Justine Moreau, an associate with Bowie & Jensen LLC, planned and organized the Real Property Section’s recent winery and cidery tour. Please note that the Real Property Section hopes to offer a similar opportunity next year to explore an interesting case study of legal issues in a pleasurable setting. Stay tuned! Justine shared the following summary of legal issues encountered by the owners and operators of the winery and cidery we visited:
On Sept. 21, the Maryland State Bar Association’s real property section hosted a bus trip to Elk Run Vineyard and Winery and Distillery Lane Ciderworks. The primary impetus for the event was to meet with the owners and discuss the various real estate and business-related legal issues that they encountered when starting their businesses, as well as the issues that they continue to address in current operations. Participants also enjoyed a sampling of Maryland wine and the fall weather in gorgeous Frederick County settings.
Carol Wilson and her two business partners have been operating Elk Run Vineyard and Winery in Mt. Airy for thirty-three years. We were at Elk Run for only an hour and a half, but this short time was long enough to get a taste of the many difficulties and rewards that accompany such an endeavor. Carol spoke about how interest in Maryland wine, both from a consumer and a producer standpoint has increased over the last three decades, and how legislation has changed, affecting her enterprise. The main points of her presentation are as follows:
• Although Maryland wineries are independent enterprises, they are collectively “Maryland wine”, and accordingly, there is an increasing shift to create transparency between the wineries so that all owners are aware of the best practices available. If someone has one bad experience with a brand of Maryland wine, all Maryland wineries suffer. A concept known as “terrior”, a French term loosely translated as “a sense of place” creates a safe harbor for wineries to share information because the geography, climate and geology interact with the plant’s genetics to produce a unique product. In other words, no two wineries will produce wine that tastes exactly the same even if using the same variety of grape.
• Zoning and health department regulations vary by county, giving some counties an advantage over others in relation to producing wine.
• Federal labeling restrictions for wine are onerous, often taking up to six weeks for approval, delaying the entry of new products to the market.
• The Maryland wine industry does not have as much power as other lobbying groups and industries such as restaurants. These other interests can easily overpower wineries, successfully influencing aspects such as operating hours and ability to have live music. Within the wine world, other states, such as California, are able to leverage their power by influencing federal law as it relates to the wine industry in order to maintain their position atop the market. Within Maryland wines, the different strata of producers, distributors and wholesalers all operate with different incentives and not always cooperatively.
• Effective July 1, 2011, Maryland wine producers can now ship wine directly to a consumer, saving producers money because they no longer have to pay a middleman (Md. Ann. Code art. 2B, § 7.5 (2013)). Previously, producers needed to go through a wholesaler to sell their products.
• Obtaining financing for agricultural enterprises remains difficult because banks often require that repayment terms of ten or fifteen years. It can take up to ten years before a red wine is ready to be sold on the market, making even “short term” financing difficult if not impossible.
After Elk Run, we ventured further west to Distillery Lane Ciderworks in Jefferson, where Rob Miller greeted our group and similarly shared the various legal obstacles that have affected his operation. Rob and his family bought the property, which had never been used as an apple orchard, from Maryland in an auction in 1998. In 2001 they began planting trees, and by 2006, they were producing cider. Distillery Lane is the first cidery to be licensed in Maryland and operates under a winery license because the alcohol content of cider is analogous to the alcohol content of wine.
Rob explained that Distillery Lane is part of the Maryland Historical Trust (“MHT”), a status that has had a serious impact on his operation as he tries to strike a balance between adhering to the multitude of restrictions while operating a growing small business. For example, because it is part of the MHT, the farm must undergo an annual inspection and any new development is significantly restricted, if it is ever even granted. He said that the documents that accompany his property, (title documents, etc.) only make one mention of an easement that is on the property; a small mention, but as we know, even a small mention has serious implications in a real estate contract. His tip of the day to our group was to “learn about the word easement”. Similarly, terms in the MHT documents are not thoroughly defined, granting a wide spectrum of opportunity for the MHT to decide what should constitute terms such as a “historic building”. A dilapidated foundation of an old barn remains on the property, and to any observer looks like a pile of rubble. However, any change to this structure can only be accomplished with prior approval of the state.
Both Rob and Carol provided excellent presentations as they conveyed their knowledge with an overt sense of passion and sense of humor – two requirements for anyone who dares to dabble in agriculture for their livelihood. As attorneys, we have opportunities to influence, implement and interpret the law. However, the rules that we create don’t always directly affect our own livelihoods. Listening to Carol and Rob speak about how different levels of legislation specifically affect their small business provided a unique perspective for our group.