KEEPING CURRENT PROPERTY
Keeping Current-Property offers a look at selected recent cases, rulings and regulations, literature and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
- ADVERSE POSSESSION: Tenants in common. A developer of subdivisions dedicated waterfront to both waterfront and inland owners. The waterfront owners, who built docks and boathouses, claimed adverse possession of the waterfront. The court held the waterfront and inland owners were tenants in common under the dedication. Because none of the inland owners had objected to the docks or boathouses, there was no ouster and therefore no adverse possession. The court rejected the argument that the subdivision dedication created quasi-public rights that could not be destroyed by adverse possession. Denman v. Gans, 607 N.W.2d 788 (Minn. Ct. App. 2000).
- DEEDS: Reformation. The developer of a residential subdivision included its office building in a conveyance of a clubhouse to the owners' association, allegedly due to a surveyor's mistake. Five years later, the developer sought reformation. The developer had continued occupying the office building as if it were the owner. The developer's surveyor and the association's own lawyer testified there had been a mistake, but the "principal negotiator" for the association denied any mistake in the transfer. The court refused to grant reformation. Resort of Indian Spring, Inc. v. Indian Spring County Club, Inc., 747 So.2d 974 (Fla. Dist. Ct. App. 1999).
- EASEMENTS: Dedication. Owners in a subdivision sought to vacate an undeveloped portion of a road in the subdivision that the developer had offered to dedicate for public use in 1903. The owners argued that a 1940 county resolution purportedly accepting the dedication was not timely. The court held neither the original developer nor his successors took any steps to withdraw what was in effect a continuing offer and, therefore, the 1940 acceptance was timely. Christiansen v. Gerrish Twp., 608 N.W.2d 83 (Mich. Ct. App. 2000).
- EASEMENTS: Prescription. Owners of adjacent properties drafted an easement that inadvertently prohibited truck loading, contrary to the parties' intent. In the servient owner's suit to stop the truck loading, the court held that the dominant owner had a prescriptive easement to continue the use because of the mistaken belief the easement granted such a right. Consequently, the use was not permissive but hostile based on a claim of right. Plymouth Canton Community Crier, Inc. v. Prose, 2000 Mich. App. LEXIS 219 (2000).
- LANDLORD AND TENANT: Relocation of premises. A landlord leased space for a jewelry store under a lease that allowed the landlord to relocate the tenant at the landlord's expense with no express comparability requirement. Nevertheless, the court held the landlord's unilateral relocation of the tenant violated an implied duty to provide reasonably comparable space. Kite v. Gus Kaplan, Inc., 747 So.2d 503 (La. 1999).
- LENDER LIABILITY: Statute of Frauds. The borrower claimed its lender orally promised to waive a prepayment penalty. Citing a statutory requirement for written loan modifications, the court held that the borrower's claim failed even though it was based on such traditional exceptions to the Statute of Frauds as promissory estoppel, waiver and other equitable grounds. The statute did not expressly address equitable exceptions to the requirement for a written loan modification. Crown Technology Park v. D&N Bank, FSB, 2000 Mich. App. LEXIS 209 (2000).
- LIENS: Broker's commission. Missouri's brokers' lien act states that if a broker claims a lien for a commission before closing and the parties establish escrow in an amount sufficient to cover the lien, the broker must re-lease the lien and look only to the escrow. In this case, all the sale proceeds were to go to a bank in exchange for the release of its prior mortgage lien. The court held the bank's release did not impair the bank's priority in relation to the funds retained in escrow due to the broker's lien claim. Dalton Investments, Inc. v. Nooney Co., 10 S.W.3d 590 (Mo. Ct. App. 2000).
- LANDLORD AND TENANT: Condition of premises. A lease contained an "as is" clause but was otherwise silent on the responsibility to replace the HVAC system if that became necessary. The court held the "as is" clause in the lease unambiguously required the tenant to re-place HVAC equipment that failed during the lease term. Capital City Mortgage Corp. v. Habana Village Art & Folklore, Inc., 747 A.2d 564 (D.C. 2000).
- LANDLORD AND TENANT: Estoppel certificate. A landlord's successor in interest and a tenant disagreed over the lease expiration date for purposes of determining whether the tenant's notice timely exercised its renewal option. The tenant had executed an estoppel certificate specifying an expiration date that would have made the tenant's notice untimely. The court held that even though the date in the certificate was demonstrably incorrect and the landlord had not significantly relied upon the certificate in buying the property, common law estoppel by agreement bound the tenant. Plaza Freeway Ltd. Partnership v. First Mt. Bank, 96 Cal. Rptr.2d 865 (Cal. Ct. App. 2000).
- LANDLORD AND TENANT: Lease renewal. The tenant objected to the landlord's rejection of the tenant's un-timely renewal request. Although the tenant claimed to have previously given timely notice, the court, in overturning summary judgment for the tenant, held there was evidence the alleged timely notice was fabricated. If fabrication were proven, the tenant would be precluded by unclean hands from obtaining an equitable decree compelling the landlord to accept the late renewal. JGT Corp. v. Andrews, 2000 Tenn. App. LEXIS 281 (2000).
- OPTIONS: First refusal. Grantors of land who reserved a right of first refusal in the event the grantees ever desired to sell the land brought suit to nullify a gift of the land by grantees to a third party. The court held that, because the conveyance was a gift rather than a sale, the right of first refusal was never triggered. Cottrell v. Beard, 9 S.W.3d 568 (Ark. Ct. App. 2000).
- QUIET TITLE: Mortgagee's interests. The true owner brought an action to quiet its title against an adverse possessor who had, during the period of adverse possession, granted a mortgage on the property. A default judgment was obtained against the adverse possessor. Although known to the true owner, the mortgagee was not served a summons and had no knowledge of the quiet title action but was nonetheless held bound by the judgment. Ford Consumer Finance Co., Inc. v. Carlson and Breese, Inc., 611 N.W.2d 75 (Minn. Ct. App. 2000).
- SERVITUDES: Scope. The owner of property adjacent to a new subdivision agreed in an unrecorded contract with the subdivision developers to join the subdivision association and pay the association assessments for road maintenance costs, in return for access to the adjacent property through the subdivision roads. A later purchaser of the adjacent property who knew of the contract refused to pay the assessment. The court held that any implied equitable servitude could apply only to lots within the subdivision and rejected the contract as an implied annexation of the adjacent property to the subdivision. Dansie v. Hi-Country Estates Homeowners Assn, 987 P.2d 30 (Utah 1999).
- SERVITUDES: Touch and concern the land. A city required a developer to record covenants that purported to release the city from any claims by lot owners and their successors arising out of negligent issuance of the development permit on steep slopes. After heavy rains caused a landslide, the owners brought negligence claims against the city, citing expert opinion that the development site was a landslide hazard. The court held the waivers were merely a personal covenant made by the developer to obtain a permit and did not physically affect the property or alter its value. Therefore, the waivers did not touch and concern the land. 1515-1519 Lakeview Blvd. v. Apt. Sales Corp., 2000 Wash. App. LEXIS 1798 (2000).
- TAKINGS: Exactions. A city required that all new developments dedicate 30% of the land to open space without regard to the development's environmental impact. After finding the city failed to show rough proportionality, the court held the open space requirement an improper exaction, because (1) the U.S. Supreme Court's definition of "exaction" as a "dedication of property to public use" as found in Del Monte Dunes was nonbinding dicta; and (2) even if the Del Monte Dunes definition applied, there was still an exaction because part of the set-aside requirement included conveying ownership of the property to the development's homeowners' association. Isla Verde Intl. Holdings, Inc. v. City of Camas, 990 P.2d 429 (Wash. Ct. App. 1999).
- TAXATION: Reverse Starker exchange. The IRS issued Revenue Procedure 2000-37, Sept. 15, 2000, to provide a safe harbor for taxpayers engaged in certain deferred exchanges of property. Under Code § 1031, an exchange of like-kind property used for business or investment is not taxable. If the properties are not exchanged at the same time, the transaction may still be nontaxable under Starker v. United States, 602 F.2d 1341 (9th Cir. 1979). Section 1031(a)(3) allows deferred exchanges of property if the taxpayer gives up property and identifies the property to be acquired within 45 days or acquires other like-kind property within 180 days. In the past, the IRS has not approved tax-free treatment for "reverse Starker" exchanges-exchanges in which the replacement property is acquired before the taxpayer relinquishes the property being given up. In the revenue procedure the IRS approved "parking" transactions to facilitate reverse like-kind exchanges. In these cases, rather than acquiring other property, the taxpayer "parks" it with another "accommodation" party, who holds it until the taxpayer identifies someone who will make an exchange for the taxpayer's property. Once the ultimate acquiring party is identified, the taxpayer engages in a tax-free exchange with the accommodation party, who subsequently transfers the property to the third party. In Rev. Proc. 2000-37, the IRS said for the first time that it will treat a reverse Starker exchange as tax-free under § 1031. For the transaction to be a tax-free exchange, taxpayers must give the accommodation party sufficient legal rights in the property's "benefits and burdens" to be treated as the owner for federal tax purposes.
- ZONING AND PLANNING: Nonconforming uses. Landowners argued that hosting commercial parties four times a year at their residence over many years constituted a preexisting nonconforming use. The court held that such intermittent use did not qualify as a preexisting nonconforming use, citing the owners' primarily residential use, lack of permits to operate a business and failure to pay sales taxes. Weisler v. Board of Zoning Adjustments, 745 So. 2d 1259 (La. Ct. App. 1999).
- California expands housing discrimination laws. Provisions prevent creation of restrictive covenants and remove from the records existing restrictive covenants that are unenforceable under the state civil rights laws regarding discrimination as to color, religion, sex, marital status, national origin, ancestry, familial status or disability. The mere existence of such a covenant, even though unenforceable and accompanied by a statement of un-enforceability, will become a form of prohibited housing discrimination. Cal. Gov't Code § 12955. Homeowner association boards must revise association documents to remove such covenants, even without approval from the association members. Attorneys fees are available in suits to force such action. Cal. Civil Code § 1352.5.
- Colorado curbs municipal jurisdiction over nuisances. Municipalities no longer have jurisdiction to control nuisances resulting from agriculture-related businesses in one mile strips immediately outside municipal borders. However, county commissioners making land use decisions regarding agricultural businesses to be conducted in such border strips are required to seek "review and comment" from the affected municipalities. Colo. Stat. §§ 31-15-501, 30-28-138.
- Colorado revises local power to establish redevelopment areas. The act attempts to define more specifically the circumstances that may justify treatment of an area as blighted, requires localities to draw boundaries of such areas as narrowly as feasible and sets different standards depending on whether the affected land-owners accept or object to the redevelopment efforts. Governing bodies must consider the feasibility of relocating affected businesses to adequately desirable locations, and the act authorizes inclusion of "good will and lost profits" in compensation payable to affected businesses. Colo. Stat. §§ 31-25-103 et al.
- Colorado bars "excessive regulatory takings." The act imposes various substantive and procedural protections against regulatory impairment of private land. Localities may impose discretionary conditions on land use approvals only if there is an "essential nexus between the required dedication or payment and a legitimate local government interest, and the dedication or payment is roughly proportional to the impact of the proposed use." A process is established for landowner objections to local land use decisions, including expedited consideration of court petitions, with the locality bearing the burden of justifying its decisions. Colo. Stat. §§ 29-20-201 et seq.
- Colorado expands vested development rights protection statute. After a developer has submitted a substantially complete development application, the locality must review the application under existing law, except that it may apply new law post facto "when necessary for the immediate preservation of public health and safety." Once certain plan approvals are given, developers have "vested property rights." Each jurisdiction must give general notice of the types of approvals that will cause such vesting and in each case must notify an applicant when vesting has occurred. Colo. Stat. §§ 24-68-102 et seq.
Readers interested in a comprehensive review of current developments in real estate law are encouraged to subscribe to the ABA Real Estate Quarterly Report, which is prepared by the Real Property Division's Decisions Committee. For more information on this publication, contact Pam Hollins at (312) 988-5651.
Keeping Current-Property Editor: Eugene L. Grant, 1211 SW 5th Ave., Ste. 1600, Portland, OR 97204-3795, firstname.lastname@example.org. Contributing editors: Robert Flores and Terry Frazier, email@example.com.