FORECLOSURE: Judgment ordering foreclosure is not final and appealable until judicial confirmation of sale. Kemp defaulted on her home mortgage loan and EMC Mortgage Corp. initiated foreclosure proceedings. The complaint alleged that EMC was the “legal holder of indebtedness,” but made no reference to the original mortgagee. Kemp’s answer challenged EMC’s standing and asserted counterclaims based on the origination of the loan. The court dismissed her counterclaims and scheduled a foreclosure sale. Kemp filed an emergency motion to vacate the foreclosure and a subsequent motion to reconsider. After the court denied these motions Kemp appealed. The appellate court dismissed the appeal, explaining that while a judgment of foreclosure is final for the matters it adjudicates, it is not a final appealable order because the trial court still must confirm the sale and direct distribution of the proceeds. EMC Mortg. Corp. v. Kemp, 982 N.E.2d 152 (Ill. 2012).
LANDLORD-TENANT: Court order against landlord to remediate hazardous conditions terminates lease even though tenant was not party to underlying proceedings. Farricielli owned four parcels, one of which contained a “tire pond” used for the disposal of some 15 million used tires. The state environmental protection agency brought a series of suits against Farricielli and his corporations, obtaining either consent orders or judgments requiring the discontinuance of disposal activities on the sites and remediation. While the litigation was ongoing, a Farricielli corporation leased part of one of the parcels to Modern for recycling, screening, and reselling construction materials. A court order to remediate the parcel required Modern to vacate the land, effectively terminating the lease. Modern insisted that, as a nonparty, it was not bound by the order. The supreme court disagreed, finding that, as a tenant, Modern’s “identity of interest” rendered it in privity with the landlord so as to make the order enforceable against it. The order was like an injunction in a nuisance case, which is treated as an in rem order, binding nonparties having possessory rights to the property. Commissioner of Envtl. Prot. v. Farricielli, 59 A.3d 789 (Conn. 2013).
PREMISES LIABILITY: Dumping large quantities of cooking grease into sewer system is not covered by restaurant’s liability insurance policy. The Hog’s Breath Saloon & Restaurant dumped substantial amounts of cooking grease into the sewer system, causing a large clog that led to a dangerous buildup of hydrogen sulfide gas. Two city workers were injured as they attempted to clean the sewer and sued the restaurant. The restaurant’s insurer contingently defended the suit but sought a judgment that it was not obligated to indemnify the insured based on a policy exclusion for claims arising from the discharge of pollutants. In ruling for the insurer, the supreme court noted that the policy defined pollutant to mean “contaminant.” That term is commonly understood to mean a substance that infects or renders unfit for use by the introduction of unwholesome or undesirable elements. In addition, a city health ordinance prohibited the discharge of pollutants in the sewers, recognizing that a variety of substances, including commercial waste, were contaminants if discharged in sufficient quantities. The court rejected the restaurant’s position that the policy exclusion for the discharge of pollutants should be limited to toxic substances covered by federal environmental laws. Mountain States Mut. Cas. Co. v. Roinestad, 296 P.3d 1020 (Colo. 2013).
SALES CONTRACTS: Terms in preprinted form created contract for deed, despite handwritten words “lease option to purchase.” The parties used a preprinted “Purchase and Sale Contract” but wrote underneath the printed label, “Lease-Option to Purchase.” The preprinted terms referred to the parties as “purchaser” and “seller,” expressed promises “to purchase” and “to sell and convey,” and stated a price, deposit, payment schedule, interest rate, and final balloon payment. The poorly drafted contract included an addendum, which in places referred to the “buyer/lessee” and called some of the payments “rent.” The purchasers took possession of the property, a bar. Under the contract, they were responsible for operating licenses, equipment, taxes, and insurance. After failing to make the balloon payment, the purchasers vacated when threatened with loss of the liquor license. Soon after, however, they sought to be restored to possession, maintaining that the original agreement was a contract for deed, giving rise to an equity of redemption that could only be extinguished by foreclosure. The sellers maintained that the instrument created a lease with an option to purchase and sought to recover back rent and damages. The supreme court found that, despite the handwritten label, the instrument created a contract for deed because it described a bilateral agreement, with obligations and rights on both sides, and the payments made were applied to reduce the purchase price. Because Vermont treats a contract for deed as creating an enforceable equitable mortgage, the purchasers could demand foreclosure by sale. Prue v. Royer, No. 11-417, 2013 WL 562881 (Vt. Feb. 15, 2013).
SALES CONTRACTS: Damages for buyer’s breach is difference between contract price and property’s fair market value at time of breach, not at resale. The Whites contracted to purchase the Farrells’ home for $1.725 million, with a $25,000 deposit. Several months later, the Whites notified the Farrells that they elected to terminate the contract based on uncompleted construction work. One year later the Whites sued the Farrells for return of their deposit and the Farrells counterclaimed for breach of contract. The next year, while the case was pending, the Farrells sold their house to another buyer for $1,376,550. At issue before the court of appeals was the appropriate measure of damages—whether based on the fair market value at the time of breach or at resale. Although the four departments of the Appellate Division had consistently endorsed the time of breach rule, this was the first occasion for the court of appeals to consider the question. Finding the time of breach rule as long-standing in New York and consistent with general contract principles, the court rejected the Farrells’ invitation to adopt the resale measure. The resale price, however, might be evidence of fair market value at the time of breach. White v. Farrell, 20 N.Y.3d 487 (N.Y. 2013).
STATUTE OF LIMITATIONS: State and federal constitutional takings claims are subject to 10-year statute of limitations. In 1959, the U.S. Forest Service granted a special-use permit to Smith to operate a sawmill on 14 acres of land to facilitate the salvage of timber from a recent fire in the area. Over the years, Smith and his lessee built and operated a sawmill and made various improvements. In 1964, dissatisfied with Smith’s performance under the permit, the Forest Service temporarily shut down his operation and sought to change the terms of the permit. In 1967, the state applied to the Forest Service to select and acquire title to land that included Smith’s permit area. The state’s selection became final in 1979. Over the years, Smith protested the changes in the permit and tried to obtain title to the land but did not bring suit until 2006, when he alleged a taking of the land. The court dismissed the action as time-barred. In 2010, Smith sued again, alleging a taking of his improvements, suffering a dismissal on the basis of a state 10-year statute of limitations for the recovery of real property. On appeal, Smith argued that a statute of limitations does not apply to constitutional claims. The court held that all civil claims are governed by statutes of limitations and that there was no exception for constitutional claims. Smith v. State, 282 P.3d 300 (Alaska 2012).
TITLE INSURANCE: Insured who lied to title company about existence of prior liens is liable for fraudulent misrepresentation. Dude obtained a $1.9 million home mortgage loan from Washington Mutual, securing the loan with a mortgage. That mortgage was recorded, but was defective because it lacked a legal description of the property. Dude then borrowed $500,000 from Wells Fargo, representing on a form provided by the title insurer, Stewart, that there were no loans or liens on the property. Dude later sold the property, and Stewart, unaware of the first loan, turned over the proceeds to Dude. Dude’s scheme came to light when he stopped paying the first loan and Washington Mutual threatened to foreclose. Stewart paid off the Washington Mutual loan and sued Dude, alleging fraudulent misrepresentation. Stewart prevailed on the claim, but Dude would not own up to his wrongdoing. On appeal, he maintained that the element of justifiable reliance was not established for two reasons: (1) Stewart knew he was lying when he stated that there were “no liens” because the title report prepared by Stewart contained a list of other liens on the property held by persons other than Washington Mutual; and (2) Stewart had constructive notice of the Washington Mutual mortgage from the land records. Neither point impressed the court. First, the form Dude completed elicited disclosure of liens “other than those” listed in the title insurance commitment. Second, because the first mortgage was not properly recorded, it did not give constructive notice. The court noted that the latter point, had it been asserted, might well have operated to defeat the priority of Washington Mutual; that is, subsequent bona fide purchasers would not have been bound by the prior defectively recorded mortgage. Stewart Title Guar. Co. v. Dude, 708 F.3d 1191 (10th Cir. 2013).
TITLE INSURANCE: Liability for insured’s inability to resell property is limited to face amount of policy. Mattson Ridge purchased property and obtained a title insurance policy from Ticor Title Insurance in the amount of its purchase price, $1.286 million. Mattson later agreed to sell the property to Thompson Builders and Contractors for $2.9 million. Thompson’s title insurer refused to issue a policy, claiming title was not marketable without a survey of the property and the cure of an ambiguity in the legal description. Mattson sought assistance from Ticor under the policy’s coverage of loss from the unmarketability of title, but Ticor denied the claim. Mattson ultimately resolved the problem, but not before Thompson lost financing. Mattson sued Ticor to recover up to $2.6 million, the difference in the value of the property with and without marketable title. The court held that Ticor breached the policy by failing to defend the title, but recovery was limited to the face amount of the policy. Ticor’s breach did not cause Mattson’s failure to close the resale to Thompson; Ticor could not have cured the legal description problem more quickly than Mattson did. Mattson Ridge, LLC v. Clear Rock Title, LLP, 824 N.W.2d 622 (Minn. 2012).
ZONING: Ordinance prohibiting check-cashing establishments in certain zones is invalid regulation of users. A zoning ordinance prohibited check-cashing establishments in all use districts except industrial and light manufacturing districts. The ordinance aimed to encourage vulnerable groups to deal with reputable banks and to eliminate predatory and exploitative finance enterprises from certain areas. Several check-cashing establishments challenged the validity of the ordinance. The court of appeals explained that the zoning power delegated by statute to towns was not a general police power but empowered towns only to regulate land use and not the persons who occupy land. The zoning ordinance violated that principle because it was not aimed at preventing crime or addressing negative secondary effects from certain uses but at the perceived social evil of check-cashing services. “Whatever the merits of this view as a policy matter, it cannot be implemented through zoning.” Sunrise Check Cashing and Payroll Servcs., Inc. v. Town of Hempstead, 20 N.Y.3d 481 (N.Y. 2013).
ZONING: Zoning ordinance filed with city clerk but not county recorder is valid. The Aamodts bought a second home, intending to rent it to friends and fishermen for short-term stays to offset their costs of upkeep. Before purchasing, they reviewed all zoning ordinances on file with the county recorder and found no restrictions on short-term rentals. Unfortunately for them, in 2008, the city had enacted such an ordinance, but had filed it with the city clerk and not with the county recorder. The Aamodts sued to enjoin the application of the ordinance. Focusing on a provision in the state zoning statute that requires a majority vote of the city council to amend zoning ordinances, the Eighth Circuit rejected the Aamodts’ challenge, finding it undisputed that the city passed the ordinance by a majority vote. A dissenting judge maintained, however, that the majority missed the point—the Aamodts did not claim that the ordinance was not properly passed, but that the city failed to follow its own mandatory procedures by not filing it with the county recorder. In the dissent’s view, the majority ruling deprives future purchasers of the assurances in the zoning ordinance that all zoning restrictions could be found at the office of the county recorder. Aamodt v. City of Norfork, 682 F.3d 735 (8th Cir. 2012).
Land Use. As land use regulation has become increasingly complex over the last several decades, so court decisions have become more confused. That is the position of Prof. Adam J. MacLeod, in Identifying Values in Land Use Regulation, 101 Ky. L.J. 55 (2012/2013). He explains that, despite what seemed a useful test articulated by the Supreme Court in Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1922), local legislators routinely fail to adhere to the standards and often make decisions that may be corrupt and irrational, leaving the legal theory virtually undecipherable and the results completely unpredictable. His assessment is based on an analysis of scores of cases and a close examination of the standards for judicial review expressed in them. Prof. McLeod suggests a new approach to the problem of judicial review of land use regulation, one that requires the articulation of the specific means-ends justifications for land use decisions and an identification of which ends are legitimate, substantial, and compelling, as well as the particular police powers that they are exercising in each regulatory decision. The framework he develops promises accessibility and coherence in what he depicts as an inscrutable universe.
Property Rights and Climate Change. These days, the concerns about climate change are loudly expressed, and more and more courts and administrators are listening. Apart from the environmental effects (unpredictable weather patterns, drought, sea level rise), there are both mundane and theoretical property law issues now getting attention.
In The Cathedral Engulfed: Sea-Level Rise, Property Rights, and Time, 73 La. L. Rev. 69 (2012), Prof. J. Peter Byrne shows how sea level rise poses new challenges to property rights, such as changing boundaries and public/private land demarcation that call for new approaches to land use. These new approaches, including “armoring” (building structures to hold back the sea), rolling development restrictions, prohibitions on development after a storm, and condemning future interests, will generate novel claims of regulatory takings. He explains that the choice of responses is complicated by the fact that regulations adopted now may have their principal regulatory effect only in the future on the occurrence of some event.
In Coastal Land Loss and the Mitigation-Adaptation Dilemma: Between Scylla and Charybdis, 73 La. L. Rev. 31 (2012), Prof. Blake Hudson identifies three major causes for coastal land loss: population growth along coast lines, vanishing wetlands, and rising seas, largely from global climate change. He explores the two prevailing approaches to addressing coastal land loss—mitigation (actions that seek to forestall or mitigate land loss through wetland restoration, river diversion to renourish coastlands and restore the natural accretion of land, barrier island restoration, dam and levee building) and adaptation (accepting that certain coastal lands will be lost to subsidence or rising sea levels). Prof. Hudson urges caution in opting for mitigation over adaptation for three reasons: uncertainty about its effectiveness, the influence of political expediency driving the choice, and the effects of past failures to adapt coastal land-use activities to the need to adapt or mitigate today. Prof. Hudson’s treatment of the dilemma presented by the opposing strategies is sobering and is sure to prompt deep thinking on the best way to navigate.
In Land Use and Climate Change: Lawyers Negotiating Above Regulation, 78 Brooklyn L. Rev. 521 (2013), Prof. John R. Nolon shows how, as attitudes toward natural resources have evolved—from nuisance to precious—so has the common law. He asserts that the contours of property rights must evolve to reflect the realities of global climate change. The new conception of property, under which development in the path of sea level rise might be prohibited by existing background principles of state law, calls into question the unvarnished application of takings doctrine as articulated in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). If it is known that sea level rise endangers development, can one have a legitimate expectation to develop? He advocates a new regulatory environment, one that merges common law, statutory, administrative, transactional, and jurisprudential concerns in an effort to resolve the conflict between private rights and the protection of the natural world. This new regulatory regime will apply new conceptions of common law doctrines of nuisance and public trust, embrace measures for permitting minimal use on a vulnerable parcel, incorporate protocols on sea level rise in comprehensive plans, and employ deal making tools, such as “contingency bargaining.” Integral to this effort are lawyers who must operate “above regulations and beyond the confines of current practices, using new tools and techniques appropriate to a rapidly changing world.”
ARIZONA protects the rights of tenants to assemble in mobile home parks. Landlords cannot prohibit tenants or tenant associations from meeting inside their mobile homes or in common areas or facilities during normal operating hours to discuss mobile home living and affairs, including the formation of a tenant association. Landlords must permit tenants to post notices about such meetings. 2013 Ariz. Sess. Laws 8.
ARKANSAS adopts new forms of acknowledgment. The new forms are deemed valid and sufficient for recordation of documents relating to real property and for entry into evidence. An enumerated list of drafting defects cannot defeat the constructive notice that a recorded document provides. The changes address an emergency identified by the state because certain documents have been found not to provide constructive notice, undermining “property rights and interests.” 2013 Ark. Acts 999.
IDAHO protects homeowners from regulatory takings. Zoning district governing boards must set clear and objective standards “while ensuring that application of such standards does not constitute a regulatory taking pursuant to Idaho or federal law.” Land use ordinances regulating permits and other approvals must set forth “standards and criteria . . . in express terms” to give greater guidance to “permit applicants, interested residents and decision-makers alike.” Written decisions by regulatory authorities must identify whether an application complies with the relevant standards and criteria. Failure to address such standards can justify reversal. 2013 Idaho Sess. Laws 216.
IDAHO limits liability for trespass and for wrongfully cutting down or harming trees on another’s property. Liability requires a showing that the defendant took such actions “willfully and intentionally.” Damages to real and personal property from unintentionally or negligently setting a range fire or wildfire exclude environmental damages and are limited to fire control costs, economic damages, and loss in fair market value or “actual and tangible restoration costs . . . to the extent that such actual and tangible restoration costs are reasonable and practical.” 2013 Idaho Sess. Laws 62.
ILLINOIS responds to the ongoing mortgage foreclosure crisis by amending its Housing Development Act. Fees, ranging from $50 to $500, are imposed for filing foreclosure complaints to generate funds for two programs: the Foreclosure Prevention Program, authorized to make housing counseling grants, and the Abandoned Residential Property Municipality Relief Program, authorized to use funds to secure and clean up abandoned property. The statute contains a new declaration of policy regarding abandoned residential property, citing the challenges created by foreclosures—from lowered property values to increased crime and lengthy judicial proceedings—and declares that housing counseling helps homeowners avoid foreclosure. An expedited process is provided for the sale of abandoned residential property. Mortgagees that enter to secure and maintain such property are given immunity from liability. 2011 Ill. Laws 1164.
INDIANA extends the period in which both mortgage and vendor’s liens survive in cases of uncertainty. Under existing law, liens in the state generally expire 10 years after the due date of the last installment of the debt secured by the lien. Under the new law for most debts entered into before July 2012, if the last installment date is not noted in the relevant documents, the period before expiration is extended to 20 years after the lien execution date; or, if that date is omitted from the documents, to 20 years from the date the lien was recorded. Actions to foreclose filed within the permitted periods avert lien expiration. 2013 Ind. Acts 18.
MISSISSIPPI requires all state agencies, departments, and public institutions of higher learning to report all real property transactions. The law requires a report of the exercise of eminent domain and all other real estate transactions to the Department of Finance and Administration, Bureau of Buildings, Grounds and Real Property Management at least once a year. 2013 Miss. H.B. 1265.
MONTANA increases protections for a tenant’s personal property left in the dwelling after termination of the tenancy. The law raises the standard from a landlord’s reasonable belief of abandonment to clear and convincing evidence. On obtaining such evidence, however, the landlord can remove such property after two days instead of the five days required in the prior statute. The landlord must give the tenant notice of these provisions “in plain and understandable language” in the lease or at the time of occupation, as well as after termination. 2013 Mont. Laws 93.
NEW MEXICO adopts a Homeowner Association Act to complement its Condominium Association Act. New associations formed after the act’s effective date, July 1, 2013, must record notice within 30 days; existing associations have one year. Proxy and absentee voting are allowed. 2013 N.M. Laws 122.
NORTH DAKOTA provides for the creation of an assignment of rents by virtue of any security interest given in real property. The assignment of rents arises whether or not the instrument also creates or provides for a security interest in personal property, unless the document provides otherwise. The assignment of rents creates a presently effective security interest in all accrued and unaccrued rents arising from the real property. The security interest is separate and distinct from any security interest held by the assignee in the real property. The act specifies when such interests are perfected and identifies the priority of interests. 2013 N.D. H.B. 1191.
UTAH amends its condominium and community association statute. Unit owner associations cannot charge fees for reviewing or approving construction and improvement plans that exceed the actual costs of such review and approval. Insurance requirements in Utah Code § 57-8-43 no longer apply to commercial condominium projects insured under a policy issued or renewed on or after July 1, 2013, and associations no longer need to insure commercial units in mixed-use projects unless the declaration so requires. The act now applies to any association that has at least one residential lot instead of only to entirely residential projects. After July 2014, all homeowner associations can enter a unit or lot if necessary to maintain, repair, or replace common areas and facilities, if they give 24 hours’ written notice or if, in the case of an emergency repair, they give or attempt notice reasonable under the circumstances. 2013 Utah S.B. 90.
VIRGINIA amends its condemnation statute. The amendment prohibits any local government from conditioning or delaying the consideration of a real estate permit or similar application merely to consider condemning that property. 2013 Va. Acts 581.
VIRGINIA sets a floor for the amount that state agencies must pay for condemned property. The amount must be the greater of (1) the current assessed value on condemned property (unless the value has changed so significantly since the time of assessment that it no longer constitutes fair market value) or (2) the state agency’s approved appraisal of the property’s fair market value, if required. These changes follow on the heels of the November 2012 amendments to the Virginia Constitution making the exercise of eminent domain more difficult. 2013 Va. Acts 764.
VIRGINIA permits tenants to end leases early in cases of family or sexual abuse or other criminal sexual assault. The victim must present a protective order or a court order showing the abuser’s conviction and must file written notice of termination and pay rent through the time of termination. 2013 Va. Acts 531.
VIRGINIA amends its mandatory disclosure provisions governing former methamphetamine laboratories. Landlords with actual knowledge of such prior use, when the premises have not been cleaned up pursuant to statute, must disclose that information to prospective tenants before the lease is signed or before occupancy in the case of an oral lease. Tenants not given such notice can terminate their leases in accordance with the statute’s timing provisions. 2013 Va. Acts 557.
WYOMING adds a new category of “innocent owners” of contaminated property for purposes of immunity. An innocent owner includes a “bona fide prospective purchaser,” someone who bought contaminated property after January 11, 2002, knowing it was contaminated but who nonetheless satisfies several criteria, such as stopping any ongoing contamination and not sharing liability for any prior contamination through enumerated relationships such as family or contractual connections. 2013 Wyo. Sess. Laws 38.