Keeping Current-Property offers a look at selected recent cases, rulings and regulations, literature and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
- BROKERS: Joint agency. A broker represented both buyer and seller of a property that had been the subject of construction litigation. The litigation and its settlement were disclosed to the buyer, but the broker did not disclose concerns he had expressed to the seller about how the settlement's potential inadequacy could affect the property value. An owners' association later denied the buyer permission to make certain improvements to the property because of construction defects uncured due to the inadequate settlement proceeds. The court held that the broker did not violate his fiduciary duty to the buyer in failing to disclose his opinions about the inadequacy of the settlement. The buyer had adequate opportunity to review the settlement. Assilzadeh v. California Fed. Bank, 98 Cal. Rptr. 2d 176 (Cal. Ct. App. 2000).
- CONDOMINIUMS: Conversion. A condominium board could terminate a "sweetheart" deal made by the developer who previously controlled the board. Under the federal Condominium and Cooperative Conversion Protection and Abuse Relief (Act), such termination must occur within two years after developer control ends. Although the owners obtained a majority on the board more than two years earlier (one Act test for control), the court ruled that the developer still retained control because it retained veto powers protecting the sweetheart deal. Darnet Realty Assocs., LLC v. 136 East 56th St. Owners, Inc., 214 F.3d 79 (2d Cir. 2000).
- DEEDS: Description of property. When conveying property by a warranty deed, the seller included language "excepting that portion" subject to a right of way. The court ruled that, with the exception, the seller intended to retain title to the land on which the easement lay, not just to create an exception to the title warranty. Tri-County Metro. Transp. Dist. of Oregon v. Portland Gen. Elec. Co., 985 P.2d 222 (Or. Ct. App. 1999).
- ESCROWS: Duty of care. The buyer of a land purchase option brought a negligence suit against an escrow agent for failing to inform the buyer that the seller had repudiated the option agreement because the buyer missed the deadline to deposit earnest money and execute a definitive agreement. The court ruled that, without a contractual relationship beyond that of a usual escrow agreement, it is normally the responsibility of the parties rather than the escrow agent to ascertain such fundamental aspects of their business relationship as whether they continue to have one. Bowles v. Key Title Co., 986 P.2d 1236 (Or. Ct. App. 1999).
- FDCPA: Consumer purpose. A debtor sued creditors who tried to levy judgment against the debtor's house, claiming that they did not make required Fair Debt Collection Practices Act disclosures when attempting to collect. Although the debtor had originally bought and used the home for a personal residence, he had since moved and rented the house for income. In finding for the debtor, the court held that the FDCPA applies to mortgages if the proceeds were intended to be used for a consumer purpose, even if the mortgaged property is later used for a business purpose. Miller v. McCalla, 214 F.3d 872 (7th Cir. 2000)
- LAND SALE CONTRACTS: ILSA Remedies. The Interstate Land Sales Act allows buyers to rescind their contracts within seven days after execution or, if notice of such right is not in the contract, within two years after execution. The buyer, whose contract failed to include the seven day rescission notice, sought rescission of the contract and return of all funds paid to the seller. The court, in finding for the buyer, held that the buyer had not waived his right to rescission because he never knew about it. He was entitled to a full refund if the house was returned in substantially the same condition as when he initially received it. Engle Homes, Inc. v. Krasna, No. 4D98-1672, 2000 Fla.App. LEXIS 2000 (2000).
- MORTGAGES: Merger. A property owner that defaulted on a mortgage sold its interest in the property before the foreclosure sale. The mortgagee then assigned its interest in the deed of trust to the same purchaser. In an attempt to prevent foreclosure of its leasehold interest, a lessee of the property claimed that the two interests acquired by the purchaser merged into a fee simple interest, eliminating the right of foreclosure. The court held that the doctrine of merger does not apply if there are other intervening encumbrances on the property, such as the leasehold interest. Miller v. Martineau & Co., 983 P.2d 1107 (Utah Ct. App. 1999).
- NUISANCE: Electromagnetic emissions. A building owner claimed that its tenants suffered distorted images on their computer screens caused by a public utility's power lines, located on a nearby utility easement. Noting that the utility's use of the easement conformed to industry standards and had not changed since its inception, the court held that the use was reasonable as a matter of law. Westchester Assocs., Inc. v. Boston Edison Co., 712 N.E.2d 1145 (Mass. App. Ct.1999).
- PREMISES LIABILITY: Invitee or licensee? An attendee at a bible study session was injured in the poorly lit church parking lot when she tripped over a tire. The court, in determining the standard to which the church would be held, stated that people who visit churches for religious purposes (as opposed to fund raising or entertainment purposes) are considered licensees, not invitees. Even though a general invitation had been made to join the study sessions, there was no commercial purpose in attending the sessions. Stilt v. Holland Abundant Life Fellowship, No. 112217, 2000 Mich. LEXIS 1438 (2000).
- SELLER AND BUYER: Statute of Frauds. A buyer of land sued the seller after the seller repudiated the purchase agreement and sold to another. The seller defended on the ground the property lacked a legal description (only an address was provided). The court agreed that the purchase agreement was unenforceable under the statute of frauds. Key Design, Inc. v. Maser, 983 P.2d 653 (Wash. 1999).
- STATUTE OF LIMITATIONS: Instruments under seal. A buyer of real property brought a breach of contract claim against the seller after the normal three year period of limitations for contracts had run, arguing that Maryland's 12 year period of limitations for contracts entered into "under seal" applied. The court held that mere inclusion of the seal in the signature block was not enough to create a presumption that the parties intended the contract to be made under seal. Instead, the seal should have been referred to in the body of the agreement. Rouse-Teachers Properties, Inc. v. Maryland Cas. Co., 750 A.2d 1281 (Md. 2000).
- TAXATION: Sales tax. At a foreclosure sale, a mortgagee purchased real and personal property on which it held a mortgage subject to a redemption period and later transferred the certificate of sale to a third party before the redemption period expired. The court ruled that the transfer of the certificate of sale was a "sale of tangible personal property" under Colorado's sales tax laws and was subject to tax when transferred, even though the property was still subject to redemption. Telluride Resort & Spa, L.P., v. Colorado Dept. of Revenue, No. 99CA0034, 2000 Colo. App. LEXIS 1295 (2000).
- TRESPASS: Encroachment. A newly erected building encroached on a neighboring property by more than 50 feet. In holding that the encroachment must be removed, the court noted that, although courts sometimes order conveyance and payment when the encroachment is slight, over 9% of the plaintiff's usable land was taken. Forced conveyance would be inappropriate because it would effectively approve private eminent domain. Amkco Ltd., Co. v. Welborn, 985 P.2d 757 (N.M. 1999).
- ZONING AND PLANNING: Nuisance. A marina developer who had complied with all applicable zoning requirements was denied permission to build after zoning authorities determined that the increased boat traffic would constitute a public safety nuisance. Even though there was no explicit provision in the city's comprehensive plan or in the land development code that boat traffic could be considered a compatibility factor, the court held that the city had express authority to deny the permit, based on its determination that the proposed development created a public nuisance. Windward Marina, LLC v. City of Destin, 743 So.2d 635 (Fla. Ct. App. 1999).
- ZONING AND PLANNING: Permitted uses. A land-owner sought to develop part of its property as a gas station, a permitted use in the zoning district. The city rejected the application, claiming that the proposed use was incompatible with the surrounding neighborhood. The court held that a municipality effectively limits its own discretion when it designates a use as one of right. To permit a zoning body to deny a proposed use that is expressly permitted would render meaningless the distinction between permitted uses and conditional uses. Securecare Self Storage, Inc. v. City of Colorado Springs, 987 P.2d 852 (Colo. Ct. App. 1998), pet. for cert. granted, No. 99SC200, 1999 Colo. LEXIS 1022 (1999).
- Agricultural land use. In Farms, Their Environmental Harms, and Environmental Law, 27 Ecology L. Q. 263 (2000), J. B. Ruhl asserts that farms typically engage in many environmentally harmful activities yet are exempt from most environmental regulations simply because they are farms. After suggesting that regulating farming activities may require nontraditional approaches, Ruhl presents a general framework of regulatory measures designed to minimize environmental degradation.
- Bankruptcy and secured lending. If a Bankruptcy Code provision impairs the value of a creditor's security interest in the property of a bankruptcy debtor, should the creditor be able to assert a takings claim against the United States? In Bankruptcy Takings, 51 Fla. L. Rev. 851 (1999), Julia Patterson Forrester challenges the conventional wisdom among scholars that the bankruptcy clause of the Constitution somehow precludes a takings claim in such a situation.
- Brownfield developments. Unlike some authors, Gabriel Espinosa is optimistic about the potential for revitalizing inner city neighborhoods with brownfield developments. In Building on Brownfields: A Catalyst for Neighborhood Revitalization, 11 Vill. Envtl. L. J. 1 (2000), Espinosa uses a brief case study of the Homan Square housing development in the Lawndale district of Chicago to illustrate the upside potential of brownfield development in an inner city neighborhood.
- Constructive eviction in commercial leases. In Disturbing Concepts: Quiet Enjoyment and Constructive Eviction in the Modern Commercial Lease, 35 Real Prop. Prob. Tr. J. 57 (2000), Eugene Grant concludes that courts and parties are adapting the doctrines of quiet enjoyment and constructive eviction to address the evolving expectations of landlords and tenants in rapidly changing commercial leasing markets.
- Landlord's duty to mitigate damages. Stephanie Flynn surveys how states have addressed issues of whether and to what extent a landlord must attempt to mitigate damages when a tenant wrongfully abandons the leased premises before the lease term expires, in Duty to Mitigate Damages Upon a Tenant's Abandonment, 34 Real Prop. Prob. Tr. J. 721 (2000). She concludes that the trend among states is to require landlords to mitigate damages.
- Regulatory takings and the "Williamson trap." Madeline Meacham describes a Catch-22 facing landowners with inverse condemnation claims against state or local governments in The Williamson Trap, 32 Urb. Law. 239 (2000). Since the Supreme Court's Williamson decision in 1985, federal courts have required such a claimant to seek compensation in state court before a claim will be recognized as ripe for federal review. The claimant who loses at the state court level, however, may be unable to relitigate the issues at the federal court level due to res judicata, collateral estoppel and full faith and credit doctrines. Meacham rejects the theory that a claimant may "reserve" its federal claims in a state court proceeding.
- Regulatory takings claims. In Who Gets the Takings Claim? Changes in Land Use Law, Pre-Enactment Owners, and Post-Enactment Buyers, 61 Ohio St. L.J. 89 (2000), Gregory Stein examines the situation in which newly enacted local land use regulation limits the uses to which land may be put, causing the owner to sell it for a price that is discounted to reflect the use limitations. Stein proposes that the seller should have standing to seek damages equal to the discount of the sale price.
- Synthetic lease reporting requirements. By using synthetic leases, corporate tenants may keep such long-term obligations off their balance sheets and thereby possibly mislead shareholders, investors and other creditors. In Synthetic Leases: Structured Finance, Financial Accounting and Tax Ownership, 25 J. Corp. L. 445 (2000), Donald Weidner suggests that financial accounting standards, rather than IRS regulations, should be revised to require disclosure of an obligation as debt whenever the tenant chooses to treat a synthetic lease transaction as a depreciable investment in the premises for tax purposes.
- California adopts the Uniform Electronic Transactions Act. For many types of legal transactions, electronic documents and electronic signatures satisfy any requirements of writing. Wills and testamentary trusts and several other types of transactions are excluded from the scope of the Act. Cal. Civil Code §§1633.1 et seq.
- California streamlines local regulatory approvals of development projects that would increase affordable housing. Existing requirements that localities make certain specific findings before disapproving of such projects are strengthened, providing extended opportunities to persons who wish to challenge a locality's failure to approve such projects. Cal. Gov't Code §§ 65009, 65950, 65589.5.
Readers interested in a comprehensive review of current developments in real estate law are encouraged to subscribe to the ABA Real Estate Quarterly Report, which is prepared by the Real Property Division's Decisions Committee. For more information on this publication, contact Pam Hollins at (312) 988-5651.
Keeping Current-Property Editor: Eugene L. Grant, 1211 SW 5th Ave., Ste. 1600, Portland, OR 97204-3795, EGrant@schwabe.com. Contributing editors: Robert Flores and Terry Frazier, tFrazier@mc.edu.
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