The decision to bulldoze the ranch house that previously slouched on this narrow, shaded lot wasn't a tough one. With its dingy wood paneling and creeping structural rot, it was depressing, borderline hazardous, and not exactly coastal in feel.

Figuring out what to build in its place, however, was a little more complicated for builder/developer Ralph Picard, given the stringent architectural restrictions governing new construction in Rehoboth Beach, Del., a popular summer getaway spot for the Baltimore-D.C. crowd. City ordinances limited the allowable floor area ratio to 70 percent of the lot size, capped the height at 35 feet (with a maximum 2 ½ stories), and imposed limits on total bedroom and bath count. The project also mandated the preservation of several old-growth trees.

Picard, who typically builds on spec and markets his coastal properties as vacation rentals under the name Resort Pointe Custom Homes, has cultivated a niche following for Caribbean-style houses bearing cotton candy paint colors and crisp white trim. But in this quiet, wooded neighborhood of mid-century homes and classic beach cottages, some restraint was in order.

The resulting 3,366-square-foot abode, designed by Becker Morgan Group, manages to straddle both worlds. Classic cedar shingles, wide trim, and tailored gables share a resemblance with nearby houses, but then whimsy inserts itself by way of swooping roof lines, ocular windows, chunky columns, over-scaled gas lanterns, and a custom copper pennant flag rising from the cupola.

“Once we met the city's architectural criteria, we had room to play. The challenge was putting 10 pounds in a 5 pound bag,” says architect Christopher Pattey. “The builder asked us to create the largest interior space possible in what amounts to a mini-hotel (it sleeps 12). But this large program had to be disguised on the outside with a façade of lesser presence.” The solution? Stepped wall plates and undulating roof lines create the illusion of a much smaller home.

Project: Henlopen House, Rehoboth Beach, Del.; Size: 3,366 square feet; Builder/Developer/ Interior designer: Resort Pointe Custom Homes, Selbyville, Del.; Architect: Becker Morgan Group, Salisbury, Md.