Author(s)

Keeping CurrentKeeping Current—Property Editor: Prof. James C. Smith, University of Georgia, Athens, GA 30602, jim@uga.edu. Contributing editors: Prof. William G. Baker, Prof. Ronald Benton Brown, Prof. Matthew J. Festa, Prof. Shelby D. Green, Prof. Michael E. Lewyn, and Prof. John A. Lovett.

Probate & Property Magazine, November/December 2008, Volume 22, Number 6

Keeping Current | Property

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

CASES

ADVERSE POSSESSION: Adverse possession does not require that claimants live on the land as long as they act like good faith owners in their use of the land. Part of the plaintiffs’ land, isolated by a deep ravine, was reachable by car only via a driveway on a third party’s land. Beginning in 1976, the plaintiffs regularly used that driveway to reach the isolated part of their land and subsequently acquired a quitclaim deed to the driveway from the driveway’s owners. Since 1953 the defendants and their predecessors used the driveway to access their house, believing that they owned it. They mowed along the driveway, removed snow from it, trimmed the nearby trees, graded it, paved it, installed utilities along it, and put a security gate at its end. Those activities satisfied the adverse possession requirements of hostile, actual, open, exclusive, and continuous possession under a claim of right for more than the 10 years. That they had never lived on the land did not defeat their claim of title by adverse possession because their behavior was what owners would ordinarily do in maintaining and controlling that land. The plaintiffs’ claim that they had an easement by necessity over the driveway failed because they did not produce evidence of unity of title, that is, that their land and the driveway were owned by the same person before a separation of title to the isolated part. Kroeze v. Scott, 752 N.W.2d 34 (Iowa Ct. App. 2008).

BOUNDARY BY ACQUIESCENCE: A boundary by acquiescence is established by conduct of predecessors in title, even though possession of land is not proven. Neighboring tracts of land were separated by a private lane with a fence on the west side, but a recent survey showed that the legal boundary ran along the east side of the lane. The owner of the eastern tract claimed ownership up to the fence based on the doctrine of boundary by acquiescence, which operates when the landowners’ conduct shows tacit acceptance of a fence or other visible marker as the boundary. The fence was in place for many decades, and testimony about who had built the fence and for what purpose was inconclusive. Proof that either party was in possession is not an essential element for boundary by acquiescence. Moreover, proof that the current owners acquiesced is not necessary. To the contrary, in this case testimony concerning the conduct and beliefs of the litigants’ predecessors in title was critical to the outcome. By a preponderance of the evidence, the court found that the prior owners considered the fence to be the boundary, although there was some testimony to the contrary, which motivated three justices to dissent. Myers v. Yingling, No. 07-790, 2008 WL 598164 ( Ark. Mar. 6, 2008).

BROKERS: Brokerage firm may represent multiple bidders for same property without disclosure and consent. The plaintiff contacted a small brokerage firm (consisting of 16 salespersons and four associate brokers) to locate a vacation property. A broker in the firm identified a property listed at $100,000, which the plaintiff liked. After inspecting the property, the plaintiff made a written offer of $75,000, hoping this amount would prompt a counteroffer from the sellers at less than the asking price. At the time, the broker presented to the plaintiff a “Disclosure Regarding Real Estate Agency Relationship” form, which stated that the broker was the buyer’s agent and as such acted solely for the buyer. The form described the fiduciary duties of the broker as including undivided loyalty and full disclosure. Next, a couple contacted the same brokerage firm seeking to find vacation property in the same area. This second broker was advised by the listing broker that an offer was pending, presumably the plaintiff’s. The couple made a written offer at the full asking price, which the sellers accepted. The plaintiff made two other higher offers, one for $105,000, which the sellers rejected. The plaintiff brought suit in U.S. district court alleging that the brokerage firm breached its fiduciary duty by representing competing buyers for the same property without disclosure. The district court ruled against the plaintiff, not on the asserted theory of liability, but on causation. The plaintiff appealed to the Second Circuit. That court, finding no ready precedent under state law, certified to the New York Court of Appeals the question of breach of duty. The state court ruled that there was no breach. It first pointed out that the broker disclosure statute (N.Y. Real Prop. Law § 443(3)(c)) was enacted to ensure that the client knows whether the broker was acting for the seller or the buyer in a particular transaction, not whether a brokerage firm might represent multiple buyers or sellers with competing interests. Nonetheless, by its terms, the disclosure statute preserves the common law of agency for residential transactions. In determining what the common law requires in this case involving a buyer’s brokers, the court extended a rule from a case recently decided involving a seller’s brokers. The court stated that even after an agent in a brokerage firm has identified a potential purchaser for a client’s property, the firm is not precluded from trying to interest that potential purchaser in other properties. Indeed, a limitation restraining “a [brokerage firm] from simultaneously representing two or more principals with similar properties for fear of violating a fiduciary obligation in the event a buyer chose the property of one principal over that of another” would greatly hamper real estate transactions in the state. So too, a brokerage firm may represent different buyers of the same property. In such cases, there is no concern that the client’s interests will be compromised by less than zealous representation, as agents earn their commissions for sales to their own clients. An individual agent simultaneously representing multiple buyers of the same property, however, would be inconsistent with the duty of undivided loyalty, because it would be impossible for the broker to negotiate an optimal purchase price for all of them. Although on the facts, the plaintiff was in no worse position than if the successful purchaser had been represented by an unaffiliated broker, the opinion reached a sensible accommodation between strict common law principles and the realities of modern real estate brokerage. Rivkin v. Century 21 Teran Realty LLC, 887 N.E. 2d 1113 (N.Y. 2008).

COTENANTS: Uniform Fraudulent Transfer Act (UFTA) applies to transfers of property in divorce but cannot reach property held as tenants by the entirety for claims against only one spouse. The plaintiff filed a wrongful death action against the defendant, who murdered the plaintiff’s husband during a deer hunting trip. Thereafter, the defendant’s wife obtained a divorce, with the judgment awarding nearly all the marital assets to her. The court rejected the wife’s assertion that the UFTA could never reach the transfer of property in divorce actions, ruling that the language of the UFTA does not exempt from its reach property transferred in a divorce settlement. In fact, the Act defines “transfer” as “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, and creation of a lien or other encumbrance.” Mich. Comp. Laws § 566.31(l). The UFTA, however, does not reach “property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only [one] tenant.” Id. § 566.31(b)(iii). This is because by statute a judgment lien does not attach to an interest in real property owned as tenants by the entirety unless the underlying judgment is entered against both the husband and wife. Id. § 600.2807(1). The court explained that removing entireties’ property from the reach of the UFTA comports with the overall statutory purpose of avoiding fraudulent transfers because “it is difficult to comprehend how disposing of property that a creditor cannot reach could ‘defraud’ that creditor.” The plaintiff’s UFTA action, however, could proceed for the marital property not held as tenants by the entirety. Estes v. Titus, 751 N.W.2d 493 ( Mich. 2008).

EASEMENTS: Reservation of railroad easement by attaching informal diagram to deed is effective. A railroad company conveyed land by a quitclaim deed. In that deed, the grantor reserved an easement for existing railroad tracks and the drainage and appurtenances shown on a diagram attached to the deed as an exhibit. The diagram represented the tracks by two parallel lines. The area within the lines and on each side of the tracks was shaded in with the number “32” appearing between arrows leading to each side of the shaded area. The court rejected the servient landowner’s claim that this description was inadequate to establish an easement under these circumstances. There was no doubt about the location of the easement because the tracks already existed at the time of the conveyance, and an easement 32 feet wide was clearly shown in relation to those tracks. Burlington Northern R.R. Co. v. Fail, 751 N.W.2d 188 (N.D. 2008).

LANDLORD-TENANT: Long-term commercial lease is enforceable despite lack of valid writing based on equitable estoppel. A 10-year lease of land for outdoor advertising gave the tenant the option to renew for two 10-year periods. The lease was executed by an agent of the corporate landlord without naming the principal (the landlord), which violated the statute of frauds. Wis. Stat. § 706.03(1m). The corporate landlord subsequently transferred the land to a related corporation. Four years into the first 10-year renewal, the successor landlord claimed that the lease was unenforceable based on the statute of frauds violation. The court in an unreported decision granted summary judgment for the tenant based on equitable estoppel. For years the parties had acted in conformity with the lease by the payment and acceptance of rent checks. This induced the tenant’s detrimental reliance, that is, it had rented billboard space to its own customers and spent money on the upkeep and improvement of the billboard as instructed by the landlord. Tarco South, Inc. v. Collins Outdoor Advertising, Inc., 746 N.W.2d 604 (Wis. Ct. App. 2008).

PUBLIC LANDS: Forest Service ban on rock climbing to protect Native American cultural resource does not violate First Amendment Establishment Clause. Cave Rock is a large rock formation in the Nevada National Forest on the eastern shore of Lake Tahoe. It plays a central role in the religion and culture of the Washoe Tribe, whose members have lived in the Tahoe area for at least 1,500 years. Beginning in the 1980s, Cave Rock became a popular site for rock climbing, with its overhanging walls presenting a tough challenge for many of the world’s best climbers. The Washoe consider rock climbing to be a desecration of Cave Rock, and they also object to other activities, such as hiking, engaged in by non-Washoe at Cave Rock.

After public comment, the Forest Service promulgated a new management plan that banned all climbing at Cave Rock and required the removal of climbing bolts as soon as feasible. The plan permitted casual hiking, fishing, and sightseeing. A climbing advocacy group challenged the decision as a violation of the Establishment Clause. Applying the three-part test of Lemon v. Kurtzman, 403 U.S. 602 (1971), the court upheld the government’s ban on climbing, finding it had a secular purpose (preservation of a historic cultural resource), did not endorse the Washoe religion, and did not intertwine government and religion. Access Fund v. U.S. Dep’t of Agriculture, 499 F.3d 1036 (9th Cir. 2007).

RECORDING ACTS: A bona fide purchaser of land takes free of an unrecorded subterranean drainage easement. A buried drainage pipe ran from an uphill parcel across a downhill parcel to the city’s drainage system lying under a public street. No easement was shown in any public record, except for a reference to the pipe in a study of the drainage basin done by the city and in a “Storm Drainage Inventory.” After its discovery, the city refused to take a position on whether or not the pipe could be plugged up by the downhill landowner. The downhill owner plugged the pipe, allegedly causing flooding on the land of an uphill neighbor who claimed a drainage easement. The court concluded that, even if an easement had been created, and there was no evidence of that, the downhill land would have been free of the easement because it had been acquired by a bona fide purchaser without notice. They did not have constructive notice because the easement was not mentioned in any public record that would have been checked in a title search; nor did they have inquiry notice from the existence of a manhole cover at the foot of the uphill neighbors’ driveway. The city was not liable based on nuisance merely for failing to prevent the plugging of the pipe without evidence that the city had ever owned, maintained, or controlled the drainage pipe. The uphill owner also sued the downhill owner for nuisance and trespass. The trial court granted summary judgment for the downhill owner, but the state supreme court reversed because the facts could support either claim. Merlino v. City of Atlanta, 657 S.E.2d 859 ( Ga. 2008).

ZONING: Replacing porch screens with glass was unlawful extension of nonconforming use. A zoning amendment added a “critical edge zone” to protect coastal wetlands. Permitted uses in the zone were limited to non-intensive activities such as surveying, boundary posting, and hiking. An existing home in the zone became a legal nonconforming use. The zoning ordinance provided that a nonconforming structure or use could not be changed, extended, or enlarged in any way except as provided in the ordinance. The ordinance defined an expansion of use as the addition of one or more months to a use’s operating season. The home-owners sought and obtained a permit to renovate their home by replacing windows and French doors, enlarging two bedroom windows, and shifting the French door openings to their screened-in porch. As part of the renovations, the homeowners decided to enclose their porch with insulated windows, without specific permission to do so. The town’s code enforcement officer ordered the homeowners to remove the windows and imposed a fine for violating the ordinance. The zoning board of appeals affirmed the order. In challenging that ruling, the homeowners asserted that the purpose of the glass was to keep the porch furniture dry and to allow them to sit more comfortably in bad weather. The evidence showed that even though the porch was not heated, the home-owners could now open the door from the living room to allow heat to enter the porch. The court found that the board could reasonably infer from that evidence that the insulated glass would enable the use of the porch for at least one additional month out of the year. The change was therefore a violation of the ordinance. There was no discussion of the reasonableness of the ordinance itself. Inasmuch as permitted uses in the zone were extremely limited, such a challenge might have seemed futile. Trudo v. Town of Kennebunkport, 942 A.2d 689 ( Me. 2008).

LITERATURE

Discretionary Zoning Decisions. In 2000, Congress enacted the Religious Land Use and Institutionalized Persons Act (RLUIPA) to require courts to apply strict scrutiny review to land use decisions that affect religious land uses, as long as those decisions are made through “individualized assessments” of land use. 42 U.S.C. § 2000cc(a)(2)(C). In such situations, Congress reasoned that zoning officials have no standards governing their authority and are thus more likely to make discriminatory decisions. In her article, Judicial Review of Local Land Use Decisions: Lessons from RLUIPA, 31 Harv. J.L. & Pub. Pol’y 717 (2008), Prof. Ashira Pelman Ostrow argues that the rationale for RLUIPA justifies more searching judicial review of all zoning decisions affecting just one piece of land. She points out that no objective standards govern zoning of individual parcels; as a result, municipalities “zone individual parcels on a highly discretionary, case-by-case basis.” She reasons that because such standardless decision making is inherently lawless, judicial deference is pointless. It is well settled, however, that judges must defer to small-scale municipal zoning decisions. In Nectow v. City of Cambridge, 277 U.S. 183 (1928), the Supreme Court held that government should uphold such an action unless it “has no foundation in reason and is a mere arbitrary or irrational exercise of [police] power.” Id. at 187. Ostrow asserts that Nectow actually supports her proposed rule, because in Nectow the court “undertook a substantive review of the factual circumstances underlying the challenged zoning decision.” Thus, Ostrow cannot (and does not) reject rationality review; instead, she favors “rationality with bite”—that is, a standard under which judges uphold a fairly debatable zoning decision but analyze the factual record to make sure the zoning decision is in fact rational. Ostrow wisely dissects the arbitrariness of conventional zoning; however, it is not clear whether more searching judicial review will remedy the problem. If judges are bound by no standards other than “rationality,” why are their decisions likely to be wiser than those of municipal zoning officials?

Security of Tenure. The mid-20th century “revolution” in landlord-tenant law has been studied extensively by many legal scholars. In her provocative new essay, The Right to Remain: Common Law Protections for Security of Tenure: An Essay in Honor of John Otis Calmore, 86 N.C.   L. Rev. 817 (2008), Prof. Florence Wagman Roisman suggests that this judicial and legislative reform movement did not go far enough. In particular, she argues that American law still insufficiently protects the interests of residential tenants (especially vulnerable low-income renters) who wish to remain in their apartments or keep manufactured homes on land they rent. To remedy this under-protection Roisman calls for American courts and legislatures to recognize the right of residential tenants to “security of tenure.” By this she means that landlords should be prohibited from terminating a residential tenancy, even at the conclusion of its term, absent a showing of good cause. Put differently, Roisman is arguing for a presumption in favor of the ability of a residential tenant to renew a lease. She makes her case for this significant legal reform by first marshaling an impressive body of social science research to demonstrate why security of tenure is so important to individual tenants and society at large. She details the negative social and economic effects that residential instability and involuntary displacement can have on tenants, their children, and on communities. The second branch of her argument discusses the doctrinal movement toward security of tenure that has already taken place in the United States—primarily under federal regulations concerning public and subsidized housing and Low Income Housing Tax Credit financed housing, through the Uniform Residential Landlord-Tenant Act’s adoption of a good faith performance standard, and through complete or partial adoptions (primarily by statute) in jurisdictions such as Connecticut, New Jersey, New Hampshire, and the District of Columbia. Although most of the movement in this direction so far has come from legislatures, Roisman suggests that future reform should ideally come from the courts: case-by-case doctrinal development will allow for nuanced balancing of interests and consideration of the many relevant factors that may come into play in any given landlord–tenant relationship. In the final portion of her essay, Roisman invokes well-known common-law contract principles (principally the implied covenant of good faith and fair dealing) to support the development of security of tenure for lessees, explaining how such principles have already served to protect franchisees. Although Roisman does not attempt to provide an empirical evaluation of the costs and benefits of her reform proposal, and although it may be years before American law fully embraces an implied covenant for security of tenure (if it ever does), Roisman’s essay is an excellent place to begin to understand this important debate.

Subsurface Property Rights. In law school many of us learned the old common-law maxim “cujus est solum, ejus est usque ad coelum et ad inferos,” which is usually translated as meaning that the rights of the surface owner extend upwards to the heavens (ad coelum) and downward to the center of the earth (ad inferos). Based on this adage, which William Blackstone introduced into Anglo-American common law in 1776 (largely by rephrasing the German theorist Samuel Pufendorf), we assume that property rights of a surface owner extend in a pyramid-like cone down to the very center of the earth. Although many American decisions have reiterated this idea in dictum, its actual doctrinal reach is quite limited, according to Prof. John G. Sprankling’s fascinating study, Owning the Center of the Earth, 55 UCLA L. Rev. 979 (2008). As Sprankling explains, American property law generally only pays lip service to this “center of the earth” theory and increasingly recognizes that a surface owner’s property rights only extend down to a limited portion of the earth’s crust, close enough to the surface to affect activities on or very near the surface. Sprankling’s reason for examining this old chestnut of common law property doctrine is not simply academic, though. New technology and new opportunities—in particular “heat mining,” the use of naturally hot rock formations far below the surface to produce artificial geothermal power; and “carbon sequestration,” a technique for mitigating global warming by removing carbon dioxide from the air and then storing it deep below the surface—will soon lead us to discard completely the antiquated “center of the earth” theory, just as the advent of aviation in the first half of the 20th century led to the abandonment of the ad coelum doctrine. Not content to point out the inadequacy of the center of the earth theory and how it is already being undermined in a number of important areas (for example, the law of groundwater use; oil, gas, and hard rock mineral exploration and production; and waste disposal, to name but a few), Sprankling also evaluates the factors that should shape a new model for subsurface property rights. In the end, he suggests that we move toward a model that is consistent with our growing understanding of the complexity of subsurface geology and with the goal of promoting the realistic exploitation and use of practically accessible portions of the earth’s subterrain. Thus, Sprankling proposes that a surface owner’s title should only extend downward for 1,000 feet, subject to special exceptions for mineral rights. He also argues convincingly for federal governmental ownership of the layers of the earth below the crust (the mantle, for instance). This article, a first of its kind in American property scholarship, will undoubtedly spark much more debate on this important and deep topic.

LEGISLATION

Arizona regulates mortgage loan originators. Among other requirements, mortgage loan originators must meet educational requirements, pass a test, obtain a license, and be employed by a mortgage broker or banker. 2008 Ariz. Sess. Laws 310.

California authorizes Department of Parks and Recreation to acquire conservation easements. When the department determines that a conservation easement is necessary to protect a state park from an inharmonious use, it may acquire a conservation easement. The department may also obtain easements to enhance the natural resource, cultural, or historic value of a state park. The department is also authorized to make grants to a state or local government agency or a nonprofit land trust organization to purchase and hold one of those conservation easements. 2008 Cal. Stat. 135.

California makes substantial procedural and substantive changes for foreclosure of residential mortgage loans. A mortgagee, trustee, or agent must wait 30 days after contact is made with the borrower, or 30 days after satisfying due diligence requirements, to contact the borrower before filing a notice of default. The mortgagee must contact the borrower, assess the borrower’s financial situation, and explore options for the borrower to avoid foreclosure. The borrower must be advised by the mortgagee that he or she has the right to request a subsequent meeting within 14 days. Notice of default must include specified declarations from the mortgagee regarding its contact with the borrower. The borrower may designate a HUD-certified housing counseling agency, attorney, or other person to discuss with the mortgagee options for the borrower to avoid foreclosure.

After foreclosure, a person who purchases vacant residential property at a foreclosure sale, or acquires vacant residential property through foreclosure under a mortgage or deed of trust, must maintain the vacant residential property. Required maintenance includes caring for the exterior of the property, preventing excessive foliage growth that diminishes the value of surrounding properties, protecting the property from trespassers and squatters, and averting other conditions that create a public nuisance. 2008 Cal. Stat. 69.

Colorado adopts new requirements to obtain tax benefits for conservation easements. Some parties have abused the tax credit program for conservation easements to obtain a financial benefit by submitting easements that misrepresent a property’s conservation or financial values. To reduce this occurrence, affidavits of appraisers must be submitted for review to the division of real estate, which is directed to share information with the department of revenue to ensure compliance with accepted appraisal practices. 2008 Colo. Sess. Laws 448.

Colorado enacts duty on landlords and tenants to maintain residential housing. A tenant is required to maintain that portion of the premises under the tenant’s control in a reasonably clean and safe manner, including complying with applicable building codes, properly disposing of trash and garbage, using heating, plumbing, ventilation, and sanitary facilities in a reasonable manner, and promptly notifying the landlord if the premises become uninhabitable. The landlord must maintain the premises in a habitable condition, including keeping the premises wind and watertight, ensuring that the plumbing, heating, ventilation, and electrical facilities are in good working order, exterminating vermin, providing adequate receptacles for garbage and trash, maintaining the common areas, and complying with all applicable building, housing, and health codes. 2008 Colo. Sess. Laws 387. Connecticut establishes a foreclosure mediation program. In conjunction with the Homeowners Equity Recovery Opportunity Loan program, the mediation is designed to minimize the effect on homeowners who default on residential mortgages. 2008 Conn. Acts 176.

Delaware limits seller financed sales of residential real estate. A contract for the sale of residential real estate under which the seller agrees to provide any financing for the purchaser may not remain executory for more than 12 months (six months, plus a six-month extension) unless the contract contains certain statutory minimum protections. The statute requires the conditional sales contract to grant the purchaser a 120-day right of redemption after default. The contract must also state the periodic rental value of the property, which may not exceed 75% of the original periodic installment (if the buyer fails to redeem after default, the buyer’s financial obligation is limited to the periodic rental value). Failure to comply with these rules makes the contract voidable. 76 Del. Laws 311.

Florida increases thermal efficiency standards. By 2010, the energy efficiency for building construction must increase by at least 20% over the energy efficiency that existed in 2007. By 2013, the increase must be at least 30%. By 2016, the thermal efficiency of new construction must be at least 40% greater than 2007. By 2019, the increase must be at least 50% greater than 2007. 2008 Fla. Laws 191.

Florida limits early termination fees in residential landlord tenant agreements to amount equal to two-months rent. The landlord may require the tenant to give up to 60-days notice before lease termination. If the landlord retakes possession from a defaulting tenant, the landlord must exercise good faith in attempting to relet the premises and credit the defaulting tenant with any rent received. 2008 Fla. Laws 131.

Florida requires hazard insurance for condominiums to be based on replacement cost as determined by independent insurance appraisal. The full insurable value must be determined at specified intervals. The unit owners association must make its best efforts to obtain and maintain adequate insurance to protect the association and property under its supervision or control. 2008 Fla. Laws 240.

New Hampshire licenses mortgage loan originators. Among other requirements, mortgage loan originators must obtain a license and be employed by a mortgage broker or banker. 2008 N.H. Laws 333.

New Hampshire limits certain future interests in real property. After December 31, 2008, no legal possibility of reverter, right of re-entry, or executory interest in real property may be retained or created unless either the grantor or the grantee is a public or charitable organization. Existing possibility of reverters, rights of re-entry, and executory interests in land held by anyone other than the original natural person must be recorded by 2011, or within three years of receipt, and rerecorded every 25 years. No action for recovery of real estate under rights based on a possibility of reverter, right of re-entry, or executory interest may be brought after five years from the time the right to recover possession of the real property first accrued. The act does not apply to beneficial interests created through trusts, or held by lessors, mortgagors, or under options to purchase real property. 2008 N.H. Laws 228.

New York limits adverse possession claims. Adverse possession must be based on a claim of right—a reasonable basis for the belief that the property belongs to the adverse possessor. A claim of right is not required if the actual owner cannot be determined from the records of the county clerk or registry. 2008 N.Y. Laws 269.

Pennsylvania adopts Mortgage Loan Industry Licensing and Consumer Protection Act. Pennsylvania enacts legislation to prevent fraud and overreaching by lenders as part of the mortgage lending process involving a debt secured by an interest in residential real property. This Act substantially revises and heavily regulates the mortgage lending business. 2008 Pa. Laws 56.

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