Department

Keeping Current Property

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

CASES

ABANDONMENT: Statutory forfeiture does not apply to extinguish rights in ditch used to transport water. Mortensen owned land that received water through a ditch that crossed Berian’s land. The ditch was in existence and conveyed water for many decades even though sometimes poorly maintained. After Berian filled the ditch, Mortensen sued Berian. The court ordered the ditch reopened and awarded damages for the cost of repairing it. It rejected Berian’s defenses of statutory forfeiture and common-law abandonment. Statutory forfeiture under Idaho Code § 42-222(2) was not available because that theory applies only to water rights, not ditch rights. A ditch right for the conveyance of water is recognized as a property right apart from and independent of the right to the use of the water conveyed by the ditch. Berian did not prove abandonment of the ditch “by a clear, unequivocal and decisive act” because substantial and competent evidence showed use and maintenance of the ditch by Mortensen and predecessors. Aerial photographs consistently showed the ditch in the same location for multiple decades. Mortensen v. Berian, 408 P.3d 45 (Idaho 2017).

ADVERSE POSSESSION: Possessor’s quitclaim deed covering disputed area does not negate good faith requirement absent actual knowledge of precise boundary. In 1974, settlement of an estate included the execution of two quitclaim deeds by the owners of two neighboring lots. Each grantor quitclaimed any interest he had in the neighboring lot to the neighboring owner. The quitclaim deeds stated the purpose was “to establish proper boundary lines between the properties . . . and to correct descriptions [in earlier warranty] deeds.” Since 1977, Thomas, the owner of one of the lots, maintained an adjacent strip of land measuring 24 feet by 58 feet, using it for parking and storing a large trailer, machinery, and lumber. In 2015, after an apartment developer acquired the neighboring lot, Thomas claimed title to the disputed area based on adverse possession. Georgia law requires that an adverse possessor have a good faith subjective belief that he owned the disputed property. The trial court granted summary judgment for the neighbor, ruling that the deed signed by Thomas in 1974 showed conclusively that he lacked a good faith claim of right to the disputed area. The supreme court reversed, applying a presumption of good faith that arises from adverse possession. The quitclaim deed may be evidence of lack of good faith, but it was not dispositive to rebut the presumption. Knowing what a deed says about boundaries does not automatically demonstrate knowledge of where those boundaries lie. Constructive notice by itself does not prevent title by adverse possession. Conflicting assertions about what Thomas knew made summary judgment improper. McBee v. Aspire at Midtown Apts., L.P., 807 S.E.2d 455 (Ga. 2017).

EMINENT DOMAIN: Statute awarding title to abandoned property to city is not unconstitutional taking. The city sent a Notice to Abate Nuisance on two properties owned by Cahalan, noting collapsing roofs, the lack of functioning plumbing, and infestation by raccoons and other rodents. Later, the city made an offer of $2,000 for each property for the purpose of demolishing them and avoiding litigation, but Cahalan counteroffered to sell for $15,000 and $23,000, respectively. At a hearing, the city then determined that the properties were nuisances and refused Cahalan’s request for more time to address the issues, because he had offered no plans for doing so. The city then filed petitions under a statute adopted in 2015, which states that “a city in which an abandoned building is located may petition the court to enter judgment awarding title to the abandoned property to the city.” Iowa Code § 657A.10A. The trial court dismissed the petitions because such a transfer without just compensation would constitute an unconstitutional taking. The supreme court reversed, pointing out that the statute was enacted to give cities an alternative means of abating a public nuisance caused by abandoned buildings. Cahalan did not hold a constitutionally protected interest in the properties when they were deemed abandoned. By allowing the properties to persist in an uninhabitable condition with no efforts to remedy problems before or after notification, Cahalan failed to indicate a present intent to retain ownership. The court agreed with Cahalan that the transfer of title to the city denied him all economically beneficial use of the properties, which would normally be a per se regulatory taking. The court ruled, however, that there was no regulatory taking because the city could have taken title under existing state-law principles of public nuisance and property forfeiture. The statute does nothing more than provide an alternative path to those already existing for the city. City of Eagle Grove v. Cahalan Investments, LLC, 904 N.W.2d 552 (Iowa 2017).

CONSTRUCTION CONTRACTS: Statutory action for construction defects in new houses replaces all common law claims. Beginning in 2003, homeowners purchased 37 new single-family homes from a developer. In 2013, the homeowners sued the developer, alleging the homes had construction defects and seeking recovery for property damage and economic loss based on common law claims of negligence, strict product liability, breach of contract, and breach of warranty, and a statutory claim for violation of the construction standards set forth in the state Right to Repair Act. Cal. Civ. Code § 896. After the developer requested that the homeowners engage in informal prelitigation processes contemplated by the act, the homeowners dismissed their statutory claim, leaving only their common law claims remaining. The developer then moved for a court-ordered stay, which the trial court denied. The supreme court held that the homeowners must comply with the prelitigation resolution requirements. The legislature broadly reformed the rules governing construction defect actions. Previously, common law principles had foreclosed recovery for defects in the absence of property damage or personal injury, but the act supplied a new statutory cause of action for purely economic loss. At the same time, the statute reflects a clear and unequivocal intent to supplant common-law negligence and strict product liability actions with the statutory claim. This means that “claims seeking recovery for construction defect damages are subject to the Act’s prelitigation procedures regardless of how they are pleaded.” McMillin Albany LLC v. Superior Court, 408 P.3d 797 (Cal. 2018).

DEEDS: Tax deed is set aside when purchaser of tax lien fails to give notice to redeem to record owner. After property taxes on a parcel owned by Harker became delinquent, the county sold the tax lien to the parcel to Mike Ross, Inc. for almost $25,000. In 2011, after the sale, but before a deed was issued, Harker conveyed the land to herself and her son, Bergdorf, as joint tenants with right of survivorship. The deed was recorded and reflected Bergdorf’s current address. An attorney hired by Mike Ross to do a title search overlooked the 2011 Harker-Bergdorf deed. A Notice to Redeem named only Harker, did not list Bergdorf separately as a person to be notified, and was sent to Harker’s old address, not her current address shown by county records. The Notice to Redeem was returned as undeliverable, but nevertheless a tax deed was issued to Mike Ross and recorded in 2012. The court set aside the tax deed based on failure to provide the required statutory notice. W. Va. Code § 11A-3-19(a). It explained that the burden rests with the tax deed grantee to establish strict compliance with the statutory notice requirements. Here, the record owners (Harker and Bergdorf) were entitled to notice by personal service and because Bergdorf’s address appeared on the face of the Harker-Bergdorf deed recorded in 2011, his address was “reasonably ascertainable.” As a matter of law, Mike Ross failed to strictly adhere to the requirements of the statute and thus loses all benefits of the purchase. Mike Ross, Inc. v. Bergdorf, 2017 W. Va. 795 (W. Va. 2017).

FORECLOSURE: Fair Debt Collection Practices Act does not apply to nonjudicial foreclosure. In 2014, Wells Fargo, the loan servicer, hired a law firm to pursue a nonjudicial foreclosure on Obduskey’s home. The law firm sent Obduskey a letter stating that it was hired to commence foreclosure, referencing the amount owed, that the current creditor was Wells Fargo, and stating that the law firm “May be Considered a Debt Collector Attempting to Collect a Debt.” Although Obduskey apparently responded to the letter disputing the debt, the law firm did not reply and initiated foreclosure in 2015. Obduskey sued, raising numerous claims, including a violation of the federal Fair Debt Collection Practices Act (FDCPA). The federal district court granted the motion to dismiss by Wells Fargo and the law firm on all claims, and the court of appeals affirmed. Wells Fargo was not a “debt collector” because it began servicing the loan before default, falling within an express exclusion from the statutory definition. 15 U.S.C. § 1692a(6)(F). Whether the law firm was a “debt collector” turned on whether the foreclosure proceedings were the collection of a debt. Recognizing a circuit split on this issue, the court held that nonjudicial foreclosure is outside of the scope of the act. Although “judicial mortgage foreclosures may be covered under the FDCPA because of the underlying deficiency judgment, a nonjudicial foreclosure proceeding is not covered because it only allows ‘the trustee to obtain proceeds from the sale of the foreclosed property, and no more.’” Obduskey v. Wells Fargo, 879 F.3d 1216 (10th Cir. 2018).

LANDLORD-TENANT: Landlord is not required to allow tenant to keep aggressive dog as reasonable accommodation. The lease prohibited residents from keeping pets unless the landlord consented or the tenant qualified for a reasonable accommodation as a person with a disability. The tenant’s dog, Dutchess, was trained as a guard dog, and although she never attacked another person or pet, she did display aggressive behavior toward other dogs and people—lunging forward, flaring up, rearing on her hind feet, and baring teeth. Other residents were afraid of Dutchess, staying indoors when Dutchess was outside. The landlord sought to terminate the lease based on two violations—smoking in the premises and keeping a pet. The tenant then formally applied to keep Dutchess as an emotional support animal, and the landlord agreed to allow her to have a pet, but not Dutchess on account of her aggressive tendencies. At the eviction trial, the court agreed with the landlord and the supreme court affirmed. Under HUD regulations, a tenant with a disability or a disability-related need for an assistance animal is entitled to a reasonable accommodation, “unless doing so would impose an undue financial and administrative burden or would fundamentally alter the nature of the housing provider’s services.” In the case of a specific service animal, a reasonable accommodation may be denied if the specific animal poses a direct threat to the health or safety of others or would cause substantial physical damage to the property of others, neither of which threat could be reduced or eliminated by another reasonable accommodation. The abundant evidence (including the tenant’s warnings to others about the dog) established that Dutchess posed a threat that could not have been reduced or eliminated by another accommodation. Gill Terrace Retirement Apts., Inc. v. Johnson, 177 A.3d 1087 (Vt. 2017).

RESTRICTIVE COVENANTS: Prohibition on “commercial use” does not preclude short-term rentals. Covenants in a bill of assurance for a residential subdivision platted in 1953 state: “None of the lots shall be improved, used or occupied for other than residence purposes and specifically none of the lots shall be used for any commercial purpose, including motels, tourist courts, motor hotels, hotels, garage apartments, apartments, etc.” In 2015 a homeowner listed his home on the vacation home rental service, VRBO, for $329 per night, with a two-night-minimum stay required. Neighbors in the subdivision sought to enjoin him from “offering the premises to those who do not reside there, from carrying on a commercial business, from engaging in short-term rentals, and from similar activities that constitute a nuisance to the Plaintiffs.” After a hearing, the trial court granted an injunction finding that short-term rentals violated the covenants because the property was being used for “other than residential purposes” and for a “commercial purpose.” The supreme court reversed. Given the presumption against restrictions on land, the language of the covenants did not make a restriction on short-term rentals “clearly apparent.” Whether owner-occupied or rented for the weekend, the house remained a residence. Although the covenants prohibit using the property for any “commercial purpose,” providing specific examples of what was meant, it was silent on rentals. “Certainly, if the drafters of the bill of assurance intended to prohibit renting of property in the subdivision, they could have done so with an express provision.” Vera Lee Angel Revocable Trust v. O’Bryant, 537 S.W.3d 254 (Ark. 2018).

WATER LAW: Statute defining state ownership of land inundated by a dam applies retroactively. In 1958 a deed conveyed property to the United States for construction and operation of a dam and reservoir, reserving the oil and gas rights under the property. In 2012 the grantor’s successors sued the state, alleging their ownership of the mineral interests. The trial court granted summary judgment for the state. The court ruled that the state holds title to the beds of navigable waters up to the current ordinary high-water mark; that the disputed property is below the ordinary high-water mark; and that the state’s title to oil and gas below shifts with changing conditions whether natural or artificially occurring. Thus, both the surface and minerals of the property are sovereign land belonging to the state. On appeal, the supreme court recognized legislation passed in 2017, during the pendency of the case, that provided that the state held no claim to minerals above the “ordinary high water mark” of the historical Missouri riverbed channel inundated by the construction of a dam. N.D. Cent. Code § 61-33.1-02. The statute provided procedures for determining that “ordinary high water mark.” Id. § 61-33.1-03. The court found that the act specifically indicated it was retroactive to the date of closure of the dam project and applied to all oil and gas, mineral, and royalty ownership. The court reversed and remanded for the district court to apply the new statute and to consider whether a taking had occurred. Wilkinson v. Bd. of Univ. and School Lands, 903 N.W.2d 51 (N.D. 2017).

ZONING: Height limitation in historic district applies to newly constructed house. The Sapienzas purchased a house in McKennan Park, an historic district listed on the National Register of Historic Places. They decided to raze the house, not itself a historic structure, and build a new larger home. Their neighbors, the McDowells, became concerned about the proximity and size of the Sapienzas’ new home; it was only five feet from the property line, although in compliance with the city setback requirement. The McDowells’ home is located only two feet from the same property line, the minimum required at the time the home was built in 1924, leaving the two homes only seven feet apart. A city inspector informed the McDowells that they could no longer use their wood-burning fireplace because the chimney came too close to the Sapienza home. The McDowells sued for an injunction, asserting that the Sapienzas’ home violated height and setback regulations. After the Sapienzas completed their home, the trial court found that the Sapienzas’ home violated the chimney regulation and the historic district regulation. It directed the Sapienzas to modify the house so that the McDowells could use their fireplace. A unanimous supreme court affirmed in part and reversed in part. First, reversing the trial court, the court ruled that the chimney regulation was not a setback regulation. Instead, it regulates the height of chimneys on a structure, not the siting of structures on other properties. Although the Sapienzas’ new home may have caused the McDowells’ home to fall out of compliance with the chimney regulation, the Sapienzas’ home was not sited in violation of that regulation. The Sapienzas’ house, however, did violate the historic district regulations by exceeding the 36.08 feet height limit imposed on new construction and alterations within the district. The highest point of the Sapienzas’ home was 44.5 feet. This regulation applied to the Sapienzas’ home because it was situated within the historic district. Because the oversized house impaired the historic integrity of the district, an injunction to remove it was the appropriate remedy. McDowell v. Sapienza, 906 N.W.2d 399 (S.D. 2018).

LITERATURE

Adverse Possession. The law of adverse possession has always struggled to handle the great tension among a multitude of competing values. It is heavily influenced by the property theory and scholarly view one adopts when applying the law and identifying its parameters in particular cases. Thus, not just academics, but practitioners and judges too should understand the depth and diversity of the scholarship on adverse possession when crafting arguments or deciding cases. Thankfully, Prof. John Lovett has given us a one-stop shop where we can learn about the range of scholarship on American adverse possession across a critical century by the leading legal thinkers in property law, beginning with Oliver Wendell Holmes’s discussions in The Common Law and ending with debates in the 1980s that featured works by R.H. Helmholz and Roger Cunningham. Prof. Lovett’s article, Disseisin, Doubt, and Debate: Adverse Possession Scholarship in the United States (1881-1986), 5 Tex. A&M L. Rev. 1 (2017), concludes by synthesizing the themes that have surfaced across the evolution of the adverse possession discourse in the legal academy. These include: a constant debate about what the doctrine should be, with particular focus on the role of a possessor’s subjective intent; regular attempts to identify the social, economic, and other policy purposes served; a preoccupation with creating an Americanized version of English common law, including a push for nationalization of the doctrine; and an attentive focus in the scholarship to understand and influence incremental developments in case law, while at times proposing radical changes. Prof. Lovett’s article is also a reminder that value choices affect doctrinal development and that correlatively doctrinal choices advance preferred values.

Housing. The Fair Housing Act of 1968 was enacted 50 years ago, yet the dream of decent, safe, and sanitary housing remains elusive for many. Residential housing remains highly segregated by race and income. In Side by Side: Revitalizing Urban Cores and Ensuring Residential Diversity, 92 Chi.-Kent L. Rev. 435 (2017), Prof. Andrea J. Boyack explores why and offers solutions for overcoming barriers to creating communities that are inclusive and that also thrive. She shows that in addition to private discrimination, zoning laws and housing finance structures continue to work to impede housing integration. Although urban revitalization programs have operated to improve the quality of life for many, at the same time gentrification often works to force out minority residents. Urban neighborhoods that do not get the benefit of revitalization efforts continue to decay. In her analysis, these effects are avoidable if federal financing agencies and local zoning laws take a market-oriented approach that capitalizes on the rising demand for quality urban housing. Government sponsored entities (Fannie Mae and Freddie Mac) should move beyond poverty-level funding to take on mezzanine entity-level funding, and cities should earnestly embrace HUD’s affirmatively furthering housing directives by zoning for inclusive communities. Prof. Boyack calls for making the urban core desirable places for persons from all walks of life by installing adequate infrastructure for alternative transportation modes, providing walkable neighborhoods, moving away from use-based zoning toward one that allows combined uses, and supporting rehabilitation of existing improvements. As she states, there is no economic or social justification for concentrating poverty in one area.

Land Use. Complicated questions emerge when a government places conditions on granting a permit to use property instead of simply granting or denying a permit request outright. The Supreme Court has explained that these “exactions”—so named because they are exacting a promise in return for granting permission—are ripe for abuse. An exaction is upheld as a legitimate governmental action not requiring compensation only if there is a nexus between the problem the proposed use will cause and the requested action and if the government demand is roughly proportional to the expected effect. Although these basics of exaction law are well known, in his recent article, Reverse Exactions, 26 Wm. & Mary Bill Rts. J. 1 (2017), Prof. Gregory M. Stein criticizes the takings remedies generated under exactions doctrine as imbalanced. The remedies create unwelcome incentives and fail to take into account overall adverse community effects. He believes that the asserted purpose of the compensation requirement—to make the government pay for benefits it receives from the exaction—is inaccurate. Instead, he claims, exactions are designed to offset negative externalities from allowing the use of the property as proposed. The property values of neighbors are diminished by the approval of the applicant’s use. Thus, exactions law should be designed to benefit the neighbors who bear the costs resulting from the approved permit. Yet, under current exactions doctrine, these neighbors have little recourse if the government sets the exaction too low to cover the imposed harms from the new activity. This occurs when the government must fear the risk that a landowner will win a claim that an exaction is set too high, requiring compensation. As a way to alter those incentives, Prof. Stein proposes that “members of the broader community should be allowed to bring reverse exaction claims, challenging particular government impositions as insufficient to offset the negative effects of an applicant’s proposed development.”

Property Theory. In the beginning property course every law student learns about the dominance of the “fee simple absolute” as the presumptively ideal estate in our modern American property system. Yet, a scholarly and practical debate has emerged in recent years on whether the fee simple is worthy of its high praise. Critics of the fee simple have challenged its ability to structure competing interests and values efficiently, especially because fee simple owners can arguably use their perpetual monopoly to refuse or inhibit transfers to potentially valuable alternative uses. Prof. Katrina M. Wyman engages with these challengers in her recent article, In Defense of the Fee Simple, 93 Notre Dame L. Rev. 1 (2017). Her article provides a valuable summary of the law surrounding the creation, purpose, and meaning of the fee simple estate. It then surveys the literature on what she labels the “Chicago critique” of the fee simple—a body of work questioning the fee simple’s efficiency and utility on economic grounds. Exemplified by the work of University of Chicago Law Profs. Lee Fennell, Eric Posner, and E. Glen Weyl, this Chicago critique, Prof. Wyman explains, “recommend[s] redesigning property rights to enable private buyers to acquire property from existing owners without obtaining the owners’ consent or their agreement on price” to reduce the transaction costs associated with acquiring property and moving it to more socially beneficial uses. Prof. Wyman then defends the fee simple from this attack by noting a lack of empirical support for the claim that the fee simple misallocates. She points to the countervailing economic benefits of the fee simple, including incentives to invest in and improve property, which may not exist if rights were less protected against forced transfers; increased marketability from perpetual duration; and availability of credit based on rights that are certain to last. In the end, she defends the fee simple as an instrument that promotes landowner independence and autonomy, stressing that “[l]andownership is not only about efficiency, but also about individual freedom.”

Rights of First Refusal. The market often generates mechanisms to grant future privileges to buy property, such as options to purchase, rights of first refusal, and other preferential rights. But in Interpreting Stale Preferential Rights to Acquire Real Estate: Beyond the Restatement of Property, 62 Vill. L. Rev. 603 (2017), Prof. Carl J. Circo claims these market products often linger and function to bind property in chains, making efficient sales and movements to higher uses difficult if not impossible. He provides numerous examples of seemingly undesirable results (many of them arising by their terms) from strong enforcement of holders’ preferential rights that “often survive beyond the imaginations of the parties who establish them,” because “disputes may emerge decades or generations” after their creation. Changed circumstances sometimes should justify deviation from the contractually generated allocation of rights. He argues that the reliance in Restatement (Third) of Property (Servitudes) and “ancient” common law rules policing alienability, like the rule against perpetuities, are misplaced and inadequate for freeing property from unreasonable preferential rights restraints. These doctrines do not sufficiently empower courts to address what Prof. Circo calls “incomplete contracts” in which the original parties fail to take account of future unforeseen developments. Thus, he proposes an alternative framework with a “contextual” and “flexible” approach, which empowers courts “to fill in contractual gaps in preferential rights agreements with terms that are reasonable under the circumstances” with an accordance of “appropriate weight to the passage of time.” The article explains how a number of cases with unfortunate outcomes could have generated more reasonable results if the courts were so empowered.

LEGISLATION

NEW JERSEY regulates deed procurement services. The law makes it unlawful to solicit clients for deed procurement services unless the writing displays in a conspicuous manner the address and telephone number of the county clerk’s office through which the prospective client may obtain a copy of the deed directly and the fee assessed by the clerk’s office. 2017 N.J. Laws 251.

NEW YORK establishes home savings program for first-time home buyers. The legislation authorizes the creation of savings accounts of up to $100,000 for the purpose of purchasing a home. Withdrawals for the purchase and interest earned on the account are excluded from state income tax. 2017 N.Y. Laws 472.

NEW YORK establishes an affordable green building program. The program provides for incentives to owners for the construction of affordable housing in accordance with specific income limits. The incentives are based on the use of design and building techniques that promote smart growth and smart planning and provide other positive environmental benefits, including reducing greenhouse gas emissions or furthering energy efficiency. 2017 N.Y. Laws 486.

NEW YORK amends public housing law to give disabled persons preferences for certain dwelling units. The preference is for a lower-level unit of the same size or smaller. 2017 N.Y. Laws 484.