A Battle Brews Over Ownership Of The Beach
By Tom Ferriter
New Hampshire Times
May 6 thru May 13, 1981 -- Vol. 10 No. 47
First there was Hampton, a prosperous little seaside community ruled by shrewd Yankee farmers and traders. Then there was the beach, known in the late years of the last century as Pines Marsh Beach. To most of the thrifty and hard-working Yankees who ran the town of Hampton, the beach was a desolate place, a godforsaken stretch of shifting sand dunes, stinking mud flats and festering marshes.
It was a forlorn place, left mostly to the local fishermen. To the farmers of the town, the beach was useful only as a place for gathering batches of seaweed that could be converted to fertilizer. Otherwise, there was neither profit nor pleasure in the barren expanse.
For a few men of vision and enterprise, however, the mud and mosquitoes and dunes that comprised Pines Marsh Beach in the 1890s bore the promise of a glittering future.
It was in 1897 that the scions of four of Hampton's most prominent families -— the Hobbs, Blanchards, Dearborns and Batchelders -— presented the voters of the town with a unique and tantalizing offer. Using their own money, they proposed to develop the seemingly useless Pines Marsh Beach into a seaside resort. The Exeter [Street] Railway Company was preparing to bring rail service to the beach area, and the four farmers said they would build streets and sidewalks, encourage the filling of the marshes and spur the construction of shops and cottages. They would bring commerce and tax revenue to the town, with no expense to the town treasury. What is more, they even promised to pay the town for the privilege of being allowed to develop the barren beach.
The four families organized themselves under the name of the Hampton Beach Improvement Company. All they asked of the town's voters was the exclusive right to use town-owned land at Pines Marsh Beach for 99 years.
To the voters at the Hampton town meeting of 1897, the proposition simply was too attractive to refuse. They authorized the selectmen to sit down with the leaders of the Hampton Beach Improvement Company and negotiate the terms of the 99-year lease. In the course of the negotiations, the selectmen compromised on a few points, agreeing, for instance, to expend town money to build two avenues giving improved access to the leased property. But they also extracted commitments from the fledgling company to prohibit the sale of intoxicating beverages and to control the types of buildings constructed on the property.
It was one of the most important real estate transactions in New Hampshire's history, and it triggered the development and growth of Hampton Beach into a major seaside resort community. It also set in motion a pattern of land leasing in the Hampton Beach area that has evolved over the decades into an intricate and unique tradition.
To this day, practically all of the shorefront property at Hampton Beach is owned, at least in title, by the town of Hampton, and is leased, re-leased and subleased to private individuals and companies. These tenants and subtenants can build, buy and sell buildings on the leased real estate, but cannot buy or sell the land itself.
The leasing of land has taken root so firmly in the beach area, since the historic lease in 1898 to the Hampton Beach Improvement Company, that even privately owned real estate along the beach frequently is transferred by lease for temporary periods rather than bought and sold. It is a practice that boggles the minds of many outsiders, but one that long since has become a custom for real estate brokers, lawyers and bankers on the beach.
The grandfather of this strange system, the lease to the Hampton Beach Improvement Company, took effect on April 1, 1898, and for some years both sides were well pleased with the fruits of their negotiations. Today, with some 16 years remaining on the original lease, the relationship between the town and the Hampton Beach Improvement Company is rent with bitterness and strife. In a sudden shift of long-established policy, the company last year announced a dramatic change in its treatment of the people and businesses who sublease the town-owned land along the main strip of Hampton Beach. Tenants who for many years had enjoyed low rents on land subleased from the company were informed last fall that they would have to pay the company startlingly higher rents in the future.
The notice of the impending rent hikes triggered anger and dismay along the beach. Tensions -- between the improvement company and its tenants, between the company and the town government, and between the denizens of the beach and the established powers of the town -- erupted into open controversy. This year, as spring has brought the beach a renewal of the annual promise of throngs of free-spending tourists, it also has brought talk of rebellion and confrontation to the beach.
Some residents and businessmen along the beach are openly exploring ways to secede from the town of Hampton and form a new town; others are drumming up interest in a class-action lawsuit of tenants against the Hampton Beach Improvement Company; still others are lobbying officials of the town of Hampton to go to court in an effort to break the grip of the improvement company on the town-owned land along the beach.
The stakes in the brewing battle of Hampton Beach are enormous. The town-owned land along the beach, whether leased directly by the town to cottage owners and businessmen, or controlled and subleased by the Hampton Beach Improvement Company, is some of the most valuable real estate in New Hampshire. Tracts that were nothing more than mud or marsh when Pines Marsh Beach was leased to the Hampton Beach Improvement Company in 1898 now easily could command prices upward of $75,000 for a tiny 50 by 100-foot parcel, if they could be bought and sold.
The extraordinary market value of Hampton Beach real estate today, particularly in comparison with its value in 1897 and 1898, has thrown the entire future of the beach into turmoil. Land that did not even exist 85 years ago is precious today, and it seems almost everyone wants a piece of it. Much of the anger that has erupted along the beach has been aimed at the Hampton Beach Improvement Company. Critics of the company, composed mostly of people who have been renting land and who now face the prospect of staggering rent hikes, believe the company has embarked on a plan to squeeze all the income possible out of its leasehold during the 16 years remaining on its lease from the town. The dramatic rent increases announced last fall, these critics maintain, are far out of line with the company's expenses and capital investment along the beach. In the eyes of critics, the Hampton Beach Improvement Company appears determined to gouge its tenants under the protection of a lease that now seems uncomfortably one-sided.
Altogether, the land leased to the Hampton Beach Improvement Company in 1898 has been broken up into approximately 320 individual lots, measuring roughly 50 feet by 100 feet each. In several instances blocks of contiguous lots have been leased to the same tenant, as is the case with the big Hampton Beach Casino complex at the heart of the strip controlled by the Hampton Beach Improvement Company.
The 99-year lease granted the company rights to what is now the land between Ashworth Avenue and Ocean Boulevard, from A Street on the north to Q Street on the south. It is the most commercialized and most densely developed land anywhere on the beach.
Over the years the improvement company has leased the individual lots for varying periods of time to people willing to invest in the leased property. Many of the tenants have spent money to fill in low-lying lots before building their cottages, shops or restaurants on them. Each person subleasing a town- owned lot from the improvement company becomes responsible for paying taxes on his buildings to the town of Hampton. One of the key, and now controversial, provisions of the company's original lease with the town stipulates that the company pays only an annual rental fee to the town; it does not have to pay taxes.
By all reports, the company took seriously its mission from the town's voters in 1897 to encourage development of the leased property at the beach. For most of its history the company rented out the beach property at extremely modest rates. Indeed, until very recently, the company treated its tenants on the leased property with great leniency and indulgence.
"I guess you could say we've been giving people too much of a good thing for years," says Edwin (Ted) Batchelder, a grandson of one of the founders of the Hampton Beach Improvement Company and the general manager of the company's business affairs at the beach.
Batchelder, a retired Portsmouth Navy Yard employee who lives in a gracious old colonial farmhouse in Hampton, a few miles from the beach, clearly is uncomfortable in his new role as community villain. A decent and straightforward man of 57 with gray hair and piercing blue eyes, Batchelder has lived in Hampton all his life. Like the other dozen or so stockholders in the contemporary Hampton Beach Improvement Company, Batchelder is descended directly from one of the four founders of the company.
Batchelder has been managing the business affairs of the company since 1963, and for the most part has treated the company's tenants in an informal and relaxed manner. Some tenants of the company say it was not unusual in past years for Batchelder to allow leases to lapse, and to allow several years to pass before signing new leases. In the meantime the company's modest rents were collected without major increases.
Many of the company's harshest critics credit it with spurring the development of Hampton Beach into what it has become, and few complain about the treatment the company historically has accorded its tenants and subtenants along the beach. Many old- time residents of the beach, however, have not forgotten that both the company and the town selectmen of earlier generations systematically, but genteelly, excluded members of religious and ethnic groups from renting land at Hampton Beach.
This is a period that Batchelder is happy to consign to history, save for acknowledging that the company traditionally followed the general directives of Hampton town fathers to maintain a wholesome "family atmosphere" at Hampton Beach. "This beach might have developed along the lines of Salisbury Beach if it had been managed differently," Batchelder says. "Some of the controls my father imposed years ago to keep it a family beach are things I couldn't even think of doing today."
Even before the recent eruptions, the improvement company had had confrontations with the town on a number of occasions. The first conflict developed before the 99-year lease had been in effect for 15 years. At that time the town officials decided to ignore a provision of the 1898 lease exempting the Hampton Beach Improvement Company from property taxes on the land it leased from the town. The dispute went to the state Supreme Court, which ruled in 1914 that the company could not be taxed.
Relations between the town and the company appeared stable for many years after 1914, but another dispute arose during the 1960s. At that time Hampton selectmen, realizing that the town still was receiving only $500 a year in rent from the improvement company for the use of the extraordinarily valuable beach property, thought they had found a way to crack the old lease. Their angle: that the Hampton Beach Improvement Company had failed to renew its corporate registration as required by state law, and had -- in a legal sense -- ceased to exist.
Unfortunately for the town, the state Supreme Court dismissed that argument, and held that the improvement company, as it was hastily reorganized, still was entitled to enjoy the terms of the original lease.
However, the company was willing to renegotiate some of the lease's provisions. In 1968, the original lease from the town to the company was amended, with the company agreeing to pay a higher rent for the use of the beach property. Under the revisions, signed in 1968, the company agreed to pay $2,300 a year until 1978, $4,000 a year from 1978 until 1988, and $6,000 a year from 1988 until the expiration of the lease in 1997. Compared with the value of the land controlled by the company, even the increased rents are nominal.
The master lease was amended again in 1970, after town voters repealed the ancient ban on the sale of alcoholic beverages in Hampton. At that time the town and the company agreed to permit the sale of alcohol at the beach, on property leased by the improvement company.
That change set the stage for additional animosity between the company and many of its neighbors. After the ban on alcohol was lifted, company representatives sat down with restaurant and hotel owners who wanted to sell alcohol. The price the company demanded for allowing a restaurant or hotel to serve liquor was 10 percent of the gross revenue from liquor sales. No one outside the Hampton Beach Improvement Company knows how much money this fee has earned for the company since it was imposed, but it is income that is resented deeply all along the beach. The Hampton Beach Improvement Company has not been content merely to administer the land it leased from the town in 1898. Over the years the company has purchased a fair amount of property along the beach and, in keeping with the time-honored tradition at the beach, has leased it out in individual lots. The company's outright ownership of land also has created difficulties, and today some of the individuals most seriously shaken by the sky- rocketing land rents are people renting land that is owned by the company.
Alfred and Evelyn Dow are tenants of the Hampton Beach Improvement Company on land the company owns, just behind the leased strip at the beach.
"When we leased this land, it was 21 years ago, and this was nothing but a swamp hole," says Evelyn Dow. "We filled it in, we built this house up, and we hot-topped the driveway. Now we're looking for a place to move to. We can't afford to stay here any longer with what they're doing to the rents."
When they first leased their lot from the improvement company 21 years ago, the Dows paid the company a modest $75 a year in rent, plus paying taxes to the town on their house. Before last year's dramatic change in improvement company policies they were paying $375 a year for the use of their lot.
Last fall the Dows were notified that their annual rent would shoot up to $1,325, and would increase by $250 a year beginning in 1982.
"My husband's a retired fisherman, and we can't afford that rent," Mrs. Dow says. "Now we have to sell this place, and nobody will touch it. Who would want to pay what it's worth, with what they're doing to the rents?"
That may be the key question facing people leasing land from the improvement company, whether they are leasing land owned outright by the company or land the company controls through its lease from the town. According to Mrs. Dow, her family house is assessed by the town of Hampton for $52,000. "We've listed the house for sale at $30,000, and we can't find any takers," she says. "We've had one offer for $25,000, but that wouldn't give us back what we've put into it over the years."
The new policy adopted last year by the improvement company was based on what Batchelder describes as new economic realities, principally those affecting the land owned outright by the company. According to Batchelder, the dramatic rent hikes disclosed last year were triggered by a town-wide re-assessment of property values in Hampton the year before. "We were hit very hard by that," he says. "Land values in the town were practically doubled, while we were locked into leases for low rents. We were in a position on our deeded land where we were just meeting our expenses, or even losing money.
"A year or so ago, we -- the directors of the company -- sat down and decided that an eight percent return on our investment was a fair proposition. I think you could even say that eight percent is not awfully high today, compared with interest rates and the cost of money."
The company set a target of receiving eight percent of the assessed value of all its land along the beach -- both the land it was leasing from the town, and the land it owned outright. "We didn't want to impose this all at once, so we decided to start setting rents at four percent of the assessed value of the land, and work them up to eight percent over a five-year period," Batchelder says.
When they decided to hike the rents on the land they owned outright, the directors of the improvement company decided to apply the same policy to tenants on the land they had leased from the town of Hampton, even though they pay no taxes on that land. Indeed, the company pays almost nothing beyond its nominal $4,000-a-year fee to the town for the rent on the beachfront property. The company does reimburse Hampton for costs of plowing the cross-streets between Ocean Boulevard and Ashworth Avenue, but that is only expense incurred by the company beyond its annual rental charge.
To many tenants on the leased land, the income the company now will derive from the town-owned land is far out of proportion to its expenses or investment in the land. After all, they say, it is the tenants, not the company, who have invested in the buildings and improvements to the leased land. Ever since the company built the streets and sidewalks on the beach, it has had little to do except collect rents. Jim Higgins has emerged as one of the improvement company's most vocal critics along the beach. Higgins runs the Harris Real Estate office on the beach, which rests on town-owned land leased to the Hampton Beach Improvement Company and subleased to his firm.
Higgins has been paying the improvement company $225 a year rent on his 50 by 100-foot lot, which has been assessed by the town at about $20,000. If the company collects four percent of the assessed value as its annual rent, that would increase Higgins' rent to $800 a year, escalating to $1,600 a year at the end of the five-year march to eight percent of its assessed value.
"They have about 300 lots on land leased from the town," Higgins says, "and they pay $4,000 a year for the use of them. That works out to less than $15 a year for each lot, and they want to charge their tenants $1,600, and even more, for the use of them. A lot of people, especially elderly people who live here year 'round, are getting pushed out. They're being forced to move.
"Right now money is tight, and it's hard to move any real estate. How are. these people going to find somebody to buy their houses, when the rents for land are that high and there's no certainty of what will happen when the town lease runs out in 1997? Are these people going to be told to move their homes off the land?"
Even some of the most bitter foes of the Hampton Beach Improvement Company are reluctant to heap abuse on Ted Batchelder personally for the company's recent change of heart. While Batchelder has been the public spokesman for company policies, it is widely believed that voting control of the company has passed to a fourth generation of family heirs who are determined to end the company's informal business practices and treat its holdings in a more mercenary manner.
"We are changing," Batchelder says. "There are younger people, and different ideas, coming into the company. What we're doing is a shock to people, and I think that's what's causing the criticism. I think probably some people are going to have to leave because of our changes, and I don't like that."
Jim Higgins is among the beach residents who finds the idea of secession from the town of Hampton appealing, and he has made little secret of his role in stirring up interest in the possibility of a class-action lawsuit by sub-tenants against the practices of the Hampton Beach Improvement Company. "The feeling of the town has always been 'screw the beach,' Higgins says. "A lot of people here think the beach would be better off if it became a town in its own right."
The tensions between the leaders of the town of Hampton and the denizens of the beach community are ancient and enduring. The beach people believe, with keen resentment, that the proper Yankees who traditionally have run the affairs of Hampton always have treated them as somewhat shabby and disreputable neighbors, as a caste of hustlers scrabbling each summer to get rich quickly off the hordes of tourists who swarm over the seacoast.
"The political history of this town has always been the town against the beach," says one long-time beach resident. "The beach people have always resented what they feel is the snobbish attitude of the Hampton people."
The fact that the owners of the improvement company always have been members of Hampton's leading families has not helped to assuage hard feelings on the beach against the town.
All of these circumstances have thrown the future of Hampton Beach into a state of confusion and uncertainty. Not only do the beach community and the town leadership face the question of what will happen to the land leased to the improvement company by the town, but there are new pressures on the town to decide how to manage the remainder of the town-owned real estate at the beach.
Currently the town is leasing large numbers of lots to individual cottage owners, and is collecting rents equal to the amount of taxes that would be paid on the lots if the land were owned outright. In addition to the tax-level land rents, tenants also pay the town taxes on their buildings.
About 10 years ago voters at the Hampton town meeting approved a measure allowing tenants on the town-owned land to buy their lots from the town at their official assessed value. Incredibly, only three tenants accepted the offer, and the voters later rescinded it, keeping the town in the wholesale land-renting business. (When the voters decided to let tenants buy leased land from the town, they specifically ruled out making the offer to the Hampton Beach Improvement Company, making it impossible for the company to purchase the land it had been leasing for decades.)
Paying rent based on the yearly tax rate is not a bad deal for the town's direct tenants at the beach, but the policy also means the town is failing to realize much of a return on its valuable real estate holdings at Hampton Beach.
Many people in the town, and at the beach, think the town should attempt to make money on its holdings, either by selling the lots or by charging rents that reflect their market value.
One of the many background factors in the decision by the Hampton Beach Improvement Company to increase its rents dramatically was the fact that so many of the company's tenants used their leased property to generate sizable incomes, mostly by subletting their cottages at lucrative rates. "I'd say at least 90 to 95 percent of all the cottages there are being used to generate income through rentals," Batchelder says. The fact that the improvement company's tenants and subtenants were making healthy incomes from the leased property was a consideration when the company directors decided to take a share of that income for the company.
All the money that might be made from Hampton Beach real estate has triggered great anxiety throughout the town. Voters at this year's town meeting authorized creation of a special, seven-member committee to study the complex question of how to handle all the town-owned land in the beach area, both the land leased directly to tenants, and the land tied up with the Hampton Beach Improvement Company.
Strong forces are preparing to press for continuation of the town's leasing policies, while others are preparing to push for a mandate to sell the town-owned land. There seems to be practically no support in the town for a move to continue to do business with the Hampton Beach Improvement Company.
Whatever the sentiments of town residents and beach people, it seems certain that that the town will have to grapple with the improvement company as it debates the future of the beach. If, for example, the town should decide to sell the land now leased to the improvement company when the lease expires in 1997, it seems possible the company might want to become a buyer. If the town wants to continue leasing the land, it might have to negotiate with the company.
Currently, there is a mounting sentiment in Hampton in favor of bringing the improvement company to court in what would amount to a third effort to break the old lease, on the grounds that the company's new rent policies violate the condition of the 1898 lease that the company should act in the best interests of the town of Hampton in its administration of the beach property..
Batchelder, for one, has not set high expectations on the results of the town's current investigation into the future of leased land along the beach. "We had a committee just like that set up about 10 years ago," he recalls, "I served on it. We were going to decide the future of the leased land then, and I have to say it didn't amount to much."
The chances of cracking the improvement company's lease on the strip at Hampton Beach must be reckoned as slim, and it seems likely the town will have to live with the company for the next 16 years. In the meantime, many people are wondering what will happen in those intervening years. For example, will banks give 20-year or 30-year mortgages for people wanting to buy cottages on land leased to the Hampton Beach Improvement Company, when the company's lease is due to expire before the mortgages are paid up?
The town's voters have addressed this issue, at least temporarily, by agreeing to let the town of Hampton guarantee extensions of tenants' leases until the year 2002 to permit tenants of the improvement company to obtain mortgages on the leased land.
Still, the imminence of high land rents and the uncertainty over what will happen on the leased land in the next 16 years have encouraged many beach people to fear the worst. "It's an awful thing even to think about, but there's already talk of arson here, if people can't sell their buildings and can't pay their rent," says on long-time resident of the beach district.
It is hard to believe the situation will become that extreme. Says Batchelder, "I can't see the town letting uncertainty prevail. It's in the town's interests to guarantee stability there. I can't imagine that the town would not agree to carry on."
In the end, no one is quite certain what the town will do. A major factor in all future debates is the fact that Hampton no longer is the insular little town it used to be; it is one of the fastest-growing towns in New Hampshire, and most of its newer residents are noncombatants in the ancient battles involving the beach people, the improvement company and the town government.
It is a circumstance that is fraught with ironies, the most striking of which is the fact that the real estate provoking so much controversy today was regarded as virtually worthless just 84 years ago. "The thing that's so fascinating, even today, is that these four farmers had the vision and the foresight back in 1895, '96 and '97 to look at those sand dunes down there and think they could turn it into something,'' says Batchelder.
What the dunes have turned into, thanks to the currents of history and the efforts of the Hampton Beach Improvement Company, is a fabulously valuable tract of real estate. And the beach will hold out to Hampton the promise of great bounty, and the certainty of great battles, for many decades to come.