Keeping Current Property

Vol. 26 No. 1

Keeping Current—Property Editor: Prof. Shelby D. Green, Pace University School of Law, White Plains, NY 10603, sgreen@law.pace.edu. Contributors: Prof. William G. Baker, Prof. Ronald Benton Brown, Prof. Matthew J. Festa, and Prof. Bridget Fuselier.

Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

CASES

APPRAISERS: Real estate appraiser entitled to prejudgment interest on unpaid fee from time payment was due. Landowners hired a real estate appraiser in connection with an eminent domain proceeding. The appraiser sent the landowners an invoice after he completed his work. The appraiser was not called to testify, and therefore the eminent domain award did not include payment of the appraisal fee. A dispute over the amount then arose, and the appraiser filed suit. The trial court awarded the appraiser about half of what he claimed and, without explanation, failed to include pre-judgment interest. The appraiser had sought interest from the date he first submitted an invoice. The landowners asserted that interest should not begin until the date he requested payment from them after completion of the eminent domain proceedings, about two-and-a-half years later. The appellate court ruled that pre-judgment interest accrues from the date of loss, which is typically the date when payment is due. The court remanded for a determination of whether payment was due when the appraiser submitted his first invoice or when he demanded payment after the eminent domain proceeding. The court also advised that if the fact finder could not determine the due date, pre-judgment interest would run only from the date the appraiser filed suit. Wood v. Unknown Personal Representative of the Estate of Burnette, 56 So. 3d 74 (Fla. Dist. Ct. App. 2011).

CONTRACT RESCISSION: Mother’s sale of farm to son at one-sixth market value rescinded for undue influence. An 84-year-old widow rented her 159-acre farm to her son, Lincoln, for almost 20 years, beginning after his father died. Lincoln set the annual rent under an oral lease. Lincoln had his attorney prepare a contract for deed for the purchase of the farm for $117,000, the farm’s 1984 appraised value, although the property was valued at $697,000 in 2008 when the contract was signed. The contract amount was payable in annual payments of $6,903 over 30 years. When the mother signed the contract, neither Lincoln nor the attorney advised her that the attorney represented only Lincoln, nor that she could or should retain her own legal counsel. Although she stated that she did not understand the contract for deed, she became suspicious when Lincoln told her not to tell his siblings about it. After her other children explained the transaction to her, she filed an action for rescission on the ground of undue influence. The court found sufficient evidence to support undue influence. The mother was aged, hard of hearing, and had limited experience or ability to manage her financial affairs, having always relied on her husband and after his death on her children. Lincoln was a son who lived with her and whom she trusted. He engaged an attorney to assist him in purchasing the farm, but his mother did not understand the significance of the contract. Lincoln was experienced in farming and knew the increased value of the farm. Moreover, after the contract was executed, he instructed his mother not to tell her other children. The result was that the mother sold her farm for $580,000 less than its value and because of her age was not likely to realize a substantial portion of the purchase price. What was remarkable, as the court found, was that “the party alleged to have been unduly influenced was able to capably testify that she had been unduly influenced.”  Neugebauer v. Neugebauer, 804 N.W.2d 450 (S.D. 2011).

COTENANTS: Creditor of one spouse cannot attach property held in tenancy by the entirety.  A debtor signed a personal guaranty for an obligation incurred in connection with his solely owned business. In connection with the guaranty, the debtor prepared a financial statement that listed certain real property owned jointly by the debtor and his spouse as tenants by the entirety. When the business went into receivership, the creditor sought to attach this jointly owned property, but the trial court denied a writ of attachment on the ground that a creditor of a single debtor cannot attach tenancy by the entirety property. On appeal, the creditor urged the court to abolish this limitation because the tenancy by the entirety had become anachronistic in an era when women have full rights to own and manage their property, without the legal constraints imposed in favor of their husbands. The court declined. Although the Rights of Married Women Act eliminated those disabilities, the court explained that those disabilities arose from the feudalistic notion of coverture. The tenancy by the entirety had a different historical explanation and purpose. That form of ownership could only be held by married couples, who were viewed in the law as one. This meant that neither spouse held any separate interest that could be separately alienated or attached based on the separate debts of one spouse. The protection of the entirety property in such scenarios is still an important objective in the law. Because a creditor can protect itself by requiring both spouses to assume the debt, the court was not inclined to “correct [the creditor’s] error through wholesale revision of Vermont tenancy by the entireties law.” RBS Citizens, N.A. v. Ouhrabka, No. 10-415, 2011 WL 3370400 (Vt. Aug. 5, 2011).

COVENANTS: Provision for termination of covenants is interpreted based on intent of parties, with no presumption favoring free enjoyment of property. A developer planned a 52-lot development on part of a subdivision platted as the “Country Club Tract,” which was restricted to use for a hotel or clubhouse and corresponding commercial activities for profit. The homeowners association filed suit to enjoin the developer. The developer then exercised its right under a savings clause that permitted the termination of covenants by a vote of “three-fourths of the owners of said block or tract . . . according to front foot holding, each front foot counting as one vote.” One month later, the association filed an amendment to the restrictive covenants purporting to keep the Country Club Tract permanently undeveloped as an open space park. The homeowners claimed that they purchased their lots under a plat that showed a park or green area for which they paid a premium. The court recognized that such facts would give rise to an implied easement, but held there was no evidence that the developer induced the purchasers, by representation or otherwise. The court remanded to determine whether the savings clause allowed the developer to extinguish the covenants on the Country Club Tract, as the language seemed to contemplate multiple owners in a subdivided area. The court explained that the correct analysis in the interpretation of an ambiguous restrictive covenant is no longer a plain meaning analysis with a distinct policy favoring the “free enjoyment of the property and against restrictions.” Noting the great value that restrictive covenants offer for uniform development and environmental stability, the court followed the trend in other jurisdictions to focus on the intent of parties at the time of adoption as the cardinal principle in interpreting restrictive covenants. Aqua Fria Save the Open Space Ass’n v. Rowe, 255 P.3d 390 (N.M. Ct. App. 2011).

EASEMENTS: Sale of lots by reference to recorded plat showing “private lane” creates private easement over lane. The owners of five lots filed a plat to create a subdivision. Although a public road ran alongside the subdivision, the only access to four of the five lots was by a private lane. Attempting to make clear that they intended the private lane to remain entirely private, the owners crossed out language on the plat dedicating the plat’s streets and other public areas for perpetual use of the public. The Griffins purchased Lot Two—the only lot that also had access by the public road—but used the private lane for ingress and egress to the lot. Fifteen years later, the owners of the other four lots formed an association to manage the private lane. The Griffins refused to join but continued using the private lane. The other four owners deeded their interests in the private lane to the association and then placed boulders along its edges, preventing the Griffins from accessing the lane. In a case of first impression the court held that the plat reference created an easement over a private road, benefitting all owners including the Griffins. The law was well settled that an “easement by plat” is created over a public road when a recorded plat shows the public road, and the court saw no reason for a different result when a plat shows a private road. Oak Lane Homeowners Ass’n v. Griffin, 255 P.3d 677 (Utah 2011).

EASEMENTS: Easement by necessity requires strict necessity, which is not satisfied by mere assertion that alternative route is more expensive and less convenient. The trial court granted an easement by necessity over an existing road based on evidence that the claimant’s construction of alternative access would be costly and inconvenient. The elements for a prima facie case for an easement by necessity are: “(1) the dominant and servient parcels were once under common ownership, (2) severance by the common owner(s), (3) the necessity for the easement arose at the time of the severance by the common owner, and (4) the necessity is continuing.” The plaintiffs claimed that the defendant had failed to show necessity because there was another way to access its property and the defendant’s only evidence was the assertion that the other way would be less convenient and more expensive. The court clarified the Mississippi precedents by explaining there are two types of easements by necessity. The first, “ways of necessity,” requires strict necessity. The second type of easement by necessity is for utility services, requiring that the easement be “highly convenient or essential to the full enjoyment of the land.” The standard for the latter is reasonable necessity. Although easements of the first type can be implied even where the land is not necessarily landlocked, it is not enough for the claimant to assert that an alternative route would be costly and less convenient. The claimant must offer actual proof of the costs of obtaining alternative access to the property or the relative value of the land sought to be accessed. Harkness v. Butterworth Hunting Club, Inc., 58 So. 3d 703 (Miss. Ct. App. 2011).

MECHANICS’ LIENS: “Commencement of construction” in mechanic’s lien statute requires visibility of preconstruction services for priority. Dunn performed preconstruction services for a condominium project in Las Vegas, including review of design plans, coordination of contract documents, and development of a construction schedule. Thereafter, a bank that provided construction financing for the project recorded a deed of trust to secure its loan. At the time, the bank’s inspectors reported power lines had been removed and a sign had been placed on adjacent property with the name of an architect working with Dunn. The bank asked Dunn to sign a subordination agreement, but he refused. Dunn filed a notice of intent to lien and recorded a mechanic’s lien. When the condominium project defaulted on the loan, the question of the priority of the liens arose, and Dunn sought a declaratory judgment on the issue. The bank maintained that the “commencement of construction” requirement in the statute, Nev. Rev. Stat. § 108.22112, meant that work performed and the provision of materials or equipment must be visible to obtain priority, and the taking down of power lines and a sign on adjacent property failed that requirement. Dunn made both highly technical and policy arguments. Dunn argued that a symbol—an arrow—in the text of the statute signified that the visibility requirement did not apply to “work performed” but only to the provision of materials or equipment, which immediately preceded the “visibility” language in the statute. He also asserted that requiring visibility for preconstruction services would nullify a recent amendment expanding the meaning of lienable work to include such services. The court rejected Dunn’s arguments, describing them as a resort to “ingenuity to create ambiguity.” First, Dunn’s reading of the structure of the statute was illogical and ignored another statute on reading symbols in statutes; and second, the existence of a lien, the court explained, is a wholly different issue from the priority of that lien. The court emphasized that visibility was the “linchpin” of priority, and there was no suggestion that the legislature had intended to change that requirement for preconstruction services. Further, the court held that the visibility requirement was not waivable, even when the holder of a deed of trust had actual knowledge of off-site preconstruction services. J. E. Dunn Northwest, Inc. v. Corus Const. Venture, LLC, 249 P.3d 501 (Nev. 2011).

PREMISES LIABILITY: Duty to maintain public sidewalks abutting private property does not extend to residential condominium community. Two days after a major snowstorm, a pedestrian slipped and fell on black ice on a public sidewalk that abutted a condominium development. The condominium’s snow plowing company had cleared snow on the day of the snowfall and had inspected the premises the next day, but not the day after that when the pedestrian fell. The pedestrian sued the condominium association and the snow plowing company. The trial court entered summary judgment, and the supreme court affirmed on two grounds. First, even though a town ordinance required all owners to clear snow and ice from an abutting sidewalk within six hours after every snowfall or formation of ice, the pedestrian lacked standing to sue because such ordinances are not enacted for the benefit of individual members of the public, but rather to impose on those regulated the burdens of the government. Second, although at common law property owners had no duty to clear the snow or ice from a public sidewalk abutting their land, this rule was modified 30 years earlier to impose liability on commercial property owners for injuries on the sidewalks abutting their properties caused by their negligent failure to maintain the sidewalks in a reasonably good condition. This new duty was based on the extensive rights that commercial owners have over adjacent sidewalks, including setting up “stoops, areas, shutes, and other domestic and trade conveniences” and the easy access that sidewalks provide to commercial premises. These advantages add value to commercial properties. Also, the old “no-liability rule” undermined important tenets of tort law—leaving victims without recourse and giving no incentive to landowners to care for the sidewalks. And, commercial owners could treat maintenance expenses as a cost of doing business. Whether a property is commercial or residential must focus on the nature of the use of the property and not the nature of ownership. In this case, the court ruled that the condominium’s use was residential—only residents could be members of the association, the deeds expressly restricted use as private residences, and there was no retail space and no provision of any goods to the public. The members also were unable to spread the burdens of maintenance to others as a cost of doing business. In declining to extend the duty to residential owners, the court stressed the importance of the doctrine of stare decisis for predictability and reliance and that any departure from a well-settled rule would require special justification. Luchejko v. City of Hoboken, 23 A.3d 912 (N.J. 2011).

TAKINGS: Landowner’s failure to challenge city’s administrative determination to condemn property as nuisance does not preclude subsequent judicial challenge. After Hurricane Rita, the city notified a landowner that the commercial structure on her property was vacant, neglected, deteriorated, and dilapidated, warning her that if not enrolled in a work program it was likely to be demolished. The landowner disagreed with the city’s assessment that her structure was dangerous, relying on a County Appraisal District valuation of the improvements to the property at $245,980 and a rating that it was in “fair” condition. The city condemned and demolished the structure, and the owner then sued the city, asserting eight claims, including state law and federal constitutional takings claims. The court concluded that, although the state does not commit a taking when it abates a public nuisance, nuisance determinations must ultimately be made by a court and not by an administrative body. Further, the court held that the owner could have availed herself of the administrative process, which does not preclude the owner from seeking a de novo review of the decision in a constitutional suit. The court further held that the trial court’s dismissal of the owner’s federal takings claim was not appropriate before the resolution of her state takings claim. Como v. City of Beaumont, Texas, 345 S.W.3d 786 (Tex. App. 2011).

TREES: Landowner is not liable for damages to neighbor’s garage by tree that fell after landowner pruned branches that overhung his own lot but not his neighbor’s lot. Branches of a pecan tree growing on defendant’s property extended across the property line onto plaintiff’s lot. Defendant hired a tree-trimmer to prune only the branches on his side of the property line. Plaintiff talked to the tree-trimmer about pruning the branches on his side of the line, but never had the work done. Although the tree was green and alive, it was uprooted during a rainstorm and fell onto plaintiff’s garage. Plaintiff sued for damages, and the trial court granted summary judgment for defendant. Because the tree had grown naturally rather than being planted by defendant or his predecessors, defendant had no obligation to trim the branches that extended over his neighbor’s property, and he had not become obligated by any gratuitous promise that he might have made. Plaintiff might have prevailed with proof that defendant negligently pruned only one side of the tree, causing the tree to fall, but plaintiff failed to produce any evidence of negligence. The court pointed out that plaintiff had a right to prune parts of the tree on his property, particularly if he perceived a threat to him or his property. Rogers v. Ford, 57 So. 3d 681 (Miss. Ct. App. 2011).

LITERATURE

Federalism and Property Law. Although regulation of private property historically has been left primarily to local governments, a recent trend recognizes a larger state and federal role. One of the reasons for this has been the rise of environmental, technological, and other national concerns that are difficult to deal with at the local level. Prof. Ashira Pelman Ostrow examines this trend in Process Preemption in Federal Siting Regimes, 48 Harv. J. on Legis. 289 (2011). Prof. Ostrow recognizes the inherent local-versus-national tensions when it comes to siting decisions for things such as wind turbines that may serve the national interest but that are locally undesirable. A major challenge to effective siting decisions is that neither complete delegation to local governments nor total federal preemption will produce balanced results. Prof. Ostrow offers an approach that she terms “process preemption.” The approach draws on the model of the 1996 Telecommunications Act, 47 U.S.C. § 332, which establishes a federal framework for the siting of wireless communication towers. Prof. Ostrow attributes the success of the act to its careful balancing between the national interest in having wireless networks and the importance of local autonomy in specific siting decisions. A process preemption approach to other types of siting decisions, such as wind turbines, can likewise succeed if the federal constraints on local decision making are subject to a set of procedural requirements, including interjurisdictional cooperation and public participation, to increase the legitimacy of the process. An important contribution to the growing literature on federalism and property law, Prof. Ostrow’s article—co-winner of the 2010 American Association of Law Schools’ Scholarly Paper Competition—provides an excellent analysis of the topic and a compelling argument for a “process preemption” regime.

Property Rights; U.S. Supreme Court. Last year the U.S. Supreme Court issued its most significant property rights decision in five years. In Stop the Beach Renourishment, Inc. v. Florida Dep’t of Envt’l Protection, 130 S. Ct. 2592 (2010), waterfront landowners challenged a publicly funded beach restoration. Prof. Timothy M. Mulvaney discusses the case in his essay, The New Judicial Takings Construct, 120 Yale L.J. Online 247 (2011). The petitioners argued that by incorrectly ruling that the landowners did not have a property right to the water’s edge, the Florida Supreme Court had itself effected an unconstitutional taking—a “judicial taking”—of property rights. While a unanimous Court affirmed the Florida Supreme Court’s ruling under state law, the larger doctrinal question of whether there can be such thing as a judicial taking remains unresolved. Prof. Mulvaney examines in detail the four-Justice plurality opinion that argues for the validity of a judicial takings theory. The opinion, authored by Justice Scalia, clearly favors the possibility of a judicial taking, but as Prof. Mulvaney points out, it remains unclear what the legal test would be for such a holding. In the essay, he evaluates Justice Scalia’s opinion in light of precedent and legal scholarship on judicial takings and concludes that if ever adopted, the plurality’s broad approach—to treat actions of the judicial branch the same as those of the political branches—could have a radical effect on takings law: it could create a whole new class of per se takings that would apply to any court decision over disputed rights. Prof. Mulvaney’s essay offers an excellent, accessible introduction to this important case and offers a helpful analysis of what will certainly remain one of the important issues in property law in the near future.

Teaching Land Use. The issue of improving legal education has received a great deal of attention in recent years, particularly after the 2007 publication of two landmark reports, the Carnegie Foundation’s Educating Lawyers and the Clinical Legal Education Association’s Best Practices for Legal Education. Prof. Patricia E. Salkin and Prof. John R. Nolon make a strong case that the goals of the “best practices” movement are uniquely applicable to teaching the subject of land use in their recent article, Practically Grounded: Convergence of Land Use Law Pedagogy and Best Practices, 60 J. Legal Ed. 519 (2011). Land use, they argue, has several distinguishing features that make it particularly ripe for innovative teaching methods. Land use is eminently practical: a competent land use practitioner has to be able to navigate complex webs of regulatory and administrative laws and procedures in a wide variety of settings. The subject is also increasingly interdisciplinary, requiring a modern land use lawyer to have familiarity not only with real estate and local government law, but also with planning, environmental science, computer technology, and many other fields. When looked at in light of some of the “best practices” goals including multiple assessments, outcome-focused education, and skills development, the authors convincingly argue that land use should be the “poster child” for implementing best practices in legal education. The article then discusses a survey of land use professors that the authors conducted, showing the increasing variety of creative teaching methods that professors are using, including practical exercises and field work. Practically Grounded is a must-read article for anyone who does any teaching or mentoring in land use or any property-related field. Profs. Salkin and Nolon organized a recent conference at Pace Law School around the article’s theme; articles from the conference have been published in the online companion to the Pace Environmental Law Review.

LEGISLATION

California prohibits discrimination in housing and public accommodations based on genetic information. The law defines genetic information to include genetic tests, genetic tests of family members, and the manifestation of a disease or disorder in family members. 2011 Cal. Stat. 261.

Connecticut imposes ethical standards on the executive board of directors of a condominium unit owners’ association and members of a master association’s executive board. No items of value may be given or accepted by such persons with the understanding that a vote or judgment will be affected or influenced thereby. 2011 Conn. Acts 195.

Connecticut reduces the minimum interest rate on tenant’s security deposits. Since 1994, Connecticut has required interest to be paid on residential security deposits at a rate of not less than the average rate paid, as of December 30, 1992, on savings deposits by insured commercial banks as published in the Federal Reserve Bulletin with a minimum interest of 1.5%. This law eliminates the minimum rate. 2011 Conn. Acts 94.

New York imposes a real property tax cap. Beginning in 2012, no local government may increase its property tax levy by more than 2% or the rate of inflation (whichever is less); however the permitted increase will not be less than 1%. The cap does not apply to the five largest school systems and contains provisions allowing local overrides. 2011 N.Y. Laws 97.

Pennsylvania limits the enforceability of private transfer fee obligations. Such agreements are void if executed after the effective date of the act. Consideration payable, whether immediate or remote, to the grantor is exempted even when based on subsequent appreciation of the value of the property. Fees charged by property owners’ associations are excluded from the law. 2011 Pa. Laws 8.

South Dakota prohibits private transfer fees. A private transfer fee is a fee or charge payable on the transfer, or payable for the right to make a transfer, of real property. Private transfer obligations are void. Most one-time fees and fees paid to a homeowners’ association are excluded from the law. 2011 S.D. Sess. Laws 196.

Virginia voids transfer fee covenants. A transfer fee covenant recorded after July 1, 2011, is not enforceable in law or equity, and any lien purporting to secure the payment of a transfer fee is also void and unenforceable. Fees charged by a common interest community are excluded from the law. 2011 Va. Acts 706.

Washington adopts the “Foreclosure Fairness Act.” The lender must notify the homeowner by telephone and letter of the statutory right to a 60-day opportunity to meet with the lender before the lender records a notice of default. The lender must also notify the homeowner about the right to mediation through a housing counselor or attorney. Lenders are required to submit to mediation on the request of a housing counselor or an attorney for the homeowner. Both the lender and the homeowner are required to pay a $200 fee to participate in the foreclosure mediation. 2011 Wash. Legis. Serv. 58.

Washington voids private transfer fee obligations. Any private transfer fee obligation that is recorded or entered into on or after April 13, 2011, is void and unenforceable. Prior private transfer fee obligations are not assumed valid. But the payee of a private transfer fee obligation created before April 13, 2011, must record, before December 31, 2011, a “Notice of Private Transfer Fee Obligation,” which must include contact information and the terms of the obligation. Failure to record the notice voids the obligation. 2011 Wash. Legis. Serv. 36.

Washington allows courts to award attorney’s fees in adverse possession actions. The court also can require the party that prevails against the holder of record title to reimburse the record title holder for part or all of any taxes and assessments paid by the holder while the prevailing party was in possession of the property. 2011 Wash. Sess. Laws 1664.

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