found here:  http://www.ci.st-helena.ca.us/sites/default/files/11%20Winery%20Ord.pdf
The City Council meeting is open to the public, and will commence at 6pm at Vintage Hall on the campus of St Helena High School, 465 Main Street.  The agenda for the meeting can be found here:  http://www.ci.st-helena.ca.us/sites/default/files/2%20Agenda_0.pdf.

New Legislation to Help California Grapegrowers Collect

To be a winegrape buyer you have to get a processors license from the California Department of Food and Agriculture’s market Enforcement Branch (the “MEB”).  When a buyer doesn’t pay for the grapes though, the seller can resort to a lawsuit or the seller can file a complaint with the MEB under the Processors Law. (Cal. Food & Ag. Code Sections 55521 et seq.)  Under the Processors Law the MEB’s hammer has been the suspension or revocation of a winery’s processors license.  Pay the grower what is owed or MEB may shut down your processors license, rendering a defaulting buyer technically unable to make or sell wine.


That may sound simple enough, and the hammer is very real, but the punishment exacted may not be proportionate to the harm done.  Suspending or revoking a processors’ license, even temporarily, may not actually get the grower paid quickly, and has actually had the result of some defaulting buyers simply ignoring the MEB’s decision unless and until they can afford to pay.  A few wineries have just shut down instead of paying, the MEB’s suspension being the last straw.   

Through AB 907, Assembly Speaker pro Tempore Fiona Ma has proposed changes to the Processors Law that would give the MEB greater latitude to fashion remedies through fines and assessments of administrative costs against wineries that don’t pay their growers.  The fines would be up to $10,000, and the recovery of administrative costs would be assessable up to $6,000. Another key amendment proposed by AB 907 is allowing the MEB to require a winery that has had problems paying its growers to put up a surety bond in order to keep its license.  Currently, the MEB can only require a guaranty of payment from a processors’ license applicant, with the recession teaching too many creditors the hard lesson that guaranties are not always worth the paper they are written on.  Posting a surety bond is a pretty simple arrow, and a cost-effective one, to add to the MEB’s quiver, and one that is common in many other industries. 

While grower organizations are in favor of AB 907, winery organizations are tepid toward it.  But, there really hasn’t been a hue and cry about AB 907, which may be because winery organizations don’t want to waste capital at the Capitol on something that really will only affect a relative handful of grape buyers anyway. 

AB 907 is currently referred to the Senate Agriculture Committee for further deliberation.  We’ll keep apprised as AB 907 goes through volatizing.


For further information on business law matters, including grape purchase contracts, contact Scott Greenwood-Meinert at scottgm@dpf-law.com. 
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Update on North Coast Frost Protection Rules

In February, we reported that regulations slated to be enforced against grape growers in the Russian River watershed during the frost protection season had been postponed pending court action on a legal dispute over their legitimacy.  We’ve been monitoring that case and wanted to provide readers an update as to status.  Currently, the case is scheduled to be heard starting June 28 in the Mendocino Superior Court, following several delays.  We’ll keep you posted on the outcome of the hearing as soon as it’s available.
For more information on the legislation or assistance with other grower issues, please contact Dickenson, Peatman & Fogarty at info@dpf-law.com
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Courts Postpone Russian River Frost Protection Rules – For Now

Grape growers in the Russian River watershed were granted at least temporary relief from controversial new frost protection regulations earlier this month.  The regulations, originally due to be enforced starting March 15, were postponed by a Mendocino County judge pending the outcome of a trial on the merits set for March 23.  A similar action was filed in Sonoma County, but a Sacramento judge has ruled that the cases should be consolidated and the Sonoma County case moved to the Mendocino court.  The regulations affect growers in parts of Mendocino and Sonoma counties who draw water for frost protection from the Russian River, its tributaries, or from groundwater sources pumped within the Russian River watershed that are hydraulically connected to the Russian River stream system.
Under the new law, each grower is required to submit a water management plan to the State Water Resources Control Board (SWRCB) by Feb 1 or join a larger water management plan.  Growers who fail to do so would be prohibited from spraying vines for frost protection between March 15 and May 15.  Those who are part of an approved water management plan must submit data reflecting the days when water was used for frost protection, the acres protected and hours of use.
The purpose of the legislation is to prevent “stranding mortality” of endangered salmonids along the Russian River.  Stranding mortality is believed to occur when the levels of water in the river rapidly decline, leaving the fish stranded.  Regulatory agencies have identified frost protection measures by grape growers involving overhead sprinklers as a primary cause of stranding mortality.
The legislation is controversial.  Growers view compliance with the regulations as unnecessarily expensive and burdensome, and argue that they are already taking the necessary steps to prevent stranding mortality without the need for regulation forcing them to do so.  Adding to the controversy is the fact that many growers view the evidence supporting the need for the legislation as tenuous at best.
The SWRCB has urged growers to voluntarily comply with the new regulations despite the Mendocino court’s ruling.  With the restricted frost protection season rapidly approaching and the status of the regulations uncertain, growers are left in limbo for the time being.
For more information on the legislation or assistance with other grower issues, please contact Dickenson, Peatman & Fogarty at info@dpf-law.com .
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Aggressive State Stream Diversion Enforcement Comes to Napa River Watershed

A number of property owners in Napa County, including wineries, recently have received a form letter from the State Water Resources Control Board entitled, “NOTICE OF POTENTIAL UNAUTHORIZED DIVERSION AND USE OF WATER, AND FAILURE TO FILE A STATEMENT OF WATER DIVERSION AND USE FOR DIVERSION OF WATER IN NAPA COUNTY.”
The letter states that the Board has identified a reservoir on the subject property that appears to be on a “class I, class II, or class III stream,” but has determined that there is no record of a permit authorizing diversions from the stream into the reservoir.  (A class I stream is a stream where fish are always or seasonally present, a class II stream is a stream where fish are not present but certain aquatic species exist (frogs, salamanders, benthic insects), a class III stream does not support aquatic life.)  The notice spells out the various civil fines for unauthorized stream diversions ($1,000 for failure to file a statement of diversion, plus $500 per day the violation continues if a statement is not filed within 30 days of Board notice), and gives the property owner three options:
1.         Prove that you no longer own the property, or that there is in fact no reservoir on the property;
2.         Prove that you indeed do have the appropriate permit or water right authorizing the diversion, or that you have been filling the reservoir with purchased water, groundwater, or other water not subject to the Board’s jurisdiction; or
3.         Take corrective action within 60 days.
What is “corrective action?”  The Board states that, “[n]ormally, an unauthorized diversion can be stopped, removed, rendered incapable of storing water, or legalized through the appropriative water right permit process.”   Unfortunately, if a property owner wishes to apply for a permit to legalize an existing unauthorized diversion, the Board’s “Policy for Maintaining Instream Flows” (see here:  www.waterboards.ca.gov/plans_policies/) states that after May 5, 2011, it will no longer approve water rights applications for reservoirs built with an onstream dam on streams designated as a class I or class II stream (see definitions above).
There is also the question of whether the Board is even correct in assuming that the subject reservoirs are the result of stream diversion.
The Board’s website may be found here:  www.waterboards.ca.gov/waterrights.
For more information or further assistance on land use or water law matters contact Dickenson, Peatman & Fogarty at info@dpf-law.com
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Vineyard Property:The Not So Common Sense of Preventing Prescriptive Easments – Part II

This is the second part of a two part post discussing prescriptive easements.
Last time we talked about how one of two neighbors (“Joe”) should be careful not to compromise or lose his claim to a prescriptive easement to continue using a road on his neighbor’s (“Jane’s”) property by using not so common, common sense. This time we’ll talk about what Jane could do to protect her property from prescriptive easements.
Readers will recall from the last blog (or may already know), that a prescriptive easement is a legal right of access that arises from longstanding (at least 5 consecutive years) open use of property, hostile to the property owner’s rights or under claim of right, including a claim based on a mistaken belief that a legal right already existed. What, you may ask, can an owner like Jane do to protect her property from the creation of such an easement if she doesn’t object to Joe’s use when it first began and doesn’t want to lock Joe out or sue him if he refuses to stop using the road on her property?
There are three ways to protect against prescriptive easements in a situation like this: first, Jane and her predecessor could have posted statutorily prescribed signage on their property (Cal. Civil Code section 1008); second, Jane and her predecessor could have recorded and served a statutorily prescribed Notice of Consent to Use of Land (Cal. Civil Code section 813); and/or third, Jane and her predecessor could have approached Joe when his use first began to confirm that his use was permissive, not hostile. It is important to note, however, that the two described statutory options offer only prospective protection against prescriptive easements. What that means is this: If the prescriptive easement had already come into being before the signs are posted or the notice is served and recorded, then the signs and notice will not defeat that easement. This caveat is the subject of the postscript at the end of this blog.
Posting signs: Under section 1008, a property owner may post signs at each entrance to his/her property or along the property boundary at intervals of not more than 200 feet.  The sign must read substantially as follows: “Right to pass by permission, and subject to control, of owner: Section 1008, Civil Code.”  These signs give notice to the world of permission to pass onto the property, which defeats any claim of adverse use.  (Aaron v. Dunham 41 Cal.Rptr.3d, at 36.)  The section 1008 signs must be posted by the property owner or his/her agent, not by a lessee.  (Aaron v. Dunham 41 Cal.Rptr.3d, at 37-38.) Section 1008 reads in full as follows:
No use by any person or persons, no matter how long continued, of any land, shall ever ripen into an easement by prescription, if the owner of such property posts at each entrance to the property or at intervals of not more than 200 feet along the boundary a sign reading substantially as follows: “Right to pass by permission, and subject to control, of owner: Section 1008, Civil Code.”
            The advantage of this procedure is that no direct communication needs to be given to known adverse users (which in some people’s view encourages further use). The disadvantage of this procedure relates to proof of compliance with the statute. In that regard, it is not uncommon for such signs to be removed (particularly in cases of acrimonious neighbor relations), thus making proof of compliance with the statute more difficult. For that reason, when clients elect to use this procedure to protect their properties, I recommend that they or someone working for them keep a written record (like a log book with dated photographs) beginning when the signs were first posted, and continuing through periodic inspections at regular intervals such as every month or every 6 months.
Notice of Consent: Section 813 allows a property owner to record and serve a Notice of Consent to Use of Property. Such a notice creates a conclusive presumption that any subsequent use of the property within the scope of the notice will be deemed to be permissive and will not give rise to a private prescriptive easement. The full text of that statute appears below:
The holder of record title to land may record in the office of the recorder of any county in which any part of the land is situated, a description of said land and a notice reading substantially as follows: “The right of the public or any person to make any use whatsoever of the above described land or any portion thereof (other than any use expressly allowed by a written or recorded map, agreement, deed or dedication) is by permission, and subject to control, of owner: Section 813, Civil Code.”
The recorded notice is conclusive evidence that subsequent use of the land during the time such notice is in effect by the public or any user for any purpose (other than any use expressly allowed by a written or recorded map, agreement, deed or dedication) is permissive and with consent in any judicial proceeding involving the issue as to whether all or any portion of such land has been dedicated to public use or whether any user has a prescriptive right in such land or any portion thereof. The notice may be revoked by the holder of record title by recording a notice of revocation in the office of the recorder wherein the notice is recorded. After recording a notice pursuant to this section, and prior to any revocation thereof, the owner shall not prevent any public use appropriate thereto by physical obstruction, notice or otherwise.
In the event of use by other than the general public, any such notices, to be effective, shall also be served by registered mail on the user.
The recording of a notice pursuant to this section shall not be deemed to affect rights vested at the time of recording.
The permission for public use of real property provided for in such a recorded notice may be conditioned upon reasonable restrictions on the time, place, and manner of such public use, and no use in violation of such restrictions shall be considered public use for purposes of a finding of implied dedication.
            The advantage of recording such a notice is that proof of compliance with the statute will always be possible since the notice will be a matter of public record. Care should be taken, however, to be sure to include a proof of service with the recorded notice (demonstrating compliance with the service requirements of the statute) so that such proof also remains a matter of public record. The disadvantages of this alternative are, in my opinion, that: (1) where the use is by persons other than the general public (i.e., repeated use by known individuals such as  neighbors) the notice must also be served by certified mail on those known adverse users, thereby telling them that they have permission to continue their use (which some property owners don’t like to do); and (2) the statute prohibits the landowner recording the notice from interfering with the permitted use “by physical obstruction, notice or otherwise” until the notice of consent is revoked. Although I have not found any appellate decision determining the effect of any such subsequent interference, I believe that if ever raised on appeal, California courts will hold that such interference eliminates the protection from prescription otherwise provided by the statute (it is also possible that a trial court would reach the same conclusion even in the absence of guiding precedent given the plain language of the statute, although I have seen at least one trial court refuse to do that).
Express permission: Express permission is the quickest, most effective and least expensive solution to the problem of a potential prescriptive easement, yet it is often the last option considered if it is considered at all. Simply put, if Joe in our example acknowledges in writing to Jane (or her predecessor) that his use is and has been permissive (and is thus not hostile or adverse), then Joe’s use will not ripen into a prescriptive easement so long as Joe does not later expressly repudiate that permission and begin and complete a new 5 year prescriptive cycle of use. A unilateral offer of permission, however, is not sufficient, unless it is extended pursuant to the recorded notice or posted sign statutes discussed above. Instead, the potential prescriptive user (Joe, in our example) must acknowledge and accept the permission for this alternative to be effective. Given that proof is the measure of success, the acknowledgment should be written, although the form of the writing can be as simple as a signed letter or as formal as a recorded license agreement including indemnity, insurance and hold harmless provisions.
            If the express permission route is followed, however, it is important to remember that permission will only be effective to defeat claims by the person acknowledging permission and not claims by other possible prescriptive users who might not be known, but whose use is sufficiently open and adverse to qualify as prescriptive use. Therefore, it is usually best for someone in Jane’s position to pursue more than one solution.
            Postscript: In the last blog I mentioned a principle called “vesting.” Simply put, once 5 years of the requisite hostile use has passed, a prescriptive easement will become fixed and enforceable (i.e., it will “vest”), such that any later statutory signs or recorded notice will not defeat that easement. However, an express agreement with the neighbor (“Joe” in our example) acknowledging that the present AND historic uses are and have been permissive can, if properly drafted, offer such protection. So what could Jane have done in our example to protect herself from a previously perfected prescriptive easement in Joe’s favor (remember, under our facts, Joe had been using the road for more than 5 years before Jane acquired her property)? Unfortunately, there is not much Jane could do except to spot the issue during the due diligence period under her contract to purchase the property, and then to either: (1) ask her seller to secure a written permissive use agreement from Joe, or quiet title against any claim Joe might make, either by court action or negotiated quitclaim deed; (2) ask her title company to insure against any such claim by Joe (hard to get, but possible); and/or (3) negotiate a reduction in the purchase price to offset the actual or potential existence of a prescriptive easement.

For more information or assistance on real property issues contact Paul Carey at pcarey@dpf-law.com

Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Vineyard Property: The Not So Common Sense of Prescriptive Easements – Part I

This is the first part of a two part post discussing prescriptive easements.
Common sense – that’s what guides most of us, most of the time, and that’s a good thing. However, when it comes to protecting property rights, common sense solutions can sometimes be dangerous. This is because some rules of property law are counterintuitive, such as the rules relating to prescriptive easements. (A prescriptive easement is a legal right of access that arises from longstanding open use of property, hostile to the property owner’s rights or under claim of right, including a claim based on a mistaken belief that a legal right already existed.)
Take, for example, the case of the property owner (we’ll call him Joe) whose neighbor (we’ll call her Jane) told him he could no longer use an access road that crossed Jane’s property because Jane intended to plant vineyard over the road and surrounding area. Joe, however, had been using that road for over 20 years to service a vineyard on his property. For the first 15 years Joe had been using the road, he believed he had a right to use it and he had never asked permission from Jane or her predecessor. In addition, for the whole time Joe had been using the road, neither Jane nor her predecessor had ever taken steps to protect their property from the creation of a prescriptive easement. (Those steps are a topic for a later blog.) Under the rules of law relating to prescriptive easements Joe could have protected his right to continue using the access road in dispute, but his lawyer’s ability to do that after the dispute arose was compromised by the fact that Joe had previously pursued what he believed to be a common sense solution to his problem a number of years before he sought legal advice.
Specifically, a few years before the dispute arose with Jane, Joe discovered that he did not have a deeded easement over the road in question. Common sense told Joe he should do something to confirm and preserve his right to use the road. As Joe put it when he later explained it to his lawyer: “Don’t worry, when I found out I didn’t have a deeded easement, I made sure I protected my right to use the road by contacting my neighbor (Jane’s predecessor) and confirming that I had his permission to use the road. I then documented that permission in a letter.” Pleased with his proactive approach to the problem, Joe proudly produced a copy of the letter for his attorney, and then watched in dismay while his attorney sadly shook his head and told Joe he should have seen an attorney before doing anything.
While common sense told Joe that getting his neighbor to acknowledge that Joe could continue using the road, the law did not. What Joe didn’t know was that a prescriptive easement cannot exist when the use relied on to support the creation of the easement was permissive! Put another way, permissive use CANNOT be hostile or under a claim of right and therefore will not support the existence of a prescriptive easement.
Although Joe could still assert his claim to a prescriptive easement based on (1) the rule that a prescriptive easement “vests” immediately after 5 consecutive years of adverse use (which in his case had occurred long before he secured permission), and (2) the fact that his more recent request for permission was based on a mistaken belief that it would preserve his right to use the road, his common sense self help effort made it more difficult for his attorney to protect Joe’s easement because Joe had inadvertently created evidence that his neighbor could use to try to prove that Joe never really did believe he had a right to continue using the easement (or else why would he have felt he needed to ask his neighbor’s permission?).
The moral of the story is this: When it comes to the law, particularly some of the more antiquated rules relating to real property, talk to an attorney with experience in the particular area of the law involved before you do what common sense tells you.
Coming up: Could Jane and her predecessor have done anything to protect against the creation of a prescriptive easement in Joe’s favor? Yes…
For more information or assistance on real property issues contact Paul Carey at pcarey@dpf-law.com
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

The Producer’s Lien: An Often Overlooked Legal Remedy in Grape Contract Disputes

In the wine industry, one of the most common legal disputes is breach of contract between grape growers and wineries.  Often times, grape growers are surprised to learn that, upon the delivery of grapes to a winery, they automatically have a statutory lien against any wine made from those grapes.  This lien, called a “producer’s lien,” means that the winery cannot lawfully sell the wine without paying the grower.  The lien can be found in California Food and Agricultural Code § 55631 et seq.  See following link for statute text:
Additionally, this lien takes priority over many other security interests.  (See Frazier Nuts, Inc. v. American Ag Credit (2006) 141 Cal. App. 4th 1263)
The amount of the lien is the amount the winery contractually owes the grape grower for the grapes or, if an amount is not specified in a contract, the value of the grapes upon their delivery to the winery.
Sometimes, however, a grower inadvertently waives his or her right to this lien.  Often times, a contract between a grape grower and a winery includes a clause whereby a grower warrants that the grapes are not subject to any lien or other encumbrance.  The parties generally intend such a clause to ensure the winery that the grower has the legal right to sell the grapes.  Courts, however, may interpret this clause as the grower’s waiver of the producer’s lien.  If one wishes to avoid waiver of the right to the producer’s lien, such a clause should warrant that the grapes are not subject to any lien or encumbrance other than the producer’s lien.
Enforcing a producer’s lien can be time-consuming.  If the winery has not paid the grower, the grower can initiate an action in court to foreclose on the lien.  Because actual foreclosure can take months, the grower may also immediately seek a preliminary injunction from the court to prevent the winery from selling or destroying the wine pending foreclosure.  Eventually, assuming the grower proves his or her case, the court will issue an order giving the grower the right to possess the wine.  The grower must then work with the sheriff’s department to obtain physical possession of the wine.  Even if the wine has been blended with other wine, a grower can still take possession of the wine.
One of the difficulties with a producer’s lien, however, is that a grower must then have the appropriate licenses to market and sell the foreclosed wine.  If the grower lacks such license, then the grower must work with a license broker or other authorized person to sell the wine.
If you have any questions about contract disputes, including contracts between grape growers and wineries, please contact us.
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Avoiding Tax Reassessment in Transfer of Vineyard or Winery Properties

California real property is reassessed upon certain transfers causing higher (or lower) property taxes. Generally, a reassessment will occur when ownership of the property is transferred. Exclusions from reassessment are available for transfers of real property between spouses and between a parent and a child. Therefore, family owned vineyards and winery property may have been transferred down through generations without being reassessed and without a significant increase in property taxes.

Vineyards or winery property held in a legal entity (e.g., a corporation, partnership or LLC) are subject to reassessment upon a change in ownership of the entity, but the exclusion from reassessment for transfers between parent and child does not apply.  Entities are subject to a complicated set of rules that determine when a change in ownership takes place resulting in a reassessment.  If you are not careful, a transfer of a 1% interest of the entity can cause an unexpected reassessment of the entire property.  The death of a shareholder, partner or LLC member can be a reassessment event as his or her interest passes to the next generation.
Generally, a transfer of entity interests results in a reassessment if someone acquires more than 50% of the entity or if there is a cumulative transfer of more than 50% of the entity.  Whether any particular transfer is a change in ownership depends on how the entity acquired the property, the details of prior transfers and any applicable exclusions.
Beginning in 2010, any change in ownership of an entity that holds real property in California must be reported to the California Board of Equalization on Form BOE 100.  Failure to report a change in ownership can result in a 10% penalty.  County assessor forms required upon the death of a real property owner now include a question about the decedent’s interest in any legal entity.
If your vineyard or winery property is held in a legal entity, always consider the property tax consequences before restructuring or making transfers of shares or interests.  A review of potential property tax issues should be included in every vineyard or winery owner’s estate plan as well.
For further information or assistance with estate planning matters, please contact Dickenson, Peatman & Fogarty at info@dpf-law.com.
Copyright Dickenson Peatman & Fogarty at www.lexvini.com

Fight Continues Over Lot-Line Adjustments in Napa County

The Sierra Club and a Napa resident have filed separate appeals of two Napa County Superior Court rulings that upheld Napa County’s policy on allowing “successive” lot-line adjustments involving four or fewer parcels.
The County’s policy on lot-line adjustments first came under assault in connection with long-time grape grower and vintner, Will Nord, whose company, Calness Vintners, represented by Dickenson, Peatman & Fogarty, applied to reconfigure six existing legal parcels in the unincorporated area of Napa County on the eastern boundary of the Town of Yountville.  Residents of an adjacent residential subdivision, led by Carol Vendrillo, appealed the County’s ministerial approval of the second of two lot-line adjustments, claiming that State law required approval of a discretionary subdivision map.  The Napa County Board of Supervisors unanimously rejected the appeal, and Vendrillo sued.
Following Vendrillo’s lawsuit, the Board passed an Ordinance clarifying the County’s longstanding policy of allowing approval of lot-line adjustments to occur in succession as long as the prior lot-line adjustment had been recorded.  The Board’s rationale was that the State Subdivision Map Act is silent on the issue, leaving local governments free to decide whether to allow successive four-parcel lot-line adjustments or whether to “aggregate” the parcels previously involved in a lot-line adjustment with the parcels currently proposed for adjustment and require a subdivision map.  (A subdivision map is required where five or more parcels are being reconfigured and is a discretionary approval requiring CEQA review.)  The Sierra Club filed suit against the County over the Ordinance.
The November court rulings on both challenges firmly sided with the County.  According to the Court, “[I]f the legislature had intended to bring all sequential lot line adjustments within the purview of the Map Act, it easily could have used alternative language to make that intention clear.”  The ruling in the Sierra Club case also called out plaintiff’s counsel’s inability “to answer whether the court should also interpret into the statute a time limitation as to when the previous adjustment might have occurred.”  In other words, opposing counsel did not answer the question of whether lot-line adjustments occurring 5, 10 or 100 years apart should be considered “successive?”
For more information or assistance with land use matters in Napa County contact Dickenson, Peatman & Fogarty at info@dpf-law.com.
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Sonoma County Proposes Revisions to the Rules for Williamson Act Contracts

The Sonoma County Permit and Resource Management Department has drafted new rules to be applied to properties in Williamson Act agricultural preserve contracts.  The proposed 49 pages of rules will replace the existing seven pages of rules that were originally adopted in 1970.  Much of the new document clarifies existing state law and county policies, but a few new recommendations are proposed.  There will be an increase in the amount of farm income to qualify for agricultural preserve on prime land from $200 per acre to $800 per acre.  Also, a minimum of 50 percent of the prime land or six acres, whichever is more, has to be continuously used for agricultural production.  The minimum parcel size to qualify for an agricultural preserve on prime land is 10 acres while on non-prime land the minimum is 40 acres.
The rules also eliminate some existing land uses that have been considered compatible with contracted land such as forestry, raising of horses, residential uses and quasi-public uses, but new allowed uses are added such as raising ornamental trees, apiaries and irrigated pasture crops.
Wineries and other agriculture processing faculties will still be permitted but will be classified as “compatible uses” rather than as straight agricultural uses.  As such, they will be limited to occupying no more than five percent of the parcel area or five acres, whichever is less.
The first public hearing on the proposed rules was held on January 20, 2011 in front of the Sonoma County Planning Commission.  There will be at least one more Planning Commission hearing before the rules are considered by the Board of Supervisors because so many people showed up to comment on the new rules.
The controversy surrounding this revision is warranted as all Williamson Act contracts have a clause which allows for revisions and binds the landowner to comply no matter how the rules are amended in the future.  Even more troublesome is the fact that the landowners who are under contract and facing greater restrictions on the uses permitted on their property may not reap the benefit or purpose of being under contract.  The Williamson Act program itself is in peril.  Governor Jerry Brown has targeted the funds typically provided to counties and cities across California to subsidize the tax breaks that these property owners receive as a place to reduce the deficit.  If the program funding is eliminated on a state level, many counties will have to decide whether they can continue to forego the tax revenue without any chance of subsidy from the State.
For more information on land use issues in Sonoma County contact Dickenson, Peatman & Fogarty at info@dpf-law.com
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Proposed California Budget Could Impact Williamson Act Subventions

This week, California Governor Jerry Brown unveiled his budget proposing to cut state spending by $12.5 billion dollars.  Some of these cuts will directly impact land use and agriculture.  Specifically, the Governor’s budget proposes the permanent suspension of Williamson Act subventions.  The Williamson Act allows agricultural landowners to commit their properties to agricultural uses in exchange for discounted county property taxes.  The state then reimburses counties for lost property tax revenues through annual subventions.  At this time, it is not clear whether this budget will be adopted as proposed or how severely this budget action will impact those wine-growing counties that have embraced the Act.

Copyright Dickenson Peatman & Fogarty at www.lexvini.com