Yes it's because the beach raises a lot of the land up from the sea. This was meant to be a very narrow strip of beach along the road, just room for a fishing shack or a seafood stall. So I thought if I could have some different lengths of lots, it wouldn't happen. I don't think tinkering with the config will help, because the beach/sea portals are already placed on the lot template and they decide where the sea begins. It may be that shrinking from the road edge is what is needed.

But I remembered that MaryLou made some tiny lots after this tool was made, and I thought that was connected with it in some way?