FERC fiasco ripples into lakefront real estate

LAKE OF THE OZARKS, Mo. -- Disputes over ownership abound, clear titles are not so clear, property values could be at risk, and lawsuits could bring the issue to a head in Missouri courts.

For Ameren Missouri to transfer ownership of some 1,500 strips of easement recently removed from project boundary, the power company would have to get permission from the Bank of New York Mellon. That company, a financial services firm that manages investments for a wide range of clients and institutions, has been the indenture trustee since 1937 when bonds were sold to investors to finance the Lake of the Ozarks project.

According to a spokesperson for BNY Mellon, Union Electric transferred ownership of all the property within the original project boundary to the trustee as collateral for the outstanding debt.

“Under the indenture, there is a well-defined process in place for considering requests from the utility to release certain pieces of property back to the utility, including ensuring there is enough property to cover the outstanding debt as well as various required authorizations, including a Board of Directors resolution, engineer’s certificate, officer’s certificate, and opinion of legal counsel,” the spokesman said, adding that BNY Mellon would only consider these releases at the direction of the utility and in accordance with the original Indenture of Mortgage and Deed of Trust dated June 15, 1927 and its subsequent supplemental indentures.

Many say now that the Federal Energy Regulatory Commission (FERC) approved Ameren’s request to lower the project boundary, obtaining releases from BNY Mellon would be the logical next step for Ameren to take in order to restore values on the affected properties.

Last month FERC stated Ameren could comprehensively adjust the project boundary to elevation 662 with additional adjustments for residential and commercial structures below 662 where appropriate. However, FERC said the project boundary should remain above 662 where necessary to encompass project facilities, recreational sites, public access sites, historic properties, wetlands and Missouri State parks.

The ruling removed some 1,500 homes and businesses from inside project boundary but the Estoppel Certificate, filed in Benton, Camden, Miller and Morgan counties makes it clear that Ameren retains ownership of the land. Property owners whose land encroaches on Ameren land simply have the right to use and enjoy it.

Joe Roeger, owner of First Title Insurance Agency and a member of the board of stakeholders that helped create the Shoreline Management Plan (SMP), said that’s why additional steps are needed.

“Simply moving the project boundary doesn’t solve any of the title problems. I think FERC’s decision is a good thing for the real estate market because the vast majority of property is owned to 662. I also think that’s a better solution than lowering it to 660, which would have created a 2-foot-wide ribbon of anarchy around the lake that’s not part of the original lot and not part of restrictive covenants in subdivisions. However, it’s important to recognize that now that the project boundary is down to 662, it doesn’t do anything for the title. And the Estoppel Certificates filed in each county bordering the Lake only affirms easement rights. That issue of clear title still has to be resolved,” Roeger said, adding that the quickest, easiest and most inexpensive solution for everyone involved would be for Ameren to simply quit claim the property to the adjoining property owners.

Such a release took place on January 18, 2011 when BNY Mellon released a piece of ground in Key Largo Estates off El Terra Road in Osage Beach. Ameren subsequently filed a special warranty deed transferring ownership of the land to Jean Neis. Another such case took place in 2000, when Buford Foster purchased a strip of land between the 664 and 670 elevations from Ameren. His son, Dr. Dan Foster, explained.

“When we were building Cedar Glen, half of it was on land that Ameren claimed was easement. We learned that Freddie Mac and Fannie Mae would not buy mortgages on property build on easement so we asked Ameren if they could convey the property to us and they said they could – for either $60,000 or $70,000. I don’t remember the exact amount, but I do know we paid them and as a result, owned it fee simple title. To the best of my recollection, the entire process took nearly a year,” Dr. Foster said.

Officials from both Central Bank of Lake of the Ozarks and Bank Star One backed up Foster’s statement. They both said loans on easements such as those provided under the Estoppel Certificate could not be sold on the secondary market.

The BNY Mellon spokesman also said because deeds were filed when ownership of the land was transferred in 1937, they couldn’t understand how and why people were even allowed to buy land, borrow money to purchase it and then build inside the project boundary. However, Camden County Assessor Eddie Whitworth said it was easy to understand once the “whole picture” was understood.

“There were only four or five deeds that transferred thousands and thousands of acres of property. Book 63, Page 162, which has been cited several times, is 250 pages long and transfers thousands of pieces of property all under one description. None of it is indexed. It’s just one long description of all different elevations – all different points. Quite frankly, back then nobody cared about elevation. It wasn’t a point of concern because everybody used the lake as the starting point,” Whitworth said.

He also said because Ameren is just as much to blame as title companies, realtors, lenders and surveyors, he hopes Ameren will be open to the public’s request to quit claim the property.

“Everybody is at fault here, including – and maybe, especially – the electric company. This won’t be a quick process and it will cost Ameren some money but they could work thru this on a case-by-case basis and do the right thing,” he said. “If they don’t, well – I’m sure Ameren will be spending even more money in court, defending its position.”

To date, five lawsuits have been filed against the power company on behalf of lakefront property owners. The most recent suits were filed May 1 on behalf of Christopher and Susan Cipolla and Charles Sanzottera, who own property in Morgan County. Last fall, suits were filed on behalf of Donald and Rhonda Choate, David Staubley and Donald and Patsy Bruns, all Camden County residents. Tim Sear, a Lake-area homeowner and Kansas City attorney who has been researching the issue since 2007, said he expects to see many more if Ameren doesn’t soon announce it is willing to work with property owners.

“The 1,500 ‘owners’ involved cannot convey good title and therefore can only sell for a fraction of the true value after disclosing the title defect. Who would buy in that situation? Who would lend in that situation? Who would issue title insurance in that situation? The time to put the pressure on is now because just getting through the title insurance claims process can take months,” he said.

He also suggested that some affected homeowners who question the validity of Ameren’s claim get surveys because Ameren has acknowledged that the aerial photography used to create the maps doesn’t always accurately depict the boundary.

Amanda LaPorte, assistant marketing director for Schultz and Summers Engineering, agreed there have been discrepancies.

FERC issued the decision as part of its approval of the SMP, required when the power company applied for a new 40-year license to operate Bagnell Dam and its electric generating facility. Approximately four years after receiving the plan, FERC responded that all “non-conforming structures” located inside project boundaries must first be removed. FERC gave Ameren until May 1, 2012 to identify and take action. However, on August 26, 2011, Ameren filed a petition for rehearing, asking FERC to reconsider. On November 10, 2011, FERC backed down from its earlier position but still required Ameren to come up with a solution.

FERC also recognized the potential for law suits. The order states, “Any disputes regarding property rights are not within the Commission’s jurisdiction. Rather, they are matters for state courts to resolve.”

(This story was republished by LakeExpo.com courtesy of the Lake of the Ozarks Business Journal.)