CASES

 

CONDOMINIUMS: Unit owner may install clothes dryer vent without approval of the condominium association. What would seem to many people to be a minor problem can spark excruciatingly extensive litigation, as most lawyers know. It took three courts close to three years to decide where the owner of a single condominium unit could locate the exhaust vent for her clothes dryer. A building code violation was the genesis. In 1991, when The Cloisters at Charles were built, the clothes dryer for one unit was connected and vented into a basement furnace room. The dryers for the other 47 units were all properly vented to the outside of the building. In 2000, the improperly vented dryer broke. The owner bought a new dryer from Sears, but Sears refused to install it with unlawful venting. The owner resolved her problem by contracting for the rerouting of the venting system through an adjoining garage and the exterior garage wall. She did not notify or obtain the permission of the condominium unit owner’s association. Her neighbor objected that the new vent was only 17 feet from his front door. Litigation followed when the owner, neighbor, and association could not resolve the matter amicably. The trial court issued an injunction, affirmed on the first appeal, that required the owner to remove the new dryer vent immediately and then to make an application to the association for permission to install an exterior vent. The court of last resort reversed, holding that association approval was not required by the condominium documents and that, based on the trial court record, the owner had selected “the most reasonable option” for exterior venting of her dryer. The court interpreted a grant in the declaration to each owner of “an easement in the common elements for the purposes of providing maintenance, support, repair or service for such unit to and for the ducts, pipes, conduits, vents, plumbing, wiring and other utility services to the unit.” It found inapplicable other provisions of the condominium documents that generally required association approval of installations outside a unit and changes to unit exteriors. The court limited its holding to the rectification of “an obvious construction defect . . . relating to safety when the Declaration contains an express easement,” disavowing an intent to “allow unit owners the unfettered ability to make changes to the exterior of their condominium unit without prior approval” by the association. Three justices, unsatisfied by the majority’s analysis and by its professed limitations, dissented. Garfink v. The Cloisters at Charles, Inc., 897 A.2d 206 ( Md. 2006).

 

CO-TENANTS: Joint tenant’s receipt of Medicaid benefits triggers severance of joint tenancy. An elderly woman who owned her home needed assistance from her son and daughter-in-law. In 1988, the couple expanded and improved the mother’s house so the couple could move in and live with the mother. The mother then conveyed the house to herself, her son, and daughter-in-law as joint tenants. In 1997, the mother’s declining health forced her to relocate to a nursing home, where she received Medicaid benefits and died one year later. In 2003, the state of Iowa intervened in the probate proceeding for the mother’s will, filing a claim for over $28,000 for the medical care she received in the nursing home. The state based its claim on a 1994 Iowa statute, Iowa Code § 249A.5, which implements a federal statute that authorized states to create “asset recovery programs” to recover from the estates of decedents who receive Medicaid benefits. Interpreting the obtusely written Iowa statute, the court held for the state, rejecting the assertion that the statutory claim unconstitutionally impaired their contract rights. It stated that the mother’s application for Medicaid caused a severance of the joint tenancy, which allowed the state to recover medical expenses out of the mother’s one-third interest. It is surprising that the married couple grounded their case on the Contract Clause. A joint tenant’s survivorship right is usually conceptualized as a property right, not a contract right, and the Takings Clause has much more potency than the Contract Clause. This is a case of first impression, which is certain to be litigated elsewhere. Many states have similar Medicaid asset recovery statutes, and the Deficit Reduction Act passed by Congress in February 2006 mandates that every state must adopt an asset recovery program. In re Estate of Serovy, 711 N.W.2d 290 (Iowa 2006).

 

DEEDS: For breach of warranty, grantee is entitled to attorney’s fees but not to trespass damages for sale of timber. In 1995, a landowner purchased a parcel for $2,400, taking title to part of the parcel by warranty deed and the remainder by quitclaim deed. In 1999, the purchaser sold timber on the parcel for $7,787. Two years after the sale, the neighboring landowner brought an action to establish record title to the parcel and to recover statutory damages for trespass for the timber cutting. The purchaser filed a third-party complaint against his seller for breach of the covenant of warranty. The trial court held that the plaintiff had record title and awarded statutory damages for trespass. The purchaser recovered nothing for breach of warranty, because the jury found that the parcel had a present value of zero at the time of eviction (when the trial court held the plaintiff had title). The supreme court reversed, holding that the purchaser was entitled to attorney’s fees and expenses, both for unsuccessfully defending title and for defending the timber trespass action. It instructed the trial court to allocate the fees and expenses between the warranty parcel and the quitclaim parcel, with an indemnity for only the former. The supreme court rejected the purchaser’s claim that the seller should pay part of the trespass damages. This seems harsh. The court observed that the purchaser could have recovered for the value of improvements made before eviction but distinguished timber cutting as “substantial injury to the land.” The court stated it was concerned that the trespass damages might exceed $139,000. If so, it could have allowed damages but subject to a limit of the purchase price plus interest, which would be the result in most states. In so doing, the court would have reformed Maine common law, which traditionally allows damages for breach of warranty equal to the value of the land at the time of eviction. The court does not explain the basis for the jury finding that the land had no present value, which seems aberrational. Perhaps the land actually was worthless after the timber was cut, or instead the purchaser may have failed to submit competent evidence of fair market value. Dionne v. LeClerc, 896 A.2d 923 ( Me. 2006).

 

EASEMENTS: Owner of implied ditch easement has right to change use from irrigation to drainage. For almost 20 years, an irrigation ditch ran along the southern boundary of an 80-acre tract. In 1972, the owner subdivided his tract into 16 parcels, whose owners formed a lateral ditch water users’ association under state law in 1995. In 2003, the owner of one of the parcels blocked the ditch, which flooded the land of several neighbors and prevented others from using the ditch. The association obtained injunctive relief. The court recognized an implied easement, finding apparent continuous use that was reasonably necessary to the enjoyment of the dominant parcels at the time of the 1972 severance of title. The court held that the association, although it owned no land, had standing to assert the interests of its members. The obstructor argued that a substantial change in use of the easement made relief inappropriate. Before the severance, the ditch was used for irrigation, with the 80-acre tract irrigating south to north. Subsequently the owners regraded their parcels so that the ditch drained the fields, carrying away what the obstructor called “wastewater.” But the court authorized this change. The change in type of water did not matter. The burden on the servient estate was no greater because there was no physical enlargement of the ditch or increase in water volume. Beach Lateral Water Users Ass’n v. Harrison, 130 P.3d 1138 (Idaho 2006).

 

EMINENT DOMAIN: Tenant is entitled to part of landlord’s condemnation award for lost profits of tenant’s retail business. A city condemned a retail shopping center for a proposed redevelopment project, paying a total of $6.5 million for one parcel, which was subject to a lease and a sublease. The fee owner received $2.2 million. Out of the remaining $4.3 million allocable to the leasehold, the subtenant, Payless ShoeSource, made a claim based on a lease provision stating: “All [condemnation damages] shall be the property of Landlord, excluding but not limited to any sum paid or payable as compensation for loss of value of the leasehold. Tenant shall be entitled only to that portion of any award expressly stated to have been made to Tenant for loss of business, moving expenses, [and Tenant’s personal property and fixtures], to the extent of proceeds received by Landlord.” The court awarded Payless $502,991 for lost profits, concluding that the lease reference to “loss of business” called for such an award. The sublandlord unsuccessfully argued that the lease provision was not explicit enough to override the general rule that a tenant (or subtenant) is entitled to compensation for the value of the unexpired term, but not for lost profits. Most commercial leases dilute a tenant’s right to seek part of a condemnation award. This provision, as interpreted by the court, expanded the rights of a relatively small retail tenant. When the sublease was entered into, the sublandlord and its counsel may not have fully appreciated the clause’s potential effect. City of Roeland Park v. Jasan Trust, 132 P.3d 943 ( Kan. 2006).

 

FAIR HOUSING ACT: City’s failure to close illegal landfill does not constitute illegal racial discrimination. For many years the operator of a landfill engaged in the illegal dumping of solid waste in Deepwood, a predominantly black neighborhood in the city of Dallas, Texas. The city occasionally issued citations, but never undertook consistent or effective enforcement efforts. Homeowners brought an action alleging that the city’s failure to stop the dumping violated the Fair Housing Act (FHA). Plaintiffs alleged that the city better enforced the landfill laws in white neighborhoods. Section 3604(a) of the FHA makes it unlawful “[t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” The issue was the scope of the open-ended “otherwise make unavailable” statutory prong. The court refused to extend an FHA action to current homeowners, whose property value or “habitability” is reduced by governmental racial discrimination. Concluding that “making unavailable” is limited to conduct that makes it more difficult for persons to rent or buy housing, the court intimated that a different result might follow if the city’s actions caused the actual or constructive eviction of the plaintiffs. Query how severe the environmental risk or other problems stemming from an illegal dump must be before neighbors are said to be “constructively evicted”? Favorable district court findings on related issues also helped the city to prevail. The district court concluded that official actions were due to negligence, not an official policy or “custom.” Thus, the case can be seen as limited to situations of disparate racial impact, and not intentional discrimination. Cox v. City of Dallas, 430 F.3d 734 (5th Cir. 2005), cert. denied , 126 S. Ct. 2039 (2006).

 

LANDLORD-TENANT: Public housing tenants have no right of action under the Lead-Based Paint Act. A public housing tenant in Detroit, Michigan, alleged that her son, when he was a toddler, sustained lead poisoning from peeling and flaking lead-based paint in and around the dwelling unit, a condition the city and the public housing authority failed to rectify despite her complaints. She brought a § 1983 action for damages on his behalf based on the Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. §§ 4821–4846. The court dismissed the complaint, holding that the Act does not confer rights on individuals even though children of tenants are the primary intended beneficiaries of the Act, and it was enacted to protect children in public housing from the ravages of preventable lead paint poisoning. The Act lacks explicit “rights-creating” language, and it sets institutional policy and procedure to be implemented by the Department of Housing and Urban Development. The court applied the exacting standards of Gonzaga University v. Doe, 536 U.S. 273 (2002), which held that university students lack the right to enforce the nondisclosure provisions of the Family Educational Rights and Privacy Act. The court refused to follow a number of previous cases decided before Gonzaga University , including decisions from the Third and Fourth Circuits, which allowed tenant actions for violations of the Lead-Based Paint Act. Johnson v. City of Detroit, 446 F.3d 614 (6th Cir. 2006).

 

MORTGAGES: Recording in the local state land records perfects a mortgage on Indian trust lands. Federal law allows a holder of Indian trust lands to execute a mortgage with the approval of the Bureau of Indian Affairs. A member of the Puyallup Tribe granted a deed of trust, which the BIA approved. The lender recorded the deed of trust in the Washington county where the land was located, but not in the regional BIA Title Plant in Portland, Oregon. The next year, the tribe member entered into a billboard lease, which was promptly recorded in the BIA Title Plant. Later the member filed for bankruptcy, and the lender and the lessee each claimed its interest was prior. The district court held that the deed of trust was unperfected without a recording in the BIA Title Plant, but the court of appeals reversed. Two federal statutes arguably conflict. Section 5 of 25 U.S.C. directs the BIA to establish a recording system for “every deed executed by any Indian” that requires federal approval of such deeds. Section 483a(a) of 25 U.S.C. makes Indian trust land “subject to foreclosure or sale pursuant to the terms of [a BIA approved] mortgage or deed of trust in accordance with . . . the laws of the State . . . in which the land is located.” The court preferred the latter statute based on the cursory reasoning that its “resort to Washington foreclosure law necessarily incorporates Washington rules for recording, lien perfection, and priority.” This analysis does not hold up. Dual systems are not only possible, they do exist. For example, security interests on aircraft, ships, and patents can only be perfected by filing with the proper federal agency, yet state law (UCC Article 9) governs the foreclosure of that collateral. In re Emerald Outdoor Advertising, LLC, 444 F.3d 1077 (9th Cir. 2006).

 

SALES CONTRACTS: Oral modification to written contract is enforceable notwithstanding “no oral modifications” clause. A buyer contracted to purchase a residence for $2.8 million from the trustee of a revocable trust, making a deposit of $270,000. The contract, which called for closing in 10 days, had no mortgage contingency clause, because the buyer had pre-approval from a lending source. Before closing, the trust beneficiary, who was a longtime friend of the buyer and who resided in the house, asked to postpone the closing, because he was not ready to move out. The beneficiary and buyer orally agreed to a two-month extension, with two further extensions negotiated later. Because the buyer was concerned about the expiration of her mortgage loan commitment, the beneficiary assured her that, if she could not obtain an acceptable mortgage, as the settlor of a revocable trust he would direct the trustee to release her from the contract and to return her deposit. After the final extended closing date, the trustee refused to refund the deposit, and the beneficiary informed the buyer that he could not intervene, because the trust was no longer revocable. Not surprisingly, the buyer won in court. Equitable estoppel prohibited the seller from enforcing the “no oral modifications” clause because the buyer relied to her detriment on the promise to release. Kurzman v. Graham, 817 N.Y.S.2d 888 (N.Y. Sup. Ct. 2006).

 

ZONING: Ordinance prohibiting “big box” retail stores is valid. The city of Turlock adopted a zoning ordinance banning the development of “big box” stores containing a full service grocery department. The ordinance allowed smaller neighborhood shopping centers dispersed throughout the city. Wal-Mart Stores challenged the ordinance as beyond the city’s police power. Upholding the measure, the court concluded that the city made a legitimate policy choice in preferring smaller scale development and that there was no evidence that the exclusion of “big box” stores would significantly affect residents of surrounding communities. The court also rejected a claim that the city failed to comply with the California Environmental Quality Act. The measure was consistent with the city’s general plan, which was supported by a prior environmental impact report prepared for the general plan. Wal-Mart Stores, Inc. v. City of Turlock, 41 Cal. Rptr. 3d 420 (Ct. App. 2006).

 

Literature

 

Conservation Easements; Modification . The use of conservation easements has continued to expand and with this expansion has come a host of problems and questions. Prof. Nancy A. McLaughlin addresses one important issue in Amending Perpetual Conservation Easements: A Case Study of the Myrtle Grove Controversy, 40 U. Rich. L. Rev. 1031 (2006). As Don Ameche said in a film by the same name, “things change.” It may become necessary for conservation easements to “evolve over time so that they can continue to provide the conservation benefits for which they were acquired.” The author therefore asks “who should be entitled to make the decision to amend a ‘perpetual’ easement, and what standards should be applied in determining whether and when such amendments are appropriate?” To make her questions and analysis concrete, McLaughlin examines the litigation involving the Myrtle Grove conservation easement; Myrtle Grove is “located on Maryland’s Eastern Shore in the Chesapeake Bay watershed, so the controversy is close to home for proponents of protection and restoration of the Bay.” The easement holder accepted a set of amendments to the easement that “in retrospect, seem clearly contrary to both the intent of the donor and the interests of the public.” The National Trust initially approved the amendments, but later withdrew its support after public opposition. The owner of the encumbered land then brought suit. McLaughlin suggests that “conservation easements conveyed as charitable gifts to government agencies and charitable organizations for specified purposes in perpetuity . . . are likely to be treated as held . . . in trust or quasi trust for the benefit of the public.” As a result, any proposed amendments to the conservation easement are “subject to oversight by state attorneys general and the courts under charitable trust principles.” In addition to her examination of Myrtle Grove, McLaughlin provides a clear and brief statement of charitable trust rules.

 

Private Property Rights; History and Theory. Prof. David A. Thomas sounds a thoughtful warning about the increasing tendency of American law to hamper private property rights and worries about the damage this will do to American society and freedom, in Why the Public Plundering of Private Property Rights is Still a Very Bad Idea, 41 Real Prop. Prob. & Tr. J. 25 (2006). Thomas examines the history of private property, with a focus on the development of the concept of property in Colonial America. The author explains that in pre-colonial periods of human development, property was granted to individuals for limited reasons, for example, in return for loyalty to the crown. In America, however, attempts to limit the right of citizens to private property failed miserably well before the American Revolution. To European settlers, land in America seemed boundless, and therefore they saw no reason to live within the ownership constraints of prior generations. Thomas reminds the reader of the benefits of private property and the importance of property in a free society. He worries that recent law and legislation in the areas of takings, public trust, and discrimination will undermine what he views to be a strongly positive American contribution to freedom and prosperity. Thomas acknowledges that concentration of wealth in the hands of the few and the overuse of resources may result from unregulated property ownership. But he argues that laws intended to restrain these negative consequences of private property rights must “preserve a working balance between the rights of individual property owners, the interests of landowners affected by others’ use of land, and the interests of the state, which represent the common interests of the body politic.”

 

Real Estate Auctions; Use in Sale of Nondistressed Real Property. In their article, Real Estate Auctions—Legal Concerns for an Increasingly Preferred Method of Selling Real Property, 40 Real Prop. Prob. & Tr. J. 765 (2006), Steven L. Good and Prof. Celeste M. Hammond examine problems arising from the increasingly common use of auctions in selling nondistressed real property. At the outset, the authors note that auctions have been the subject of criticism, at least in the foreclosure context. Good and Hammond focus instead on auctions as an alternative to the normal use of brokers and traditional sales contracts. They explain that companies that jumped into the real property auction business in the late 1990s are now considered “pioneers.” The NAR has stated that close to 30% of all nondistressed real estate sold in this country by the year 2010 will change hands via the auction process. The authors describe the auction process, the role of the auctioneer, the relationship of the auctioneer to the seller, and the nature of the auction contract. The success of the pioneer auction companies encouraged numerous new companies to jump into the auction market, but with this growth has come complaints of unprofessional and unethical conduct. The law governing real property auction sales is undeveloped in most jurisdictions, particularly the law governing the fiduciary obligations of the auctioneer. The authors look at the conduct of seller, buyer, and auctioneer, and the legal rules that presently apply to the auction process. Ultimately, the authors suggest a series of reforms to clarify the obligations of the parties involved in a real property auction, including the adoption of a Uniform Real Estate Auctions Act.

 

Real Estate Purchase and Sale Contracts; Nonreliance Clauses. In his note, Slack v. James: Can South Carolina’s Real Estate Industry Rely on Non-Reliance Clauses? 57 S.C. L. Rev. 583 (2006), Morgan H. Rogers worries about the effect of a recent South Carolina Supreme Court decision eviscerating nonreliance clauses in purchase and sales contracts in that state. In Slack v. James, 614 S.E.2d 636 (2005), a purchaser asked the broker whether listed property was subject to any easements. The broker answered in the negative, but a title search completed after execution of the contract revealed a four-inch sewer easement running across the property. The buyer pulled out of the deal and was promptly sued by the seller. The seller argued that he was the subject of fraud and misrepresentation. The contract contained a provision titled “Entire Agreement” that stated, in part, that purchaser did not rely on “any statement or representations by either Broker or their agents.” That same provision also contained typical merger language. According to the author, the South Carolina Supreme Court opinion incorrectly invalidated the nonreliance language in the contract. Rogers suggests that the court focused too heavily on the fact that the nonreliance language was buried in the merger provision and therefore was treated by the court as nothing more than an extension of the merger clause. Furthermore, the court held that the nonreliance language was not specific enough. According to the author, as a result of the opinion, “sellers cannot eliminate lingering liability, and buyers may face increased market prices to account for that uncertainty.”

 

Subleases; Generic Sublease Form. Sidney G. Saltz and Martin P. Miner update their proposed generic sublease form in Subleases: A New Approach Revisited, 41 Real Prop. Prob. & Tr. J. 1 (2006). According to the authors, real property lawyers find it difficult to draft effective sublease documents that correctly and unambiguously allocate rights and responsibilities among the prime landlord, sub-landlord, and subtenant. According to Saltz and Miner, lawyers use one of three approaches to drafting sublease documents: (1) In the “all inclusive” approach, “the drafter creates an entirely new lease between the sublandlord and the subtenant, using the prime lease as a point of reference.” (2) In the “incorporation by reference” approach, the drafter sets out only “those agreements that apply between the sub-landlord and the subtenant.” Remaining aspects of the relationship between sublandlord and subtenant are governed by provisions of the prime lease that are specifically incorporated by reference. (3) In what Saltz and Miner call the “haphazard approach,” “the drafter may pull a lease form from the shelf, name it a ‘Sublease,’ change the references to identify the parties . . . and use the phrase ‘hereby subleases’ instead of ‘hereby leases.’” Although the authors agree that the first two approaches have merits, “the haphazard approach has no advantages.” Although creating a form sublease would seem to “attempt . . . the impossible,” the authors propose a form sublease as a “vehicle that will serve in all situations, whether they be residential, office, industrial, or retail.” The authors first proposed a form sublease in the spring 1999 issue of Real Property, Probate and Trust Journal. In this new article, the authors attach an updated form that reflects the constructive criticisms of colleagues and the lessons of years of practice.

 

Alabama limits eminent domain. The exercise of eminent domain for urban renewal projects is limited to blighted property and blighted areas. The definition of “blighted” provided in the statute is so broad that it is unlikely to present any significant impediment to condemnation for urban renewal. 2006 Ala. Laws 584.

 

Alabama enacts the “Uniform Residential Landlord and Tenant Act.” 2006 Ala. Laws 316.

 

Arizona adopts a residential inspection program. Procedures are established for comprehensive interior and exterior inspections. Cities and towns may adopt the program only after a public hearing. 2006 Ariz. Sess. Laws 285.

 

Arizona requires landlords and owners of mobile home parks who sell or transfer their interest to provide detailed records to the new owner. All available facility plans, along with records for security deposits and other tenant files, must be provided to the successor. The act requires landlords to develop and maintain underground facility records. 2006 Ariz. Sess. Laws 258.

 

Colorado mandates disclosure of whether property has been used as a methamphetamine laboratory in connection with the sale of residential real property. A comprehensive plan of inspection and cleanup procedures is set forth in the act. 2006 Colo. Sess. Laws 173.

 

Colorado enacts the “ Colorado Foreclosure Protection Act.” Foreclosure consulting contracts are subject to substantial regulation. 2006 Colo. Sess. Laws 291.

Connecticut established the Office of Ombudsman for Property Rights. The ombudsman may intervene on behalf of the public in eminent domain cases. 2006 Conn. Acts 187.

 

Florida restricts the power of eminent domain. Property acquired by condemnation may not be conveyed or leased to a private individual or entity except under limited circumstances. 2006 Fla. Laws 11.

 

Georgia adopts alternative dispute regulation to resolve construction disputes between homeowners and contractors. The procedures of the act must be followed before a lawsuit can be initiated. 2006 Ga. Laws 643.

 

Georgia enacts “The Landowner’s Bill of Rights and Private Property Protection Act.” This comprehensive act substantially revises provisions regarding the power of eminent domain. 2006 Ga. Laws 444.

 

Maine authorizes working waterfront covenants. A working waterfront covenant is an agreement between the owner of working waterfront real estate limiting the use to commercial fisheries business. Working waterfront real estate is defined as land adjacent to navigable coastal waters that is legally filled land, piers, or wharves. 2005 Me. Laws 574.

 

Maryland authorizes surety bonds in lieu of security deposits in residential leases. The landlord may not require a surety bond and the tenant may not insist on a surety bond. 2006 Md. Laws 502.

 

Nebraska restricts the use of eminent domain. A condemner (condemning authority) may not acquire property primarily for the purpose of economic development. 2006 Neb. Laws 924.

 

Oklahoma adopts Commercial Real Estate Brokers Liens. The lien attaches on the date of recording and does not relate back to the date of the brokerage. 2006 Okla. Sess. Laws 166.

 

Oklahoma enacts the Uniform Environmental Covenants Act. Environmental covenants are established as an interest in real property. The covenants arise as a result of environmental remediation or mitigation that imposes activity and use limitations on the property. Such covenants must be recorded and are subject to other requirements. 2006 Okla. Sess. Laws 182.

 

Tennessee enacts the Tennessee Home Loan Protection Act. Predatory or high-cost home loans and refinancing of home loans are restricted. 2006 Tenn. Pub. Acts 801.

 

Virginia limits evictions of residential tenants in cases of domestic violence. 2006 Va. Acts 717.

 

Virginia authorizes the release of a mortgage using an automated electronic recording system. Electronic signatures are required in accordance with the Uniform Electronic Transactions Act. 2006 Va. Acts 907.

 

Wisconsin enacts the Uniform Real Property Electronic Recording Act. 2005 Wis. Laws 421.

 

CONDOMINIUMS: Unit owner may install clothes dryer vent without approval of the condominium association. What would seem to many people to be a minor problem can spark excruciatingly extensive litigation, as most lawyers know. It took three courts close to three years to decide where the owner of a single condominium unit could locate the exhaust vent for her clothes dryer. A building code violation was the genesis. In 1991, when The Cloisters at Charles were built, the clothes dryer for one unit was connected and vented into a basement furnace room. The dryers for the other 47 units were all properly vented to the outside of the building. In 2000, the improperly vented dryer broke. The owner bought a new dryer from Sears, but Sears refused to install it with unlawful venting. The owner resolved her problem by contracting for the rerouting of the venting system through an adjoining garage and the exterior garage wall. She did not notify or obtain the permission of the condominium unit owner’s association. Her neighbor objected that the new vent was only 17 feet from his front door. Litigation followed when the owner, neighbor, and association could not resolve the matter amicably. The trial court issued an injunction, affirmed on the first appeal, that required the owner to remove the new dryer vent immediately and then to make an application to the association for permission to install an exterior vent. The court of last resort reversed, holding that association approval was not required by the condominium documents and that, based on the trial court record, the owner had selected “the most reasonable option” for exterior venting of her dryer. The court interpreted a grant in the declaration to each owner of “an easement in the common elements for the purposes of providing maintenance, support, repair or service for such unit to and for the ducts, pipes, conduits, vents, plumbing, wiring and other utility services to the unit.” It found inapplicable other provisions of the condominium documents that generally required association approval of installations outside a unit and changes to unit exteriors. The court limited its holding to the rectification of “an obvious construction defect . . . relating to safety when the Declaration contains an express easement,” disavowing an intent to “allow unit owners the unfettered ability to make changes to the exterior of their condominium unit without prior approval” by the association. Three justices, unsatisfied by the majority’s analysis and by its professed limitations, dissented. Garfink v. The Cloisters at Charles, Inc., 897 A.2d 206 ( Md. 2006).

 

CO-TENANTS: Joint tenant’s receipt of Medicaid benefits triggers severance of joint tenancy. An elderly woman who owned her home needed assistance from her son and daughter-in-law. In 1988, the couple expanded and improved the mother’s house so the couple could move in and live with the mother. The mother then conveyed the house to herself, her son, and daughter-in-law as joint tenants. In 1997, the mother’s declining health forced her to relocate to a nursing home, where she received Medicaid benefits and died one year later. In 2003, the state of Iowa intervened in the probate proceeding for the mother’s will, filing a claim for over $28,000 for the medical care she received in the nursing home. The state based its claim on a 1994 Iowa statute, Iowa Code § 249A.5, which implements a federal statute that authorized states to create “asset recovery programs” to recover from the estates of decedents who receive Medicaid benefits. Interpreting the obtusely written Iowa statute, the court held for the state, rejecting the assertion that the statutory claim unconstitutionally impaired their contract rights. It stated that the mother’s application for Medicaid caused a severance of the joint tenancy, which allowed the state to recover medical expenses out of the mother’s one-third interest. It is surprising that the married couple grounded their case on the Contract Clause. A joint tenant’s survivorship right is usually conceptualized as a property right, not a contract right, and the Takings Clause has much more potency than the Contract Clause. This is a case of first impression, which is certain to be litigated elsewhere. Many states have similar Medicaid asset recovery statutes, and the Deficit Reduction Act passed by Congress in February 2006 mandates that every state must adopt an asset recovery program. In re Estate of Serovy, 711 N.W.2d 290 (Iowa 2006).

 

DEEDS: For breach of warranty, grantee is entitled to attorney’s fees but not to trespass damages for sale of timber. In 1995, a landowner purchased a parcel for $2,400, taking title to part of the parcel by warranty deed and the remainder by quitclaim deed. In 1999, the purchaser sold timber on the parcel for $7,787. Two years after the sale, the neighboring landowner brought an action to establish record title to the parcel and to recover statutory damages for trespass for the timber cutting. The purchaser filed a third-party complaint against his seller for breach of the covenant of warranty. The trial court held that the plaintiff had record title and awarded statutory damages for trespass. The purchaser recovered nothing for breach of warranty, because the jury found that the parcel had a present value of zero at the time of eviction (when the trial court held the plaintiff had title). The supreme court reversed, holding that the purchaser was entitled to attorney’s fees and expenses, both for unsuccessfully defending title and for defending the timber trespass action. It instructed the trial court to allocate the fees and expenses between the warranty parcel and the quitclaim parcel, with an indemnity for only the former. The supreme court rejected the purchaser’s claim that the seller should pay part of the trespass damages. This seems harsh. The court observed that the purchaser could have recovered for the value of improvements made before eviction but distinguished timber cutting as “substantial injury to the land.” The court stated it was concerned that the trespass damages might exceed $139,000. If so, it could have allowed damages but subject to a limit of the purchase price plus interest, which would be the result in most states. In so doing, the court would have reformed Maine common law, which traditionally allows damages for breach of warranty equal to the value of the land at the time of eviction. The court does not explain the basis for the jury finding that the land had no present value, which seems aberrational. Perhaps the land actually was worthless after the timber was cut, or instead the purchaser may have failed to submit competent evidence of fair market value. Dionne v. LeClerc, 896 A.2d 923 ( Me. 2006).

 

EASEMENTS: Owner of implied ditch easement has right to change use from irrigation to drainage. For almost 20 years, an irrigation ditch ran along the southern boundary of an 80-acre tract. In 1972, the owner subdivided his tract into 16 parcels, whose owners formed a lateral ditch water users’ association under state law in 1995. In 2003, the owner of one of the parcels blocked the ditch, which flooded the land of several neighbors and prevented others from using the ditch. The association obtained injunctive relief. The court recognized an implied easement, finding apparent continuous use that was reasonably necessary to the enjoyment of the dominant parcels at the time of the 1972 severance of title. The court held that the association, although it owned no land, had standing to assert the interests of its members. The obstructor argued that a substantial change in use of the easement made relief inappropriate. Before the severance, the ditch was used for irrigation, with the 80-acre tract irrigating south to north. Subsequently the owners regraded their parcels so that the ditch drained the fields, carrying away what the obstructor called “wastewater.” But the court authorized this change. The change in type of water did not matter. The burden on the servient estate was no greater because there was no physical enlargement of the ditch or increase in water volume. Beach Lateral Water Users Ass’n v. Harrison, 130 P.3d 1138 (Idaho 2006).

 

EMINENT DOMAIN: Tenant is entitled to part of landlord’s condemnation award for lost profits of tenant’s retail business. A city condemned a retail shopping center for a proposed redevelopment project, paying a total of $6.5 million for one parcel, which was subject to a lease and a sublease. The fee owner received $2.2 million. Out of the remaining $4.3 million allocable to the leasehold, the subtenant, Payless ShoeSource, made a claim based on a lease provision stating: “All [condemnation damages] shall be the property of Landlord, excluding but not limited to any sum paid or payable as compensation for loss of value of the leasehold. Tenant shall be entitled only to that portion of any award expressly stated to have been made to Tenant for loss of business, moving expenses, [and Tenant’s personal property and fixtures], to the extent of proceeds received by Landlord.” The court awarded Payless $502,991 for lost profits, concluding that the lease reference to “loss of business” called for such an award. The sublandlord unsuccessfully argued that the lease provision was not explicit enough to override the general rule that a tenant (or subtenant) is entitled to compensation for the value of the unexpired term, but not for lost profits. Most commercial leases dilute a tenant’s right to seek part of a condemnation award. This provision, as interpreted by the court, expanded the rights of a relatively small retail tenant. When the sublease was entered into, the sublandlord and its counsel may not have fully appreciated the clause’s potential effect. City of Roeland Park v. Jasan Trust, 132 P.3d 943 ( Kan. 2006).

 

FAIR HOUSING ACT: City’s failure to close illegal landfill does not constitute illegal racial discrimination. For many years the operator of a landfill engaged in the illegal dumping of solid waste in Deepwood, a predominantly black neighborhood in the city of Dallas, Texas. The city occasionally issued citations, but never undertook consistent or effective enforcement efforts. Homeowners brought an action alleging that the city’s failure to stop the dumping violated the Fair Housing Act (FHA). Plaintiffs alleged that the city better enforced the landfill laws in white neighborhoods. Section 3604(a) of the FHA makes it unlawful “[t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” The issue was the scope of the open-ended “otherwise make unavailable” statutory prong. The court refused to extend an FHA action to current homeowners, whose property value or “habitability” is reduced by governmental racial discrimination. Concluding that “making unavailable” is limited to conduct that makes it more difficult for persons to rent or buy housing, the court intimated that a different result might follow if the city’s actions caused the actual or constructive eviction of the plaintiffs. Query how severe the environmental risk or other problems stemming from an illegal dump must be before neighbors are said to be “constructively evicted”? Favorable district court findings on related issues also helped the city to prevail. The district court concluded that official actions were due to negligence, not an official policy or “custom.” Thus, the case can be seen as limited to situations of disparate racial impact, and not intentional discrimination. Cox v. City of Dallas, 430 F.3d 734 (5th Cir. 2005), cert. denied , 126 S. Ct. 2039 (2006).

 

LANDLORD-TENANT: Public housing tenants have no right of action under the Lead-Based Paint Act. A public housing tenant in Detroit, Michigan, alleged that her son, when he was a toddler, sustained lead poisoning from peeling and flaking lead-based paint in and around the dwelling unit, a condition the city and the public housing authority failed to rectify despite her complaints. She brought a § 1983 action for damages on his behalf based on the Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. §§ 4821–4846. The court dismissed the complaint, holding that the Act does not confer rights on individuals even though children of tenants are the primary intended beneficiaries of the Act, and it was enacted to protect children in public housing from the ravages of preventable lead paint poisoning. The Act lacks explicit “rights-creating” language, and it sets institutional policy and procedure to be implemented by the Department of Housing and Urban Development. The court applied the exacting standards of Gonzaga University v. Doe, 536 U.S. 273 (2002), which held that university students lack the right to enforce the nondisclosure provisions of the Family Educational Rights and Privacy Act. The court refused to follow a number of previous cases decided before Gonzaga University , including decisions from the Third and Fourth Circuits, which allowed tenant actions for violations of the Lead-Based Paint Act. Johnson v. City of Detroit, 446 F.3d 614 (6th Cir. 2006).

 

MORTGAGES: Recording in the local state land records perfects a mortgage on Indian trust lands. Federal law allows a holder of Indian trust lands to execute a mortgage with the approval of the Bureau of Indian Affairs. A member of the Puyallup Tribe granted a deed of trust, which the BIA approved. The lender recorded the deed of trust in the Washington county where the land was located, but not in the regional BIA Title Plant in Portland, Oregon. The next year, the tribe member entered into a billboard lease, which was promptly recorded in the BIA Title Plant. Later the member filed for bankruptcy, and the lender and the lessee each claimed its interest was prior. The district court held that the deed of trust was unperfected without a recording in the BIA Title Plant, but the court of appeals reversed. Two federal statutes arguably conflict. Section 5 of 25 U.S.C. directs the BIA to establish a recording system for “every deed executed by any Indian” that requires federal approval of such deeds. Section 483a(a) of 25 U.S.C. makes Indian trust land “subject to foreclosure or sale pursuant to the terms of [a BIA approved] mortgage or deed of trust in accordance with . . . the laws of the State . . . in which the land is located.” The court preferred the latter statute based on the cursory reasoning that its “resort to Washington foreclosure law necessarily incorporates Washington rules for recording, lien perfection, and priority.” This analysis does not hold up. Dual systems are not only possible, they do exist. For example, security interests on aircraft, ships, and patents can only be perfected by filing with the proper federal agency, yet state law (UCC Article 9) governs the foreclosure of that collateral. In re Emerald Outdoor Advertising, LLC, 444 F.3d 1077 (9th Cir. 2006).

 

SALES CONTRACTS: Oral modification to written contract is enforceable notwithstanding “no oral modifications” clause. A buyer contracted to purchase a residence for $2.8 million from the trustee of a revocable trust, making a deposit of $270,000. The contract, which called for closing in 10 days, had no mortgage contingency clause, because the buyer had pre-approval from a lending source. Before closing, the trust beneficiary, who was a longtime friend of the buyer and who resided in the house, asked to postpone the closing, because he was not ready to move out. The beneficiary and buyer orally agreed to a two-month extension, with two further extensions negotiated later. Because the buyer was concerned about the expiration of her mortgage loan commitment, the beneficiary assured her that, if she could not obtain an acceptable mortgage, as the settlor of a revocable trust he would direct the trustee to release her from the contract and to return her deposit. After the final extended closing date, the trustee refused to refund the deposit, and the beneficiary informed the buyer that he could not intervene, because the trust was no longer revocable. Not surprisingly, the buyer won in court. Equitable estoppel prohibited the seller from enforcing the “no oral modifications” clause because the buyer relied to her detriment on the promise to release. Kurzman v. Graham, 817 N.Y.S.2d 888 (N.Y. Sup. Ct. 2006).

 

ZONING: Ordinance prohibiting “big box” retail stores is valid. The city of Turlock adopted a zoning ordinance banning the development of “big box” stores containing a full service grocery department. The ordinance allowed smaller neighborhood shopping centers dispersed throughout the city. Wal-Mart Stores challenged the ordinance as beyond the city’s police power. Upholding the measure, the court concluded that the city made a legitimate policy choice in preferring smaller scale development and that there was no evidence that the exclusion of “big box” stores would significantly affect residents of surrounding communities. The court also rejected a claim that the city failed to comply with the California Environmental Quality Act. The measure was consistent with the city’s general plan, which was supported by a prior environmental impact report prepared for the general plan. Wal-Mart Stores, Inc. v. City of Turlock, 41 Cal. Rptr. 3d 420 (Ct. App. 2006).

 

LITERATURE

 

Conservation Easements; Modification . The use of conservation easements has continued to expand and with this expansion has come a host of problems and questions. Prof. Nancy A. McLaughlin addresses one important issue in Amending Perpetual Conservation Easements: A Case Study of the Myrtle Grove Controversy, 40 U. Rich. L. Rev. 1031 (2006). As Don Ameche said in a film by the same name, “things change.” It may become necessary for conservation easements to “evolve over time so that they can continue to provide the conservation benefits for which they were acquired.” The author therefore asks “who should be entitled to make the decision to amend a ‘perpetual’ easement, and what standards should be applied in determining whether and when such amendments are appropriate?” To make her questions and analysis concrete, McLaughlin examines the litigation involving the Myrtle Grove conservation easement; Myrtle Grove is “located on Maryland’s Eastern Shore in the Chesapeake Bay watershed, so the controversy is close to home for proponents of protection and restoration of the Bay.” The easement holder accepted a set of amendments to the easement that “in retrospect, seem clearly contrary to both the intent of the donor and the interests of the public.” The National Trust initially approved the amendments, but later withdrew its support after public opposition. The owner of the encumbered land then brought suit. McLaughlin suggests that “conservation easements conveyed as charitable gifts to government agencies and charitable organizations for specified purposes in perpetuity . . . are likely to be treated as held . . . in trust or quasi trust for the benefit of the public.” As a result, any proposed amendments to the conservation easement are “subject to oversight by state attorneys general and the courts under charitable trust principles.” In addition to her examination of Myrtle Grove, McLaughlin provides a clear and brief statement of charitable trust rules.

 

Private Property Rights; History and Theory. Prof. David A. Thomas sounds a thoughtful warning about the increasing tendency of American law to hamper private property rights and worries about the damage this will do to American society and freedom, in Why the Public Plundering of Private Property Rights is Still a Very Bad Idea, 41 Real Prop. Prob. & Tr. J. 25 (2006). Thomas examines the history of private property, with a focus on the development of the concept of property in Colonial America. The author explains that in pre-colonial periods of human development, property was granted to individuals for limited reasons, for example, in return for loyalty to the crown. In America, however, attempts to limit the right of citizens to private property failed miserably well before the American Revolution. To European settlers, land in America seemed boundless, and therefore they saw no reason to live within the ownership constraints of prior generations. Thomas reminds the reader of the benefits of private property and the importance of property in a free society. He worries that recent law and legislation in the areas of takings, public trust, and discrimination will undermine what he views to be a strongly positive American contribution to freedom and prosperity. Thomas acknowledges that concentration of wealth in the hands of the few and the overuse of resources may result from unregulated property ownership. But he argues that laws intended to restrain these negative consequences of private property rights must “preserve a working balance between the rights of individual property owners, the interests of landowners affected by others’ use of land, and the interests of the state, which represent the common interests of the body politic.”

 

Real Estate Auctions; Use in Sale of Nondistressed Real Property. In their article, Real Estate Auctions—Legal Concerns for an Increasingly Preferred Method of Selling Real Property, 40 Real Prop. Prob. & Tr. J. 765 (2006), Steven L. Good and Prof. Celeste M. Hammond examine problems arising from the increasingly common use of auctions in selling nondistressed real property. At the outset, the authors note that auctions have been the subject of criticism, at least in the foreclosure context. Good and Hammond focus instead on auctions as an alternative to the normal use of brokers and traditional sales contracts. They explain that companies that jumped into the real property auction business in the late 1990s are now considered “pioneers.” The NAR has stated that close to 30% of all nondistressed real estate sold in this country by the year 2010 will change hands via the auction process. The authors describe the auction process, the role of the auctioneer, the relationship of the auctioneer to the seller, and the nature of the auction contract. The success of the pioneer auction companies encouraged numerous new companies to jump into the auction market, but with this growth has come complaints of unprofessional and unethical conduct. The law governing real property auction sales is undeveloped in most jurisdictions, particularly the law governing the fiduciary obligations of the auctioneer. The authors look at the conduct of seller, buyer, and auctioneer, and the legal rules that presently apply to the auction process. Ultimately, the authors suggest a series of reforms to clarify the obligations of the parties involved in a real property auction, including the adoption of a Uniform Real Estate Auctions Act.

 

Real Estate Purchase and Sale Contracts; Nonreliance Clauses. In his note, Slack v. James: Can South Carolina’s Real Estate Industry Rely on Non-Reliance Clauses? 57 S.C. L. Rev. 583 (2006), Morgan H. Rogers worries about the effect of a recent South Carolina Supreme Court decision eviscerating nonreliance clauses in purchase and sales contracts in that state. In Slack v. James, 614 S.E.2d 636 (2005), a purchaser asked the broker whether listed property was subject to any easements. The broker answered in the negative, but a title search completed after execution of the contract revealed a four-inch sewer easement running across the property. The buyer pulled out of the deal and was promptly sued by the seller. The seller argued that he was the subject of fraud and misrepresentation. The contract contained a provision titled “Entire Agreement” that stated, in part, that purchaser did not rely on “any statement or representations by either Broker or their agents.” That same provision also contained typical merger language. According to the author, the South Carolina Supreme Court opinion incorrectly invalidated the nonreliance language in the contract. Rogers suggests that the court focused too heavily on the fact that the nonreliance language was buried in the merger provision and therefore was treated by the court as nothing more than an extension of the merger clause. Furthermore, the court held that the nonreliance language was not specific enough. According to the author, as a result of the opinion, “sellers cannot eliminate lingering liability, and buyers may face increased market prices to account for that uncertainty.”

 

Subleases; Generic Sublease Form. Sidney G. Saltz and Martin P. Miner update their proposed generic sublease form in Subleases: A New Approach Revisited, 41 Real Prop. Prob. & Tr. J. 1 (2006). According to the authors, real property lawyers find it difficult to draft effective sublease documents that correctly and unambiguously allocate rights and responsibilities among the prime landlord, sub-landlord, and subtenant. According to Saltz and Miner, lawyers use one of three approaches to drafting sublease documents: (1) In the “all inclusive” approach, “the drafter creates an entirely new lease between the sublandlord and the subtenant, using the prime lease as a point of reference.” (2) In the “incorporation by reference” approach, the drafter sets out only “those agreements that apply between the sub-landlord and the subtenant.” Remaining aspects of the relationship between sublandlord and subtenant are governed by provisions of the prime lease that are specifically incorporated by reference. (3) In what Saltz and Miner call the “haphazard approach,” “the drafter may pull a lease form from the shelf, name it a ‘Sublease,’ change the references to identify the parties . . . and use the phrase ‘hereby subleases’ instead of ‘hereby leases.’” Although the authors agree that the first two approaches have merits, “the haphazard approach has no advantages.” Although creating a form sublease would seem to “attempt . . . the impossible,” the authors propose a form sublease as a “vehicle that will serve in all situations, whether they be residential, office, industrial, or retail.” The authors first proposed a form sublease in the spring 1999 issue of Real Property, Probate and Trust Journal. In this new article, the authors attach an updated form that reflects the constructive criticisms of colleagues and the lessons of years of practice.

 

Alabama limits eminent domain. The exercise of eminent domain for urban renewal projects is limited to blighted property and blighted areas. The definition of “blighted” provided in the statute is so broad that it is unlikely to present any significant impediment to condemnation for urban renewal. 2006 Ala. Laws 584.

 

Alabama enacts the “Uniform Residential Landlord and Tenant Act.” 2006 Ala. Laws 316.

 

Arizona adopts a residential inspection program. Procedures are established for comprehensive interior and exterior inspections. Cities and towns may adopt the program only after a public hearing. 2006 Ariz. Sess. Laws 285.

 

Arizona requires landlords and owners of mobile home parks who sell or transfer their interest to provide detailed records to the new owner. All available facility plans, along with records for security deposits and other tenant files, must be provided to the successor. The act requires landlords to develop and maintain underground facility records. 2006 Ariz. Sess. Laws 258.

 

Colorado mandates disclosure of whether property has been used as a methamphetamine laboratory in connection with the sale of residential real property. A comprehensive plan of inspection and cleanup procedures is set forth in the act. 2006 Colo. Sess. Laws 173.

 

Colorado enacts the “ Colorado Foreclosure Protection Act.” Foreclosure consulting contracts are subject to substantial regulation. 2006 Colo. Sess. Laws 291.

Connecticut established the Office of Ombudsman for Property Rights. The ombudsman may intervene on behalf of the public in eminent domain cases. 2006 Conn. Acts 187.

 

Florida restricts the power of eminent domain. Property acquired by condemnation may not be conveyed or leased to a private individual or entity except under limited circumstances. 2006 Fla. Laws 11.

 

Georgia adopts alternative dispute regulation to resolve construction disputes between homeowners and contractors. The procedures of the act must be followed before a lawsuit can be initiated. 2006 Ga. Laws 643.

 

Georgia enacts “The Landowner’s Bill of Rights and Private Property Protection Act.” This comprehensive act substantially revises provisions regarding the power of eminent domain. 2006 Ga. Laws 444.

 

Maine authorizes working waterfront covenants. A working waterfront covenant is an agreement between the owner of working waterfront real estate limiting the use to commercial fisheries business. Working waterfront real estate is defined as land adjacent to navigable coastal waters that is legally filled land, piers, or wharves. 2005 Me. Laws 574.

 

Maryland authorizes surety bonds in lieu of security deposits in residential leases. The landlord may not require a surety bond and the tenant may not insist on a surety bond. 2006 Md. Laws 502.

 

Nebraska restricts the use of eminent domain. A condemner (condemning authority) may not acquire property primarily for the purpose of economic development. 2006 Neb. Laws 924.

 

Oklahoma adopts Commercial Real Estate Brokers Liens. The lien attaches on the date of recording and does not relate back to the date of the brokerage. 2006 Okla. Sess. Laws 166.

 

Oklahoma enacts the Uniform Environmental Covenants Act. Environmental covenants are established as an interest in real property. The covenants arise as a result of environmental remediation or mitigation that imposes activity and use limitations on the property. Such covenants must be recorded and are subject to other requirements. 2006 Okla. Sess. Laws 182.

 

Tennessee enacts the Tennessee Home Loan Protection Act. Predatory or high-cost home loans and refinancing of home loans are restricted. 2006 Tenn. Pub. Acts 801.

 

Virginia limits evictions of residential tenants in cases of domestic violence. 2006 Va. Acts 717.

 

Virginia authorizes the release of a mortgage using an automated electronic recording system. Electronic signatures are required in accordance with the Uniform Electronic Transactions Act. 2006 Va. Acts 907.

 

Wisconsin enacts the Uniform Real Property Electronic Recording Act. 2005 Wis. Laws 421.

Advertisement