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BP Business Economic Loss Claim Appeal 2015-1004: Landlord not excluded real estate developer


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

Claimant, a 30-unit condominium development located in Gulf Shores, Alabama, appeals the denial of its BEL claim as an excluded real estate developer as provided in Section 2.2.4 of the Settlement Agreement. The denial notice contained general boilerplate reasons for the denial, i.e., claimant had expenses relating to real estate development activity and claimant had engaged in real estate development activity in 2010.

Claimant requested a denial summary and learned the seminal basis for denial was a finding claimant had engaged in attempts to market and sell existing condo units in the development in 2010 which was contrary to the Settlement Agreement and Policy 468. Claimant disputes this finding contending that archival internet data relied upon by the Claims Administrator is stale and should be considered in the context of its overall operating history since this is a Start-Up BEL claim.

These facts of record are essential: claimant commenced construction of two 15-unit buildings in 2006 and took occupancy in 2007. Although the original intent was to sell the units outright to third parties, none were ever sold. Instead, in December 2008 a decision was made to begin rental of one 15-unit building with the remainder being held dormant because of the existing economic climate. This endeavor is consistent with the NAICS code on claimant’s tax returns for the years 2008-2011 which is 531190(rental real estate). On review of the claim the Settlement Program assigned NAICS code 72119 (short term lodging) as the more appropriate designation.

A review of claimant’s tax returns and attached schedules shows no revenues derived from the sale of real property in 2010 or real estate development activity(or the years of 2008,2009 or 20011). This is consistent with claimant’s contention that none of the aforementioned thirty units have ever been sold. These financial records also contain no indicia of expenses associated with real estate development activity. There is also the absence of any showing that claimant obtained permits or licenses associated with real estate development activity.

While claimant concedes there is archival internet information that exhibits the units were offered for sale it asserts this information should be taken in context and against the backdrop of its original marketing endeavors in 2007-2008 to sell the units. Since then claimant has shown its business model has changed to maintain its premises for short-term lodging and not for sale; thus, the cited data should be considered stale and outdated.

This panelist has adhered to the standard of review outlined in policy 468 and the Settlement Agreement and considered enumerated criteria in measuring under the totality of the circumstances whether claimant was sufficiently engaged in real estate development activity in 2010. This panelist concludes claimant was not. The sole circumstance of extant internet advertisements and other public offerings does not rise to the level of conduct justifying invocation of the exclusions of Section 2.2.4 of the Settlement Agreement.

The decision of the Claims Administrator to exclude this claim was in error and it is remanded for processing as a viable claim under the applicable framework of the Settlement Agreement.

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