P R O B A T E   &   P R O P E R T Y
November/December 2001
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Articles

Keeping Current—Property

Keeping Current—Property Editor: Eugene L. Grant, 1211 S.W. 5th Ave., Ste. 1600, Portland, OR 97204-3795, egrant@schwabe.com. Contributing editors: Robert Flores and Terry Frazier.

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

CASES

• BANKRUPTCY : Secured claims . Applying Oregon law, the court held that cross collateralization clauses will cover only future advances of the same class as the primary obligation. In order to cover prior loans, such clauses must specifically refer to them. In re Wollin, 249 B.R. 555 (Bankr. D. Or. 2000).

• EASEMENTS: Relocation. The owner of a servient estate, over which utilities were installed pursuant to an easement by necessity, could relocate the easement, at his expense, without the dominant owner’s consent. Huggins v. Wright, 774 So. 2d 408 (Miss. 2000).

• EMINENT DOMAIN: Public purpose. Faced with the threatened departure of a Costco store for lack of expansion space, a city condemned an adjacent property occupied by a smaller discount store. The court held it would be a “naked transfer of property from one private party to another.” Avoiding “future blight” was entirely speculative and contrary to California law, which requires existing blight to support condemnation. 99 Cents Only Stores v. Lancaster Redevelopment Agency, 2001 WL 811056 (C.D. Cal. June 26, 2001).

• LANDLORD AND TENANT : Abandonment. A doctor-tenant relocated her practice from leased premises and stopped paying rent but continued to use the premises for storage. She also notified the landlord of another party interested in taking over the lease. After being locked out, the tenant brought a claim for wrongful eviction. Louisiana prohibits self-help evictions absent abandonment. The court held the tenant had not abandoned, because she continued to use the space for storage and communicated a desire that her lease be transferred. Girgis v. Macaluso Realty Co., 778 So. 2d 1210 (La. Ct. App. 2001).

• LANDLORD AND TENANT: Subleasing. A lease allowed the tenant to sublease a portion but less than the entire premises without the landlord’s consent, but with notice to the landlord. The tenant sublet all but a very small portion without the required notice. When the landlord sought to reject the tenant’s renewal notice based on the failure to notify the landlord of the sublease, the court held that the failure was immaterial and was not an actionable breach of the lease. Furthermore, the tenant’s sublease of all but a small portion of the premises did not result in a de facto sublease of the entire premises requiring the landlord’s approval. Holytrent Properties v. Valley Park Limited, 32 S.W.3d 27 (Ark. Ct. App. 2000).

• SERVITUDES: Assessments. Owners claimed the association’s higher security assessments for improved lots violated Mississippi’s Non-profit Corporation Act, which requires all members to have the same rights and obligations unless separate classes of members are provided for in the articles or bylaws. The court held that different assessments can be charged within the same class as long as the distinctions are rationally based. A rational difference in assessments will not by itself create separate classes of members if the distinction does not affect any other rights or obligations of the members. Longanecker v. Diamondhead Country Club, 760 So. 2d 764 (Miss. 2000).

TELECOMMUNICATIONS: Inverse Taking. A building owners association appealed an FCC order prohibiting restrictions impairing use of satellite devices by tenants, contending facial invalidity. The challenged rule, 47 C.F.R. § 1.4000(a)(1) (1998), allowed such tenant installations on the leased premises but not on common or landlord-retained areas. The court rejected the association’s claim that the FCC exceeded its statutory authority, and that the amended rule was an inverse taking. Applying Chevron deference, the court held the FCC could reasonably construe § 207 of the Telecommunications Act of 1996 as authorizing and requiring its contested order. A landlord affected by the subject rule would have voluntarily ceded control of an interest in his property to a tenant, thereby submitting to the FCC’s rightful regulation of a term of that occupation, rather than there being a permanent physical occupation by a stranger to the premises. Moreover, extensive case law upheld regulation of the landlord-tenant relationship without paying compensation for economic injury stemming from such regulation. Bldg. Owners & Managers Ass’n Int’l v. FCC, 254 F.3d 89 (D.C. Cir. 2001).

• SELLER AND BUYER: Mutuality of obligation. A land purchase contract conditioned upon approval by the buyer’s attorney does not fail for lack of mutuality. Surman v. Blansett, 246 Ga. App. 183 (Ga. Ct. App. 2000).

• SELLER AND BUYER: Options to purchase. An option contract setting a purchase price of “1997 appraised value” could not be specifically enforced, because such term was too ambiguous to provide a method by which a definite price could be determined. Pettigrew v. Collins, 246 Ga. App. 207 (Ga. Ct. App. 2000).

• TRESPASS: Remedies. A construction company that deposited over 14,000 yards of material on land adjacent to a construction project defended against a trespass suit by claiming the plaintiff did not present evidence of diminution in market value of the property. The court held the plaintiff’s showing of restoration costs alone was sufficient proof of diminution of value in the circumstances. Ellison v. R & B Contracting, Inc., 32 S.W.3d 66 (Ky. 2000).

• ZONING AND PLANNING: Exclusionary zoning; equal protection. A Jewish congregation sought a special exception to construct a synagogue in an area where train stations, police barracks, and outdoor recreational facilities, but not churches, were permitted. Noting that the township did not even attempt to show the negative impact of the proposed religious use versus the permissible municipal uses, and instead relied solely on the lack of any provision for a special exception for religious use, the court held the special exception ordinance created an irrational distinction in violation of the plaintiff’s equal protection rights. Congregation Kol Ami v. Abington Township, 2001 WL 793257 (E.D. Pa. July 11, 2001).

• ZONING AND PLANNING : Regulatory Takings . An owner of an 18-acre coastal wetlands parcel unsuccessfully applied for permission to develop a private beach club. The denial was based upon coastal management regulations that permitted wetlands development only for a “compelling public purpose.” The U.S. Supreme Court rejected a ripeness defense that the owner should have applied for other possible developments that would have met the regulatory criteria. The uplands portion of the parcel was admittedly sufficient to accommodate one home, but applications to permit one or more homes were not required to ripen the claim, because there was really no significant question of the permissible level of development under the regulations. The Court also rejected a defense based on the regulations existing before acquisition of the parcel, because it would be unfair to let the state put an expiration date on the Takings Clause. Not everyone is situated so as to be able to retain ownership until a takings claim is ripened and resolved. Because the owner was not deprived of all economic use of the property, the case was remanded for a Penn Central analysis of the takings claim based upon the standard of reasonable investment-backed expectations. Palazzolo v. Rhode Island, 121 S. Ct. 2448 (2001).

• ZONING AND PLANNING: Vested rights. Skamania County, Washington, approved a landowners’ application to build a home in the Columbia River Gorge National Scenic Area. The Columbia River Gorge Commission found the approval of the application ran counter to the federal law giving it land-use jurisdiction over the gorge, the commission’s management plan for the scenic area, and the county’s scenic area ordinance. The commission directed the county to: (1) order the landowners to stop construction; (2) invalidate its earlier decision approving the application; and (3) issue a new decision that would comply with the law, the management plan, and the ordinance. The Washington Supreme Court held the commission could not invalidate the county’s land-use decision, because of its failure to timely appeal the county’s decision. The court refused to give Chevron deference to the commission’s view of its authority, because it was a patently irrational interpretation contrary to the principle of finality of vested rights necessary for land development. Skamania County v. Columbia River Gorge Comm’n, 26 P.3d 241 (2001).

LITERATURE

Affordable housing issues. A recent symposium issue of the Western New England Law Review reviewed the effect of affordable housing legislation and the Mount Laurel doctrine in several eastern states in Symposium [On Housing], 22 W. New Eng. L. Rev. 321 (2001).

—In Affordable Housing in Suburbia: The Importance But Limited Power and Effectiveness of the State Override Tool, 22 W. New Eng. L. Rev. 323 (2001), Sam Stonefield compares the experiences of four states, each of which allows a state agency to override local permitting decisions by issuing a comprehensive permit. Stonefield found that local control is still extremely popular and political resentment toward the comprehensive permitting statutes is very strong. He concludes that, even with a comprehensive permit scheme in place, most communities will not see new affordable housing projects without some government financial support in addition to the club of the comprehensive permit.

—Werner Lohe links affordable housing issues to smart growth issues in Command and Control to Local Control: The Environmental Agenda and the Comprehensive Permit Law, 22 W. New Eng. L. Rev. 355 (2001). He concludes that the key to making smart growth coexist with efforts to expand affordable housing opportunities is for local housing advocates and environmentalists to work together creatively.

—Sharon Perlman Krefetz offers an empirical analysis of the Massachusetts comprehensive permit statute in The Impact and Evolution of the Massachusetts Comprehensive Permit and Zoning Appeals Act: Thirty Years of Experience with a State Legislative Effort to Overcome Exclusionary Zoning, 22 W. New Eng. L. Rev. 381 (2001). Although Massachusetts has not achieved all of its ambitious goals for affordable housing in the thirty years since its statute was adopted, Krefetz asserts that the state has increased affordable housing in the suburbs to a greater extent than it would have without the statute.

Fair housing. Polly Blakemore proposes a new amendment to the Fair Housing Act in Note, Short of Money or Shortchanged?: Reasonable Accommodations in Rental Rules and Policies for Disabled Individuals Receiving Financial Assistance, 39 Brandeis L.J. 449 (2000–2001). Blakemore notes that landlords may refuse to lease an apartment to a tenant if the tenant’s source of rent payment is a Section 8 housing voucher. The effect of such refusals often is to deny housing opportunities to disabled individuals, because many disabled tenants depend upon government subsidy programs to pay for housing and other living expenses. Blakemore proposes that the Fair Housing Act’s list of categories of tenants who are protected from discrimination should be expanded to include applicants who will pay their rent with housing vouchers from the government.

FHA implications of gated communities. In Comment, The Wall Is Down, Now We Build More: The Exclusionary Effects of Gated Communities Demand Stricter Burdens Under the FHA, 34 J. Marshall L. Rev. 379 (2000), Angel M. Traub asserts that gated communities may raise a number of thorny legal issues, some implicating the Fair Housing Act. Such issues may include possible Fourth Amendment search and seizure issues at guardhouses, Fourteenth Amendment equal protection issues with exclusionary policies, and public trust doctrine issues when control of once-public streets is turned over to a private developer or homeowners’ association. When an excluded person argues that he or she has been the victim of discrimination in violation of the FHA, the developer or community association often responds with a business reason that justifies the exclusion on the basis of protecting property values. Traub insists courts must require more than just evidence of the truism that exclusion protects property values to justify barring citizens from neighborhoods in their communities.

LEGISLATION

Maryland restates and revises its zoning and planning/ land-use codes. 2000 Md. Laws ch. 426, Md. Ann. Code 1957, art. 66B, § 1.01 et seq.

• Maryland adopts a statewide building rehabilitation code. The law is intended to encourage rehabs and infill redevelopment in urban areas. Localities may adopt local amendments—but there will be incentives to discourage them from doing so. Md. Ann. Code 1957, art. 83B, § 6-503 et al.

Massachusetts permits landowner to withdraw property from title registration system. All of the fee owners of a parcel may initiate a proceeding in the land court by filing a notice of voluntary withdrawal, showing good cause, and recording the resulting decree. The land will then become “unregistered” and the owners will have title at that moment free and clear of various potential encumbrances (such as adverse prescription)—in the manner of a quiet-title judgment. Mass. Gen. Laws ch. 185, § 52.

The Maryland Office of Planning will develop model land-use codes and guidelines relating to infill development, and “smart neighborhood development” (“compact development that integrates residential, commercial, open space, and public uses”). Incentives will be applied to encourage adoption by localities. Md. Code Ann., State Fin. & Proc. § 5-7B-09.

Minnesota adopts the Uniform Electronic Transactions Act. Electronic documentation and digital signatures are deemed valid. A non-uniform provision excludes coverage of certain transactions by deferring to an existing statute “relating to requirements for recording any conveyance, power of attorney, or other instrument affecting real estate [and] requirements for creation of a statutory short form power of attorney.” Minn. Stat. § 325L.03 et seq.

Minnesota revises mechanics lien law. A contractor who has received payment from the project owner and not yet passed payments along to subcontractors and laborers is declared to hold the money received “in trust for the benefit of those persons who furnished the labor, skill, material, or machinery.” Funds are “not subject to garnishment, execution, levy, or attachment.” The holder, however, is not required to place the money in any special separate account. It can be commingled with other money, and this section of the act does not “create a fiduciary liability or tort liability” of the holder.” Minn. Stat. § 514.02 et al.

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.

 

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