BROKERS: Broker’s license is revoked for sexual abuse of child and abuse by parent. The broker pleaded guilty to felony charges of sex abuse with a minor and child abuse by a parent. The victims were his daughter and niece. The abuse occurred over a 15-year period. The broker was sentenced to four years of incarceration, three of which were suspended. He served four months in prison and eight months under house arrest, during which he was allowed to work. While still in the probationary period, the Real Estate Commission sought to revoke the broker’s license on the basis of this conviction. After a hearing, the administrative law judge ruled that the broker should have his license suspended, but not revoked, noting that he was in rehabilitation, receiving counseling, and that his crimes had no effect on his practice as a broker. The Real Estate Commission overruled the judge’s decision and revoked the broker’s license. The broker challenged the revocation, but the Maryland Court of Appeals upheld the Commission’s findings in substantially all respects. It pointed out that, while the statute regulating brokers provided that a real estate broker can lose his license on conviction of a felony, the larger issue to be addressed was the question of the nexus between the felony, here child sexual abuse, and the broker’s fitness to act as a real estate broker. The court agreed with the Commission that the circumstances of the crime demonstrated that the broker did not evince the responsibility, maturity, and trustworthiness, nor the good character and reputation required of brokers. Bad faith, incompetency, fraud, or dishonesty is not required. A statute enacted in 2009 requires the state to show a direct relationship between convictions for nonviolent crimes and the specific occupational license before denying the license, Md. Code Ann., Crim. Proc.
§ 1-209, but the sexual abuse inflicted on minor children over an extended period of time was anything but nonviolent. Pautsch v. Maryland Real Estate Comm’n, 31 A.3d 489 (Md. 2011).
CONDEMNATION: Domesticated foreign corporation must demonstrate business as pipeline company in home state to condemn pipeline easement. D-Mil is a Texas corporation formed “to transact any and all business for which corporations may be incorporated.” Its Articles of Domestication filed in Oklahoma declared its purposes for transacting business in Oklahoma as those authorized in Texas as well as for “mineral leasing.” D-Mil brought a condemnation action against a landowner to obtain an easement to construct a pipeline to transport natural gas. The landowner answered, challenging the corporation’s status as a pipeline company. The landowner maintained that D-Mil failed to show in any of its filings with the state that it was a “pipeline company” in Texas, a condition precedent to becoming one in Oklahoma. D-Mil filed a motion for summary judgment and a Board of Commissioners sustained D-Mil’s action to condemn the land. The district court affirmed, finding that there was no issue that
D-Mil was a Texas corporation, properly domesticated in Oklahoma, and that D-Mil transported natural gas to market as part of its activities. The Supreme Court reversed, finding that the district court’s analysis was not complete as it did not determine that D-Mil had in fact operated as a pipeline company in Texas. Eminent domain proceedings must strictly comply with constitutional mandates, which are construed in the light most favorable to the landowner. To exercise the eminent domain power afforded to pipeline companies, D-Mil had to demonstrate that it operated a pipeline business in Texas. All that it offered in support of its motion for summary judgment was an unsubstantiated assertion that it is a statutorily authorized “pipeline company.” D-Mil Production, Inc. v. DKMT, Co., 260 P.3d 1262 (Okla. 2011).
CONDOMINIUM ASSOCIATION: Condominium tenant is coinsured with condominium association under insurance policy and therefore cannot be sued by insurer that pays claim. The insurer for a seven-unit commercial condominium building paid a claim to the condominium association for fire damage. The fire originated in Unit F, leased by its owner to tenants. The fire department did not determine the specific cause of the fire but noted that it was likely associated with a space heater. The condominium’s “Declaration and Covenants, Conditions, Restrictions, and Reservations” required the board to obtain and maintain fire insurance in an amount equal to the full insurable replacement value of the building for the benefit of the board and the owners. After the insurer paid the claim, it sued the tenants, claiming they negligently caused the fire. The court granted summary judgment for the tenants on the basis that they were coinsureds under the insurance contract and thus were not liable to the insurer on the basis of subrogation. The appellate court held that the law presumes that a tenant is a coinsured on the landlord’s insurance policy unless there is an express agreement to the contrary. No contrary agreement appeared here. Community Ass’n Underwriters of Am., Inc. v. Kalles, 259 P.3d 1154 (Wash. Ct. App. 2011).
DEEDS: Deed providing for automatic reverter if buyer did not install waterline within one year creates fee simple determinable, not fee simple subject to condition subsequent. The seller contracted to sell 68 acres out of a 125-acre parcel she inherited from her grandfather. The buyer planned to subdivide the land and sell lots. The 68 acres contained a structure built by the seller’s grandfather called the “Rock House.” The deed required the buyer to install a municipal waterline across the property within one year of closing and to grant a waterline easement to the seller to serve the remainder of her property, which she hoped to develop. The deed provided that “in the event that the Buyer does not comply with the provisions in this paragraph, title to the Rock House Lot shall automatically revert to Seller in fee simple,” and that on timely completion of the waterline, the seller would quitclaim to the buyer “all her right, title and interest in and to this automatic reverter.” The buyer’s plans for development were derailed by the prohibitive costs of obtaining the requisite permits for the waterline, which the town would not issue without installation of sewer lines. Eventually, the buyer abandoned its development plans. Five years after closing, the seller brought a complaint for a declaratory judgment that she was the owner of the property and prevailed on a motion for summary judgment. The court held that the clause created a fee simple determinable, resulting in the automatic reverter of the Rock House by operation of law when the buyer failed timely to install the agreed-on waterline. On appeal, the buyer argued that the deed language created not a fee simple determinable but a fee simple subject to condition subsequent. The court rejected the assertion, finding that when language is clear and unambiguous, its literal meaning controls. The term “automatic” meant that the seller was not required to take any action to activate her rights; thus the language had to create a fee simple determinable. A fee simple determinable operates to terminate the estate immediately on the happening or nonhappening of a stated event. The buyer’s defenses of waiver and laches also failed. The seller’s failure to mention the reverter in discussions over the years with the buyer about the progress of the development was not a voluntary relinquishment of her rights, and the buyer failed to demonstrate that any part of its investment related to the Rock House. Lasater v. Hawkins, No. M2010-01495-COA-R3-CV, 2011 WL 4790971 (Tenn. Ct. App. Oct. 10, 2011).
DEEDS: Former wife who knew her husband had forged deed cannot recover land from bona fide purchaser. In 2003, unbeknownst to Mrs. Phillips, her former son-in-law and husband forged a warranty deed, later replaced by a forged corrective deed, to sell her land to Allstate Investment Properties. Both deeds were recorded. After a series of conveyances, Alvarez bought the property, which he then lived on and maintained. The court found that Mrs. Phillips had constructive notice of the forged deeds because they were recorded. Moreover, Mrs. Phillips and her attorney gained actual knowledge of the forgeries during a deposition connected with her divorce in 2004, but they decided not to take any action until 2005, after Alverez’s purchase. Then, she sued the purchaser and not the perpetrators of the fraud. In the words of the court, she “knowingly let the bad guy walk.” The court ruled that Mrs. Phillips had a duty to give notice to others who were in danger of being harmed once she learned of the forged deeds. Alvarez was a bona fide purchaser for value, who relied on the public records, which gave no indication of Mrs. Phillips’ claim. Because her “silence led another to take a position in which the assertion of the legal title would be contrary to equity and good conscience,” she was equitably estopped from now asserting her interest in the property. Nunes v. Allstate Inv. Props., 69 So. 3d 988 (Fla. Dist. Ct. App. 2011).
EASEMENTS: Tax sale of servient estate does not extinguish easement by prescription acquired before the sale. The plaintiffs had used the “Beach Lot” to access Lake Ossipee for more than 20 years. In 1987, the town of Ossipee acquired title to the Beach Lot by tax sale and thereafter sold it. In 1998, a developer conveyed portions of the Beach Lot to several lot purchasers. In 2010, the plaintiffs sought a declaration that they held a prescriptive easement to continue using the Beach Lot. The owners of the Beach Lot maintained that the town’s tax sale had extinguished the easement. Rejecting that assertion, the court applied the long-standing rule that a tax sale does not extinguish prescriptive easements that have ripened into vested property rights before recording the tax deed. The court noted, however, a different result might obtain if the tax sale interrupts the prescriptive period. It declined to overrule the long-standing rule, particularly because the new rule urged would upset the settled expectations of the easement holders and impose on them the nearly impossible burden of ensuring that the servient estate is properly assessed and that the taxes are paid. The court found no substantive changes in the state tax scheme that showed the existing rule operated as an impediment to tax collection. Even if this were the case, it seemed best left to the legislature to make adjustments, subject to constitutional limits. Marshall v. Burke, 162 N.H. 560 (2011).
Foreclosure: Lender was not entitled to proceed with foreclosure when it failed to act in good faith in foreclosure mediation program. Mortgagors defaulted on their loan and elected to mediate under the state’s newly adopted foreclosure mediation program. The program requires that if the homeowner elects to mediate, both the homeowner and lender must attend, must mediate in good faith, provide certain enumerated documents, and, if the lender attends through a representative, that person must have authority to modify the loan or have “access at all times during the mediation to a person with such authority.” Nev. Rev. Stat. § 107.086(4). After the parties met on two occasions, the mediator filed a statement noting that the lender had not produced all the required documents, nor sent to the mediation a person with actual authority to modify the loan, and had not participated in good faith. The mortgagors sought sanctions against the lender, namely a loan modification. Notwithstanding the mediator’s report, the trial court ruled that the mortgagors had not met the burden of showing why sanctions should lie and ordered the foreclosure to continue. This was an abuse of discretion. The supreme court explained that compliance with the statutory requirements was mandatory, which, unless met, means that the mediation cannot be certified, the foreclosure proceeding cannot proceed, and the lender is subject to sanctions. The court remanded, instructing the trial court to impose sanctions in its discretion, but directing that some sanction was necessary. The relevant factors to consider were whether the violations were intentional, the amount of prejudice to the injured party, and the lender’s willingness to mitigate the harm by continuing meaningful negotiation. Pasillas v. HSBC Bank USA, 255 P.3d 1281 (Nev. 2011).
FORECLOSURE: Trustee that communicates erroneous delinquency amount to auctioneer is not entitled to set aside sale on grounds of procedural irregularity. The borrower owed $219,105, but the trustee communicated the sum of $21,894 to the auctioneer as the opening bid, with no instructions to make any further bids on the lender’s behalf. The purchaser bid $22,896 and was declared the highest bidder. When the trustee discovered its error, it attempted to return the purchaser’s cashier’s check and refused to deliver a trustee’s deed. The purchaser then sued the trustee seeking specific performance. In its motion for summary judgment, the trustee asserted the wrongly communicated sum as a procedural defect, making the sale improper and voidable. The court of appeals disagreed. The California statute regulating power of sale foreclosures provides a comprehensive threefold scheme: (1) to provide a quick, inexpensive and efficient remedy; (2) to protect the homeowner from wrongful loss of property; and (3) to ensure that the properly conducted sale is final between the parties and conclusive for a bona fide purchaser. Cal. Civil Code § 2924–2924k. Once the trustee’s deed is delivered, a rebuttable presumption arises that the sale was conducted regularly and properly. Until delivery of the deed, however, the sale can be challenged, but only on the grounds of procedural irregularity. But mere inadequacy of price, without some procedural irregularity, is insufficient. Here, there was no procedural irregularity, only error arising out of the trustee’s negligence. The auctioneer twice confirmed the credit bid price. The error was wholly under the trustee’s control. Biancalana v. T.D. Service Co., 132 Cal. Rptr. 3d 719 (Ct. App. 2011).
SALES CONTRACTS: Purchaser of leasehold cannot recover down payment when contract allocates risk of failure to obtain municipal consent to purchaser. As part of an urban renewal project, in 1981 the city conveyed property subject to the condition that part of the land be used for a Pathmark Supermarket for 25 years after project completion. The agreement provided that for 25 years the developer could transfer the land only with the city’s written permission, not to be unreasonably withheld. In 2007, a purchaser offered to buy the Pathmark Supermarket leasehold interest for $87 million, believing it had a much higher value if used for residential purposes. Before closing, the real estate market took a downturn, the purchaser decided not to go forward, and Pathmark retained the $6 million down payment. The purchaser maintained that it had a right to recover its down payment because Pathmark breached a contract warranty that it “was not prohibited from consummating the transactions . . . other than [by] any Permitted Exception.” The permitted exceptions included the prohibition in the land development agreement against transfers without the city’s permission. The court held that the purchaser expressly agreed to the risk that Pathmark might not obtain such permission. Although “permitted exceptions” in contracts usually describe encumbrances that the seller need not remove, the words were used here in a broader sense. The risk seemed a small one and the restriction had only a year and a half to run, but the purchaser undertook that risk. This allocation of risk did not offend public policy. Therefore, by the clear terms of the contract, the seller could retain the down payment because it did not breach the contract. CPS Operating Co. v. Pathmark Stores, Inc., 958 N.E.2d 894 (N.Y. 2011).
ZONING: Placing portable manufactured cabins in an RV park was permitted nonconforming use. In 2005, the tenant leased land that contained an RV campground, a convenience store, and several permanent cabins held for rental. The following year, the county zoned the land for single-family residential use. The RV campground qualified as a nonconforming use, but the ordinance expressly provided that “nonconformities shall not be enlarged upon, or extended, nor used as grounds for adding other structures or uses prohibited elsewhere in the same district.” Later on, the tenant began selling portable, manufactured cabins. Buyers of two cabins rented campground lots where they installed and occupied their cabins. When the county informed the tenant that his display and installation of the portable cabins violated the zoning ordinance, he sought a permit from the county planning commission. The commission refused to permit the display of the portables for sale, but allowed him to leave the portables on the land as a continuation of the nonconforming use. A group of nearby homeowners appealed the latter ruling to the circuit court, which reversed the commission’s decision. The court of appeals upheld the commission’s ruling, holding that it was not arbitrary or capricious and was supported by substantial evidence. The commission properly defined the nonconforming use broadly as a commercial operation, rather than narrowly as an RV park. Thus, placing the portable cabins on the lot was merely a continuation of the nonconforming use. Moreover, because the ordinance defined RVs as “portable or mobile living units for temporary human occupancy away from the place of residence of the occupants,” it was reasonable for the commission to construe the term “RV” to include these portable cabins. Jones v. Lutken, 62 So. 3d 455 (Miss. Ct. App. 2011).
Conservation Easements. Recent years have seen a dramatic rise in the use of conservation easements as a tool to limit growth and preserve land for environmental purposes. Conservation easements are interests in land given to governments or land trusts, usually for charitable purposes and often perpetual, that restrict development or serve other conservation purposes. Many states have statutes authorizing the creation of conservation easements. Grantors of easements obtain significant federal and state tax advantages. As the use of these relatively new servitudes has increased, so has the recent literature discussing and critiquing them.
Much of this literature has suggested that conservation easements, while well intentioned, have certain flaws and limitations that actually impede their stated goals of environmental protection. Prof. Jessica Owley has written several recent articles in this vein. In Changing Property in a Changing World: A Call for the End of Perpetual Conservation Easements, 30 Stan. Envtl. L.J. 121 (2011), Prof. Owley argues that the typical conservation easement is too rigid, static, and ill-suited to the more flexible adaptive management approach needed to achieve modern conservation goals. She suggests a “multi-tiered holistic approach” to environmental protection that involves a coordinated effort among levels of government and an array of regulatory and property tools. Changing the standard length of conservation easements from perpetuity to a renewable term would enable governments, landowners, and interest groups periodically to reassess the value and effectiveness of particular servitudes on particular lands, as circumstances and scientific imperatives evolve over time. This article also serves as an excellent background primer on conservation easements.
Prof. Owley takes on another potential weakness of conservation easements in The Enforceability of Exacted Conservation Easements, 36 Vt. L. Rev. 261 (forthcoming 2011). Although the majority of conservation easements are donated or sold voluntarily by landowners for charitable or tax purposes, sometimes they are “exacted” by governments in exchange for development rights. Prof. Owley, studying the legal framework in California, warns that exacted conservation easements can present serious enforceability problems. To be enforceable, they must meet the requirements of the applicable conservation easement statute. The text and legislative history of the California statute, for example, contemplates the “voluntary” creation and conveyances of conservation easements and leaves significant interpretive discretion to the courts, which have characterized “exactions” as voluntary because a developer makes a “voluntary decision” to construct her project. An additional potential problem is the state law of exactions, which might not allow exactions for environmental purposes, or might have particular limitations on types of servitudes that may be exacted. Prof. Owley cautions those with an interest in using conservation easements to have a greater understanding of the legal rules and potential risks to their viability. A shorter version of this article was published as Exacted Conservation Easements: Emerging Concerns with Enforcement, 26 Prob. & Prop., Jan./Feb. 2012, at 51.
Another important factor in the trend toward conservation easements is their tax effects. Landowners can take advantage of significant tax benefits, both for charitable donations generally, and for conservation easements specifically. Prof. Nancy A. McLaughlin has published Internal Revenue Code Section 170(h): National Perpetuity Standards for Federally Subsidized Conservation Easements, a comprehensive two-part study of the federal charitable income tax deduction for conservation easements. In Part 1: The Standards, 45 Real Prop. Tr. & Est. L.J. 473 (2010), she analyzes the history of the federal tax deduction. She concludes that the legislative history of IRC § 170(h) and the accompanying Treasury Department regulations indicate that the tax subsidy was intended to promote only conservation easements that are perpetual in duration and to ensure that the holder would be compensated for any conservation easements that are extinguished because of changed conditions. In Part 2: Comparison to State Law, 46 Real Prop. Tr. & Est. L.J. 1 (2011), Prof. McLaughlin surveys the conservation easement laws of all 50 states and explains how the federal perpetuity requirement for tax deductions should be considered in light of state law. This guide will prove extremely helpful to practitioners advising clients about the tax consequences of conservation easements. Prof. Josh Eagle has provided a more theoretical study exploring the reasons for what he determines is a higher-than-expected level of generosity when it comes to donated conservation easements. In Notional Generosity: Explaining Charitable Donors’ High Willingness to Part with Conservation Easements, 35 Harv. Envtl. L. Rev. 47 (2011), Prof. Eagle studies several potential explanations from an economic perspective and concludes that conservation easement donors receive tax benefits that far exceed the subjective value of what they are giving away. The result, according to Prof. Eagle, is that the public is overpaying for this type of public good.
Although most of the recent literature on conservation easements has focused on their application in the United States, some experts have advocated that other countries adopt and apply this tool. Prof. Gerald Korngold evaluates this suggestion in Globalizing Conservation Easements: Private Law Approaches for International Environmental Protection, 28 Wis. Int’l L.J. 585 (2011). He analyzes comparative legal frameworks for both property law and environmental protection and concludes that the conservation easement as we know it is not an appropriate one-size-fits-all tool for every context. Instead, Prof. Korngold suggests engaging in a process that analyzes a given country’s “conservation toolbox” to determine the most appropriate mix of legal, regulatory, and economic tools to achieve conservation goals.
The dramatic growth in the use of conservation easements—and the increasing critique of various aspects of the tool—inspired an important symposium, edited by Prof. James L. Olmstead and published as Conservation Easements: New Perspectives in an Evolving World, 74 Law & Contemp. Prob. 1 (2011). Attorney Jeff Pidot, a former state deputy attorney general, provides an interesting account of Maine’s efforts to update its law for some of the weaknesses evident in conservation easement law, particularly problems with enforcement, in Conservation Easement Reform: As Maine Goes Should the Nation Follow?, 74 Law & Contemp. Prob. 1. Prof. Daniel Halperin returns to the tax question in Incentives for Conservation Easements: The Charitable Deduction or a Better Way, 74 Law & Contemp. Prob. 29, and suggests that direct government grants to facilitate the acquisition of conservation easements would be superior to the current tax subsidy. Julie Ann Gustanski and Prof. John B. Wright also look at the tax subsidy, concluding that it exceeds the public benefit and advocating reforms in the underlying valuation of conservation easements, in Exploring Net Benefit Maximization: Conservation Easements and the Public-Private Interface, 74 Law & Contemp. Prob. 109. Prof. Jesse J. Richardson Jr. and Amanda C. Bernard argue that conservation easements should be included in local zoning codes, comprehensive plans, and state zoning statutes, in Zoning for Conservation Easements, 74 Law & Contemp. Prob. 83. Prof. Richard Brewer uses a case study from Michigan to illuminate the problems arising from a state legislature’s ability to extinguish these devices in Conservation Easements and Perpetuity: Till Legislation Do Us Part, 74 Law & Contemp. Prob. 249. Prof. Brewer calls for the renaissance of protection in fee. Prof. McLaughlin also contributes an article addressing the question of whether and when conservation easements are extinguished under the doctrine of “merger,” if the easement holder acquires fee title to the land, in Conservation Easements and the Doctrine of Merger, 74 Law & Contemp. Prob. 279.
Other articles in the symposium address issues about the effectiveness of conservation easements themselves for achieving environmental purposes. Prof. Olmstead addresses the issue of public access to the large array of data behind conservation easements. In The Invisible Forest: Conservation Easement Databases and the End of the Clandestine Conservation of Natural Lands, 74 Law & Contemp. Prob. 51, he argues in favor of transparency and discusses the future benefits of the National Conservation Easement Database. Prof. Adena R. Rissman notes that even flexible conservation easements often pose administrative problems and offers a multidisciplinary approach to studying them in Evaluating Conservation Effectiveness and Adaptation in Dynamic Landscapes, 74 Law & Contemp. Prob. 145. Laurie Wayburn defends conservation easements as essential for protecting land in Conservation Easements as Tools to Achieve Regulatory Environmental Goals, 74 Law & Contemp. Prob. 175. Prof. Owley extends her critique of the rigidity of these servitudes in Conservation Easements at the Climate Change Crossroads, 74 Law & Contemp. Prob. 199, arguing that the rapid pace of climate change underscores the limitations of conservation easements as imperfect tools to flexibly adapt environmental measures to the changing landscape. Prof. W. William Weeks, sharing some of these concerns, advocates a reform that would allow the trading of conservation easements, in A Tradable Conservation Easement for Vulnerable Conservation Objectives, 74 Law & Contemp. Prob. 229.
Although much of this literature is partly critical of the way in which conservation easements have developed in the law, it is also mostly in favor of the underlying environmental objectives that these tools were developed to address. This recent wealth of thoughtful, nuanced analyses will make great contributions to the evolution and reform of conservation easements as they continue to serve as popular options for achieving conservation goals.
Florida substantially modifies its power of attorney act. Under the new law, springing powers are no longer recognized. Most gifting powers are subject to a separate signature requirement. The Florida Power of Attorney Act generally conforms to the Uniform Power of Attorney Act. 2011 Fla. Sess. Laws Serv. 210.
Hawaii adopts the Uniform Real Property Transfer on Death Act. The deed on death, known as a transfer-on-death deed or a beneficiary deed in other jurisdictions, is revocable until the death of the grantor. The beneficiary acquires no present interest in the property. At least six jurisdictions have now enacted this uniform law. 2011 Haw. Sess. Laws 173.
Illinois enacts the Uniform Real Property Transfer on Death Act. The deed on death, known as a transfer-on-death deed or a beneficiary deed in other jurisdictions, is revocable until the death of the grantor. The beneficiary acquires no present interest in the property. At least six jurisdictions have now enacted this uniform law. 2011 Ill. Laws 555.
North Carolina adopts the Commercial Real Estate Broker Lien Act. The legislation authorizes brokers to file liens against real property for unpaid broker services in connection with commercial real estate. It does not apply to residential units, including houses, condominiums, and townhouses, that are individually sold. 2011 N.C. Sess. Laws 165.
North Carolina authorizes risk-based environmental remediation of industrial sites. The legislative goal is to encourage accelerated cleanup of contaminated industrial sites through the use of site-specific remediation standards. The difficult balancing of both environmental and economic benefits is assigned to the Division of Waste Management. 2011 N.C. Sess. Laws 186.
Texas imposes liability on a landlord that loses a certificate of occupancy because of the landlord’s failure to maintain the premises. A tenant that is not in default can recover the tenant’s security deposit, the pro rata portion of any advance rental payment, the tenant’s actual damages, and court costs and attorney’s fees. 2011 Tex. Gen. Laws 512.
Texas prohibits private transfer fees. A private transfer fee obligation is a fee or charge payable on the transfer, or payable for the right to make a transfer, of real property. Private transfer fee obligations entered into after the effective date of the law are void. Existing private transfer fee obligations are subject to numerous statutory requirements, which if not satisfied may make them void. Most one-time fees and fees paid to homeowners associations are excluded from the law. 2011 Tex. Gen. Laws 211