Recently while examining the title of a cabin in northern Minnesota I was presented with an odd situation. It was an investment I had not previously considered. I would not define a vacation experience as an investment because I am not buying anything. That is because at the end of the vacation there is nothing left. (i.e., there is no equity in a vacation.)
Which is why buying a cabin is an investment. Anyone buying a cabin in Northern Minnesota expects to own the land and the buildings. They anticipate building equity. But when you "purchase" from someone whose cabi is in the Chippewa National Forest on land the government owns, you aren't really purchasing anything more than a right to use the cabin and to mow the lawn. At the end whatever you paid to use the land and cabin immediately goes to zero. Which makes this sort of like going on a long vacation to Disneyland.
THE GOVERNMENT IS YOUR LANDLORD
Of course if the land is in the Chippewa National Forest, but is not land owned by the U.S. Government, and is in private hands, then my concerns raised in this blog do not matter. These same concerns arise with any government or indian reservation land. Which is a good reason to actually read the disclosures and to review the tax bill.
So here I am presented with "buying a cabin" in the Chippewa National Forest.
The realtor presented me with the documents and it is likely she understood that this was an offer to purchase land. But when I considered what I was offering to buy I realized after reading the title that what was being sold was only a right to use. When someone makes an offer to purchase on a lake in the Chippewa National Forest, or in any national forest for that matter, you should know you aren't purchasing the land and the cabin. You are purchasing an interest in the use for a set period of time. The park service continues to own the land and buildings. What you own is a right of use.
And don't make the mistake of believing you have a lease for a certain amount of time, because you don't. The two are very different because a permit to use may be terminated at any time for what may seem like insignificant transgressions. Today's case is one such example.
The permit idea may seem like a good idea, because you won't have any local real estate taxes to pay. But while you will pay no real estate taxes to Itasca County, you will pay a special use permit fee to the Department of Agriculture Forest Service.
The Chippewa National Forest is a National Forest located in northcentral Minnesota, United States, in the counties of Itasca, Cass, and Beltrami. Forest headquarters are located in Cass Lake, Minnesota. This area is beautiful and peaceful having over one thousand lakes. You'd think it is just right for you to own a cabin. It may be, but not in any national forest because you cannot buy the land.
A purchaser of the right to live in a cabin on Forest Service land should understand the limits or their rights.
- You do not own the land.
- You are not "leasing" anything because this is not a lease.
- A permit is different than a lease.
- A permit may be revoked for violating the terms and conditions of use.
- The permit fee may be increased at any time the United States government deems it in its best interest.
- A lease rate stays the same as is stated in the lease.
- You are being permitted to possess the cabin and buildings on the land; which means you can use and enjoy them so long as you follow the permitted uses and pay the annual fee. It is not much different than staying at a camp site for a long weekend.
- The permitted uses can change at any time.
- There is a annual fee.
- The permit may be revoke from violating the conditions of use. 36 C.F.R. § 327.30, app. A(3).
- Some restrictions on use are not obvious.
- Anyone entering into the sale of a cabin in the National Forests should sit down with the ranger to understand the permit restrictions.
- Even honest mistakes can get your permit revoked.
- You must seek permission of the local ranger before changing any vegetation or introducing any new vegetation.
- This is not a complete list, only a partial list.
Know the “Conditions of Use”.
The annual payment is comparable to paying real estate taxes and this permit fee may not be deductible on your income taxes. If not deductible the permit fee is then higher than real estate taxes. Before entering into a purchase agreement you may want to seek the advice of your accountant or whoever prepares your tax return.
THE CONDITIONS OF USE CAN BE TRICKY
Not abiding by the permitted use and restrictions can get your rights terminated as the John and Kim McClung decision demonstrated. This case out of the Eighth Circuit began in Arkansas on Greers Ferry Lake and started over a dock, stone steps and the vegetation along the property and the water.
The Army Corps of Engineers manages federal water resource development projects such as Greers Ferry Lake under 16 U.S.C. § 460d, part of the 1944 Flood Control Act. Regulations governing public use of such federal water resources are found in 36 C.F.R. pt. 327. No private structure may be located on public lands or waters without a permit, and removal or alteration of public property (including vegetation) is prohibited without written permission. 36 C.F.R. §§ 327.14, 327.20, 327.30(f)(1). The Corps issues permits for private shoreline use in accordance with the Shoreline Management Plan (SMP) for each project. 36 C.F.R. §§ 327.19(e), 327.30(d)(2)-(3). The Corps district commander may revoke permits "when it is determined that the public interest requires such revocation or when the permittee fails to comply with terms and conditions of the permit [or] the Shoreline Management Plan." 36 C.F.R. § 327.30, app. A(3).
The decision points out these permits that change the terms of the original permit are non-transferrable and are voided upon the sale of the property. 36 C.F.R. § 327.30(g). While this case did not turn on this point, this restriction is significant for those purchasing the right to use the property. (Notice how I did not say “purchasing the property” but said “purchasing the right to use the property.” When entering into a purchase agreement you are not purchasing the real estate.)
I saw this case and thought of the Minnesota realtor If you are considering purchasing property in a national forest you may want to read this case that concerns private use of government land by permit. The same reasoning would apply to cabins in the Chippewa National Forest that are subject to federal special use permits. The holding certainly proves my point about what one "buys" when they sign a purchase agreement for one of these cabins. The owner takes over a right to use, not a right to own; and that use is subject to the permit being revoked at any time for most any reason that is not in the public interest. So let us look at what happened to the McClures.
Here is the gist of what the McClures were alleged to have done wrong.
"No vegetation other than that prescribed in the permit will be damaged, destroyed or removed. No vegetation of any kind will be planted, other than that specifically prescribed in the permit." Sections 8-01 and 8-02 of the Greers Ferry SMP authorize permits for certain types of vegetation modification including removal of underbrush within 50-100 feet of a residence, but the use of chemicals for vegetation modification is prohibited. The McClungs received a "mowing permit" with a map specifying the area within 100 feet of their home where vegetation modification was permitted.
When Ranger Ivy investigated a vegetation kill on the shoreline between the McClure property and lake it was game-on between the permit holder and the Ranger. Just know the permit holder lost and in doing so lost the right to the use of the cabin and land. So whatever the McClungs paid to the previous permit holder they lost when the permit was terminated. And that is the most important point of purchasing in a national forest - you can never-ever build any equity in the property.
Read the decision here.
McClung v. Paul Docket: 14-3463 Date: June 8, 2015
Opinion The McClungs bought a vacation home next to Greers Ferry Lake in Arkansas, and received a permit for a boat dock and stone steps on the public land between their property and the lake. The lake and shoreline area is federal property managed by the Army Corps of Engineers under 16 U.S.C. 460d. Before obtaining their permit, the McClungs met with Ranger Ivy in 2011 and were informed of permit regulations. The Corps later sanctioned the McClungs for violating those regulations, first for causing herbicide to be sprayed on public property and then for removing brush from the previously sprayed land, and revoked their permits. The district court determined that the sanctions were not arbitrary and did not violate due process. The Eighth Circuit affirmed. There was no constitutional due process violation because the McClungs did not have a property interest in their permits. No statute or regulation requires the Corps to authorize private use of publicly owned shorelines. Shoreline use permits "do not convey any real estate or personal property rights or exclusive use rights," 36 C.F.R. 327.30(d)(5), and the Corps has broad discretion to manage and regulate water resources and to revoke permits as the public interest requires.
I read the comment below and will stick with my opinion. What he says does not change my opinion. No if's-and's-or-but's about it.