Wetlands and the New and Improved Addendum W – Wetlands

What do parties need to know about wetlands?


 Jennifer Lindsley and James Brodzeller  |    January 10, 2022
Wetlands

As the age-old saying goes “roses are red, violets are blue, wetlands are wet, but sometimes dry, too.” Wait, what?  The state of Wisconsin defines a wetland as an area where water is at, near or above the land surface long enough to be capable of supporting aquatic or hydrophytic vegetation, and which has soils indicative of wet conditions.  While some wetlands remain inundated with surface water and feel squishy under your feet for the majority of the growing season, many of the state’s wetlands do not exhibit these features at times due to natural variation. 

Similar to water levels in lakes, groundwater elevations fluctuate in response to changing temperatures and rainfall patterns, resulting in annual and multi-year variability in soil moisture conditions. For example, one of Wisconsin’s most common wetland types, wet meadows, may sometimes appear to the untrained eye as an upland grassland or prairie in terms of wetness, but when you dig deeper — literally —  these areas have multiple characteristics other than wet vs. dry that define them as wetlands. The same is true for another wetland community type present in Wisconsin, floodplain forests, which may appear as non-wetlands during drier times of the year. These dynamic water regimes are the driver behind the many human and ecosystem services that wetlands provide, which include flood and stormwater storage, fish and wildlife habitat, recreational opportunities, and water quantity and quality benefits, just to name a few.

So what else is there to a wetland other than water? The Wisconsin Department of Natural Resources (DNR) identifies wetlands in accordance with the wetland delineation manual, developed by the U.S. Army Corps of Engineers, which is based on a three-parameter test. For an area to be classified as a wetland by these state and federal agencies, it must have:

  1. Hydric soils (indicative of wet conditions).
  2. Dominant hydrophytic plants (species that like to have their “feet” wet).
  3. Indicators of wetland hydrology. 

Site evaluation during the wetland identification process typically includes examining soil pits, identifying vegetation species and measuring aerial coverage, and observing the presence/absence of wetland hydrology indicators. It is important to note that not all three parameters need to meet wetland criteria for an area to be classified as a wetland in locations that have been disturbed, such as soils, vegetation and/or hydrology that have been altered from their natural state. For example, a recently tilled crop field absent of living vegetation may be evaluated only on the basis of soils and hydrology and may meet the definition of a wetland if certain criteria are met for just two of the three parameters.  

Even the above simplified summary of the wetland identification process demonstrates its complexity, providing rationale for why this must be completed by a qualified professional. Wetland identification is typically completed by private consultants, and concurrence is needed from the DNR or Army Corps for state and federal permitting purposes.  

Once a prospective buyer determines if and where wetlands are present on the property, the next important part of wetland due diligence with real estate transactions is knowing what types of activities require permits, and the likelihood of obtaining said permit(s). While the specific type of permit or application requirements may differ between the DNR and Army Corps, there must be a discharge of dredge or fill material to wetlands to exercise their jurisdiction. If a buyer is interested in a property containing wetlands solely for recreational purposes, where activities will be limited to mowing, hand treatment of vegetation and prescribed burns, wetland permits typically are not needed. If a buyer is pursuing property acquisition for development purposes, where filling or land disturbance (such as grading) is proposed in wetlands, the agencies’ authority will be triggered if the wetlands are jurisdictional and do not qualify for an exemption.

One key piece of information prospective buyers need to be aware of is that not all wetland disturbance proposals meet the criteria for a permit to be issued. The DNR and Army Corps have numerous agency-specific standards set in state and federal law that must be met for the respective agency to grant a wetland permit for a proposed project. One element of the wetland permit process typically required by both agencies is commonly referred to as the Practicable Alternatives Analysis (PAA). For wetland permit applications submitted to the DNR, the PAA requires the applicant to evaluate alternatives that would meet their project purpose and need, taking into consideration cost, site availability, available technology, logistics and proximity to the proposed project site, in light of the overall purpose and scope of the project. If the PAA determines wetland impacts can be practicably avoided and/or minimized, the DNR is not able to issue a permit for the proposed activity. In the context of real estate transactions, permit applicants are frequently required to conduct an alternative real estate search as part of the PAA, especially for wetland disturbance proposals on lots that are predominately wetland with no or limited upland to serve development. For residential, commercial and industrial development proposals, buyers should also know the DNR commonly conducts the PAA and processes permit applications containing both a driveway/roads and a new home/building(s) as a single and complete project, and cannot take privacy and aesthetic desires into consideration when issuing a wetland permit decision.

In addition to the PAA requirements, another critical item for buyers to be cognizant of is the functional value and quality of the wetland they intend to impact for their project. Proposals to impact rare or high-quality wetlands — wetlands that are serving a significant function to the environment or community and/or cannot be properly mitigated — typically cannot meet all legal standards for the DNR to grant a permit. There are also certain types of activities that present significant challenges to obtaining a wetland permit from the DNR that are not necessarily dependent on the functional value or quality of the wetland. These activities include, but are not limited to, stormwater treatment features, drainage projects to convert wetlands to new agricultural use, and speculative development.  

As with the complexities of identifying a wetland, navigating and providing assistance through the wetland permit process also often warrants professional assistance. Prospective buyers should be strongly encouraged to contact the DNR, Army Corps, the local shoreland wetland zoning authority, administered by counties if not within city/village limits, and/or an environmental consultant before closing on a real estate transaction with the intention to impact wetlands subject to local, state or federal permit requirements. Buyers can obtain preliminary information regarding state wetland permit requirements for their project through the DNR’s Waterway and Wetland Information Line by calling 608-267-3125, emailing DNRWMSPublicInquiry@wisconsin.gov or visiting dnr.wisconsin.gov/topic/Wetlands/permits/contacts.html to find the DNR wetland contact for the county where the property is located.

What do licensees need to know about wetlands?

The first thing licensees need to know about wetlands is to leave the identification of wetlands to the experts. A second point to remember is that licensees should refrain from discussing what a party can or cannot do with a property whether the issue is wetlands, zoning, development or changing the use of a property. Buyers with questions about what can be done with a property should be referred to the appropriate expert. Luckily, licensees have many tools to assist buyers in transactions involving issues such as wetlands, development and other scenarios where a buyer is considering changing an existing use of a property. The WB-13 Vacant Land Offer to Purchase includes Proposed Use Contingencies to address zoning, soil issues, suitability for a private wastewater treatment systems, easements and restrictions, approvals and permits, and utilities in addition to other contingencies for land use approval and obtaining a map of the property. These Proposed Use Contingencies allow a licensee to competently draft an offer that provides the buyer with every opportunity to consult the experts regarding questions of zoning, location of utilities, approvals and permits, and other questions related to developing a currently vacant parcel. 

Addendum W — Wetlands: new and improved 

Recently, the wetlands experts at the DNR reached out to the WRA legal team to discuss issues that were arising for buyers purchasing property, often vacant land, without conducting due diligence with regards to the presence or absence of wetlands on a property. The buyer’s intentions to develop or use the property in a certain way were stymied when the buyer learned of the presence of wetlands on the property after the transaction closed. With the assistance of the DNR wetlands experts, the WRA has revised the Addendum W — Wetlands to better serve parties negotiating a transaction on a property that potentially has wetlands located on it. 

The Addendum W — Wetlands can be a licensee’s go-to tool when dealing with property, vacant or otherwise, on which a buyer wants to make the offer contingent on investigating the wetland situation. In addition to including a Wetland Evaluation Contingency, the Addendum W — Wetlands includes educational information for both the seller and the buyer to help them understand the potential impact on a transaction if wetlands are present as well as some basic informational resources the parties can use if they have questions regarding wetlands. 

The Addendum W — Wetlands begins with a notice to a buyer pointing out it is in the buyer’s best interest to determine if there are wetlands on the property before purchasing or leasing the property. Additionally, it highlights that wetlands are not suitable for development, not easily identifiable, and that professional assistance is often needed to verify the presence or absence of wetlands. This initial notice to the parties is important because a licensee may be dealing with a buyer who thinks, “Well, I don’t see any cattails, ducks or other swampy features, therefore there must not be any wetlands!” This would be a dangerous assumption to make, and an agent may be wise to educate a buyer that this would be akin to a buyer announcing, “Well, I don’t smell any radon, so we don’t need a radon testing contingency.” Every licensee is going to caution that buyer that the only way to determine if there is radon on a property is to call in a professional to test for it, and similarly, professional assistance may be needed to verify the presence or absence of wetlands.

The next few sections in the Addendum W — Wetlands give the parties some informational resources on wetlands, including a link to a page on the Wisconsin Wetlands Association’s website that covers types of wetlands, benefits of wetlands and a section titled Wetlands 101, available at www.wisconsinwetlands.org/learn/about-wetlands. This is followed by a section informing the parties that wetland confirmation, wetland identification, assured delineation report submittal and wetland exemption service are all DNR services and provides a link to the DNR’s Wetland Identification Program, which can be accessed at dnr.wisconsin.gov/topic/Wetlands/identification.html. An additional link is provided for the DNR’s Locating Wetlands page, which is available at dnr.wisconsin.gov/topic/Wetlands/locating.html. The form further explains that the DNR Wetland Identification Program is a service that identifies approximate wetland boundaries but does not provide a quantifiable extent of the wetland on a property and would not be suitable for permit applications or calculating a seller credit to the buyer per the Wetland Evaluation Contingency. 

The Addendum W — Wetland next addresses permitting requirements that may be triggered if one intends to build on a wetland. Both state and federal wetland permitting requirements could be triggered, and the parties are provided links to the DNR’s page on permits, which is available at dnr.wisconsin.gov/topic/Wetlands/permits, and a link to the permit information from the U.S. Army Corps of Engineers, which can be found at www.mvp.usace.army.mil/Missions/Regulatory/Permitting-Process-Procedures. And lest any buyers be misled, the Addendum W — Wetlands notes that “not all projects will be eligible for permits.” 

Additionally, the form points out that construction in wetlands without permits will result in enforcement action, which may include the removal of structures, wetland restoration and potential fines. Hopefully by this point in reviewing this form, both licensees and their parties have developed an appreciation of the potential complications wetlands can add to a transaction and the importance of completing due diligence. 

The seller has an opportunity to disclose if they do or do not have certain information about the property, such as if there are wetlands on the property; if the property includes lakes, ponds, streams or drainage ditches; and whether there are areas of standing water or areas where water collects at or near the surface between March and November of most years. The seller is not expected to be a wetlands expert, but if the seller has knowledge of these property characteristics and discloses them to the buyer, the buyer may have a better appreciation of what the buyer is dealing with in terms of the likelihood of wetlands on the property. Additionally, there is a note in this section that reminds the buyer that the seller’s lack of knowledge does not confirm the absence of wetlands. Just as when a seller completes a Real Estate Condition Report or Vacant Land Disclosure Report and answers “no” to a question on those forms, it does not mean that a defect will not later be revealed through an inspection. 

The final portion of the Addendum W — Wetlands provides the parties an opportunity to include a Wetland Evaluation Contingency. Familiar to licensees regardless of practice area is the instruction that to include the contingency, the parties must mark the optional provision box with an “X,” and if the box is not marked or is marked “N/A,” the contingency is not included. Also familiar to licensees is a note reminding them to be thoughtful of deadlines and to make sure to include a deadline for the contingency that provides adequate time for the buyer to obtain what the buyer is seeking. This note also informs the parties that wetland delineations cannot be confirmed by the DNR in winter months.

If the buyer checks the box to include the Wetland Evaluation contingency, the offer is contingent upon a buyer obtaining a written report that determines if there are wetlands at the property within the deadline specified in the contingency, with 60 days being the default deadline. The buyer is responsible for arranging for a wetlands professional to conduct an on-site evaluation of the property and prepare a written report at the buyer’s expense unless otherwise agreed to in writing. The contingency is deemed satisfied unless the buyer delivers a copy of the wetland confirmation or delineation report to the seller that shows the presence of wetlands on the property within the deadline specified in the offer, with the default deadline being 10 days of the deadline for the buyer obtaining the report. If the report shows wetlands, the parties can negotiate different outcomes to the transaction, including the seller crediting the buyer an amount per wetland acre at closing, the buyer’s rescission of the offer or another outcome as drafted on the blank line in this contingency. 

Jennifer Lindsley is Staff Attorney and Director of Training for the WRA. James Brodzeller is Wetland Team Coordinator for the Wisconsin Department of Natural Resources. 

Learn more at Winter Convention

Workshop: “Know Before You Buy: DNR Wetlands Workshop”
February 3 at 12:00 p.m.
Live in Green Bay
Instructor: Jennifer Lindsley, WRA Staff Attorney and Director of Training

Join this workshop with Wisconsin DNR wetlands experts for a discussion of considerations when there are wetlands on a property. Learn about the process for identifying and locating wetlands on a property and why it is so important for a buyer to consider potential wetlands on a property before purchasing the property.
Register: www.wra.org/WetlandWorkshop

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