Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
ADVERSE POSSESSION: Grazing and trailing cattle on isolated parcels within perimeter fence does not establish hostile possession. A perimeter fence built last century enclosed the Burnett Ranch plus three isolated parcels of the neighboring Warbonnet Ranch, which were not contiguous to the main body of the latter ranch. The neighboring ranch owners trailed cattle across each other’s property, and the Burnetts occasionally grazed their cattle on the disputed parcels. In 2016, after the sale of both ranches, the owner of the Burnett Ranch denied the owner of the Warbonnet Ranch access to the disputed parcels. The Warbonnet Ranch owner sued for declaratory judgment and to quiet title, and the Burnett Ranch owner counterclaimed for adverse possession of the three disputed parcels. After a five-day bench trial, the trial court held for the Warbonnet Ranch owner, essentially on the ground that the Burnetts had failed to establish hostile possession of the parcels. The supreme court affirmed, explaining that the possession required for adverse possession must be calculated to put the record owner on notice of the adverse claim; it must be so incompatible with or so in defiance of the rights of the true owner as to clearly signal an intent to claim the property, such that the owner should take action to protect his title. Significantly here, the parcels were not separately fenced within the Burnett Ranch, testimony showed that the perimeter fence was not on the true boundary line because of the terrain, and the neighbors traded land use to facilitate and maximize the use of forage. The fence was maintained to keep the neighbors’ respective cattle in certain areas on the particular ranches, not as a claim of ownership. The failure of the claimants to make a prima facie case meant that the record owner was not required to explain or rebut the claim through a showing of permission. Little Medicine Creek Ranch v. D’Elia, 527 P.3d 856 (Wyo. 2023).
EQUITABLE SUBROGATION: Replacement mortgage doctrine does not protect first mortgagee who refinances its own mortgage loan. The Baileys mortgaged their residence to Quicken Loans for $256,500, with the mortgage recorded on October 20, 2009. One week later the Baileys entered into an equity line of credit (LOC) with ArrowPointe for $99,000, secured by a mortgage recorded on November 4, 2009. On November 23, 2009, the Baileys refinanced the Quicken loan, granting a new mortgage to Quicken of $296,000. At closing on the refinanced loan, the Baileys executed an acknowledgment indicating the only outstanding lien on the property was the first Quicken loan, which was not correct. ArrowPointe was unaware of the transaction as Quicken did not inform it of the refinance or request it to execute a subordination agreement. The first Quicken mortgage was released, and the refinanced mortgage was recorded on December 15, 2009. When the Baileys defaulted on the LOC, ArrowPointe filed suit, seeking foreclosure and a declaration that its loan had priority over the Quicken loan now held by Quicken’s assignee, US Bank. US Bank asserted priority based on the “replacement mortgage doctrine.” ArrowPointe based its claim on the recording act. The trial court held that South Carolina does not recognize the replacement mortgage doctrine and granted summary judgment to ArrowPointe. US Bank appealed, the court of appeals affirmed, and the supreme court also affirmed. The court noted that South Carolina has a race-notice statute, which gives priority based on prior recording without notice, with only the exception being equitable subrogation. This state never expressly applied the replacement mortgage doctrine, even though recognized by the Restatement (Third) of Property: Mortgages § 7.3 (1997), and the court was reluctant to adopt it now on account of the difference in consequence to junior mortgagees. Although there is an intervening mortgage, such as ArrowPointe, in both scenarios, under the equitable subrogation doctrine, a substitute mortgagee steps into the shoes of the original mortgagee, and the original mortgage remains intact in all respects relative to the race-notice statute; the mortgage remains unsatisfied, and a new mortgage is not recorded. The position of the junior mortgagee is not affected. Under the replacement mortgage doctrine, however, the original first mortgage is satisfied of record and replaced with a new mortgage that is recorded after the intervening mortgage. Although the new mortgage may have similar terms as the original first mortgage, that is not always so and the junior mortgagee may be adversely affected. The court believed that the replacement mortgage doctrine needlessly invites litigation that could be easily avoided by a thorough examination of the record or execution of a subordination agreement. Any adoption was best for the legislature. ArrowPointe Fed. Credit Union v. Bailey, 884 S.E.2d 506 (S.C. 2023).
HOMESTEADS: Rented-out portion of residential property is not eligible for homestead tax exemption. Rebholz owned a two-story residence, which county tax officials originally characterized as a single-family home. Rebholz lived on the bottom floor. The upper floor had a common area, four individual rooms with living areas and bathrooms, and kitchenettes. Each room was lockable from the outside, and the top floor had an independent doorbell. Rebholz periodically rented upper-floor units to at least one tenant. Learning of this arrangement, the county property appraiser revoked a portion of Rebholz’s tax exemption, recalculated his taxes for several years, and notified him of a tax lien on the property of approximately $7,000. Rebholz filed suit, seeking reinstatement of the homestead exemption to the full property as opposed to the 85 percent the appraiser deemed applicable. The circuit court entered judgment for Rebholz, stating that merely sharing a residence with a tenant does not create a class of property that is not exempt. A divided appellate court affirmed, despite the dissent’s noting that one could not simultaneously live in a residence and rent out that residence for another’s exclusive use as a residence. The supreme court quashed the appellate decision and remanded. The court found that the Florida tax-exemption statute requires residency, Fla. Stat. § 196.011, and Rebholz surely did not use a portion of his property as his residence. Further, the statute, which implements the constitutional homestead tax exemption, states that the exemption applies to the portion of the property that is classified and assessed as owner-occupied residential property. Id. § 196.031. The property’s physical structure or labels are not determinative. Despite the single-family label, Rebholz effectively ran a boarding house; it was not just a sharing arrangement. Furst v. Rebholz, 361 So. 3d 293 (Fla. 2023).
LANDLORD-TENANT: Statutory presumption of one-year tenancy for agricultural leases is rebutted by actual intention of parties for month-to-month tenancy. The parties entered into an oral lease of a building for the indoor cultivation of cannabis. The property was a large industrial building with wooden floors surrounded by an asphalt parking lot, and the tenant grew cannabis inside potting cubes that could be moved around the building and not in the ground. When, after two years of negotiations, the parties were unable to agree to a written lease and a master service agreement, the landlord served the tenant with a 30-day notice to quit. After the tenant refused to vacate the property, the landlord instituted an unlawful detainer action. In its answer, the tenant alleged it could not be evicted because it was in lawful possession of the property under the statutory presumption of a one-year tenancy for “agricultural … purposes,” Cal. Civil Code § 1943, and under a presumption of a one-year holdover tenancy for use of “agricultural lands.” Cal. Code Civil Proc. §1161(2). The trial court denied the tenant’s motion for judgment, finding that the tenant failed to rebut the general presumption that an oral lease is month-to-month. The agricultural lease presumption did not apply because the tenant’s cannabis operation was not an “agricultural use of land” because it did not grow the cannabis in the ground. The appellate court affirmed, noting that, under Cal. Civil Code § 1943, a lease, other than for lodgings and dwelling-houses, is presumed to be a month-to-month tenancy, but, in the case of real property used for agricultural or grazing purposes, a lease is presumed to be for one year. The court explained, however, that it need not decide whether Coastal Harvest was engaged in the business of agriculture. For purposes of § 1943, “the intention of the parties is the controlling factor,” and evidence that the parties agreed to a longer term will rebut the general presumption of a month-to-month term for an oral lease. Likewise, evidence that the parties agreed orally to a term of less than one year may rebut the presumption of a one-year lease for agricultural land. Although disputed by the tenant, substantial evidence showed that, although the negotiations for a written lease were ongoing, the parties mutually understood that the oral lease was for a month-to-month term and would be terminated unless a written lease was eventually signed. And, assuming, without deciding, that the cannabis operation was an “agricultural” use of the property, the same evidence also rebuts that presumption. 65283 Two Bunch Palms Building LLC v. Coastal Harvest II, LLC, 308 Cal.Rptr.3d 242 (Ct. App. 2023).
MARKETABLE TITLE ACT: Act does not extinguish unused public road shown on plat. The Plat of Trout Lake Park, filed in 1912, was dedicated to the public use forever of public roads located on the plat. Some of the lots were ultimately used as a resort. In the 1980s the resort owners and the county agreed to vacate some of the lots and roads but not one across parcel 3 of the plat that provided access to Trout Lake. In 2013, the resort owner died, and the trustee winding up her estate contracted to sell the resort. No physical road was ever constructed on parcel 3, and the trustee maintained that the public way that had existed on parcel 3 was extinguished by the Marketable Title Act, Minn. Stat. § 541.023. The act forecloses the commencement of actions to enforce a right, claim, or interest in land founded upon any instrument, event, or transaction that took place more than 40 years before the commencement of the action unless that claim is preserved by the filing of a notice of claim. The county title examiner determined the trustee was in effect seeking a road vacation that required compliance with the road-vacation statute, Minn. Stat. § 505.14. The parties filed suit in opposition, and the trial court granted summary judgment for the trustee. The court of appeals affirmed, stating that the plain language of the act applies to dedications by recorded plat. The supreme court reversed and remanded. The act does not expressly reference plats as included or excepted from its coverage, but the court found it reasonable to conclude that the absence meant plats were not originally intended to be covered. When first enacted in 1943, the act aimed to simplify title searches by promoting efficiency and certainty. But interests recorded on plats do not increase the costs of title searches, and re-recording these interests would increase, instead of reduce, the burdens associated with title searches. The court also emphasized that the recording process for plats is substantially different from the recording process listed in the act, further indicating that the act does not cover plats. Additionally, the court noted, the public interest was particularly strong here—towns, cities, and counties have well-settled expectations regarding the public’s right to platted access as few, if any, were re-recorded as contemplated by the act. Applying the act would limit or remove public access to many public waters. For all these reasons, the act could not be read to extinguish public-interest property dedicated by plat. In re Moratzka, 988 N.W.2d 42 (Minn. 2023).
RECEIVERSHIP: Bondholders’ claims to proceeds from sale are prior to unsecured claims of residents of property. The Atrium arranged for bond financing for its construction of an assisted-living community. It mortgaged its real estate and granted a security interest in its personal property, revenue, and proceeds as collateral for the repayment of the bonds. Bank One purchased $8,050,000 in Atrium bonds and perfected its security interest in Atrium’s assets. Atrium required residents to pay from $40,000 to $238,000 as entrance fees and collected a total of $7.5 million in fees at the time of the suit. Atrium defaulted on its debt service payments and commenced a voluntary assignment in court for the benefit of creditors. The residents of Atrium filed claims for entrance fee refunds totaling more than $7 million. The bondholders filed their proof of claim totaling more than $6 million. The court appointed a receiver, who sold the Atrium assets and then moved for declaratory relief as to the order of priority for distributing the $5 million in net sales proceeds. The court ruled that the bondholders’ lien was superior to the residents’ entrance fee claims, and the residents were not entitled to a constructive trust over the sales proceeds. The residents appealed the court’s decision and the appellate court reversed, finding the residents’ claims superior to the bondholders. The supreme court reversed, stating the receivership statute determined the order of priority. Under Wis. Stat. §128.17, secured creditors, like the bondholders, have the first right to the collateral for the outstanding debt. Unsecured creditors, like the residents, are entitled to the distribution of proceeds only after priority claims are satisfied. The court also rejected the residents’ argument that the bondholders’ claims were subordinated based on language in several documents executed in connection with the development of the project and its financing, which only stated ways in which the liens might be subordinated but did not actually effectuate a subordination. The court concluded that nothing in law or equity authorized the court to disrupt the statutorily prescribed priority of secured lenders. In Re Atrium of Racine, Inc., 986 N.W.2d 780 (Wis. 2023).
REFORMATION: Scrivener’s error in legal description is mutual mistake subject to reformation. In 2005 at about the same time, Burt and Lacoste entered into agreements to purchase neighboring properties on Standring Street from Tondreau. In preparation for the two closings, Tondreau’s attorney prepared two warranty deeds that contained the proper legal descriptions of the respective properties—“lot 23 of the Plan of Bluestone” to Burt and “lots 21 and 22 of the Plan of Bluestone” to Lacoste. For reasons not clear, however, the closing agent from Nationwide Title & Escrow Company changed the legal descriptions of the properties being conveyed—the deed to Burt indicated that lot 21 (and not lot 23) was being conveyed, and the deed to Lacoste indicated that lots 22 and 23 (and not lots 21 and 22) were being conveyed. Burt’s mortgage and title policies repeated the incorrect property descriptions. Four years later, in the course of a foreclosure on Burt’s mortgage loan, the errors in the legal descriptions were discovered. Nationwide purported to fix the problem by substituting correct legal descriptions for the erroneous ones and, without informing Burt, Lacoste, or Tondreau, recorded the corrected deeds and mortgage. Burt and Lacoste commenced individual civil actions against Nationwide, the closing attorney, the original and present mortgagees, and the title insurer, alleging that the re-recorded deeds and mortgage were void because they were not “signed or acknowledged” by the makers, they were a fraud on the public, and the re-recorded mortgage and accompanying promissory note were a renunciation of the debt. Burt and Lacoste sought rescission based on misrepresentation. The mortgagee filed a counterclaim seeking reformation of the instruments based on mutual mistake and a declaration that the instruments, as reformed, confirmed and established interests in the intended lots. The trial court ordered reformation, finding no fraud or misrepresentation and denying rescission. Affirming, the supreme court explained that there is a presumption that “a written instrument as drawn and executed, especially a deed, correctly states the real intent of the parties” but that there are occasions, such as mutual mistake of the parties, when judicial reformation of such an instrument is appropriate. A mutual mistake is one common to both parties, who share a misconception respecting the same terms of their written agreement. It is irrelevant that the actual mistake was not made by the parties, but rather by a closing agent, who in effect served as a scrivener. The mistake here was “mutual” in the sense that all the parties shared the mistaken belief that the legal descriptions in the warranty deeds and mortgage were accurate. Reformation merely made the deeds and the mortgage convey the meaning intended by the parties. Burt v. Furtado, 292 A.3d 640 (R.I. 2023).
SALES CONTRACTS: Buyer has right to specific performance without proving that damages are inadequate remedy. The Robisons desired to sell their home if they could purchase a nearby vacant lot on Snowmobile Lane to build their “forever home.” A few days after they listed their property for sale, the Morningstars made an offer to purchase, to which the Robisons made a counteroffer that the Morningstars accepted. The contract had no provision making the sale contingent on the Robisons’ acquiring the Snowmobile Lane lot. Just before closing, the Robisons tried to cancel the contract because the Snowmobile Lane lot had been sold to someone else, but the Morningstars insisted on closing, even though the Robisons claimed that their realtor intentionally failed to insert a contingency clause into the contract. After the Robisons did not appear at the closing, the Morningstars filed suit, seeking a declaratory judgment that the Robisons breached a binding contract and asking for specific performance. In their answer, the Robisons asserted that the contract should not be enforced because of misrepresentations by their realtor and that ordering specific performance would be unconscionable because the Morningstars had other available remedies. The parties’ contract stated that in the event of default by the seller, “the Buyer shall have the right, at Buyer’s option, to either terminate this Contract and recover 100% of Buyer’s earnest money deposit held by Escrow Agent or to specifically enforce the terms and provisions of this Contract and proceed to Closing.” The trial court found a breach of contract but denied specific performance because the Morningstars had failed to show that an award of compensatory damages was an inadequate or impractical remedy or that there were special equities that demanded specific performance. The supreme court reversed. The court explained that the equitable remedy of specific performance aims to place the party without fault in as nearly the same position as the party would have been absent the other party’s default. In contracts for the sale of real property, courts generally presume that a remedy at law is inadequate; no specific allegation of the inadequacy of legal remedy is necessary. This is so because land is assumed to have a peculiar or unique value without reference to its actual quality or quantity. The trial court committed an error by placing the burden on the Morningstars to prove that damages were inadequate or impractical. That error led to the trial court’s denying specific performance and finding that the equities favored the Robsions. The trial court in effect rewrote the parties’ contract to include a contingency to allow the Robisons to cancel because their preferred replacement lot was unavailable. Courts are not at liberty to rescue parties from the consequences of a poorly made bargain or a poorly drafted agreement by rewriting a contract. Morningstar v. Robison, 527 P.3d 241 (Wyo. 2023).
TAKINGS: County’s appropriation of surplus over tax debt after foreclosure constitutes a taking. In 1999, Geraldine Tyler bought a one-bedroom condominium in Minneapolis, but ten years later, at the urging of her family, moved to a senior residential community. Her family failed to pay the property taxes on the condominium, and by 2015, there were about $2,300 in unpaid taxes plus $13,000 in interest and penalties. Acting under Minnesota’s forfeiture procedures, Hennepin County seized the condo and sold it for $40,000, extinguishing the $15,000 debt. The County kept the remaining $25,000 for its own use. Tyler sued Hennepin County and its officials, alleging an unconstitutional taking of the excess value of her home under the Fifth Amendment and a claim under the Excessive Fines Clause of the Eighth Amendment. The federal district court dismissed the suit for failure to state a claim. The Eighth Circuit affirmed, ruling: “Where state law recognizes no property interest in surplus proceeds from a tax-foreclosure sale conducted after adequate notice to the owner, there is no unconstitutional taking.” The court of appeals also rejected Tyler’s claim under the Excessive Fines Clause, adopting the district court’s reasoning that the forfeiture was not a fine because it was intended to remedy the state’s tax losses, not to punish delinquent property owners. The Supreme Court reversed. The Court acknowledged that states have long imposed taxes on property and that such taxes are not themselves a taking but are a mandated “contribution from individuals . . . for the support of the government . . . for which they receive compensation in the protection which government affords.” The concern here, though, involves the money remaining after the county’s sale of Tyler’s home to satisfy her past-due taxes and costs. That remaining value is property under the Takings Clause, protected from uncompensated appropriation by the state. The Court noted that the Takings Clause does not itself define property and while state law is one important source for this determination, it cannot be the only source. Otherwise, a state could “sidestep the Takings Clause by disavowing traditional property interests” in assets it wishes to appropriate. Even though the county had the power to sell Tyler’s home to recover the unpaid property taxes, it could not confiscate more property than was due. The Court found support for this limiting principle in ancient English history and the early laws and colonial constitutions of several states. The Court declared that a taxpayer who loses her $40,000 house to the state to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed. The taxpayer must “render unto Caesar what is Caesar’s, but no more.” This result obviated the need to rule on the Eighth Amendment claim. Tyler v. Hennepin County, Minnesota, 143 S. Ct. 1369 (2023). Two weeks after this decision, the Court vacated the judgments in two Nebraska cases on the same grounds, Nieveen v. Tax 106, 974 N.W. 2d 15 (Neb. 2022), vacated, 2023 U.S. LEXIS 2318 (U.S. June 5, 2023); Fair v. Continental Resources, 971 N.W.2d 313 (Neb. 2022), vacated 2023 U.S. LEXIS 2382 (U.S. June 5, 2023).
WASTE: Life tenant’s failure to pay property taxes is not waste that justifies forfeiture of life estate. Theodore Nelbach held the life estate and Willow Nelbach the remainder interest in property used as a rental unit. Theodore failed to pay taxes, resulting in an accumulated arrearage, with interest of $7,000. The city issued a notice of delinquency and warned that the failure to pay could result in the sale of the property. After unsuccessfully demanding that Theodore pay the taxes, Willow submitted a payment and thereafter filed a complaint against Theodore under a statute that authorizes the forfeiture of a life estate and treble damages when a life tenant commits waste. D.C. Code § 42-1601. The trial court granted summary judgment to Willow, and Theodore appealed. The court of appeals reversed. Acknowledging that statutes are to be construed according to their ordinary sense, the court questioned the application of that principle in this case because the waste statute dated back to the English Statute of Gloucester enacted in 1278, a time very different—when society was largely agrarian and governed by feudalism. In fact, property taxes did not exist then. The court then surveyed the meaning of waste around the country and found that, historically, waste involved acts that caused physical injury to the property. Even as that meaning has evolved, most states still require some harm to the property that is lasting enough to damage the future interest. Only two states have found forfeiture of the life estate in the circumstances in the case. Given the multi-layered system of protection for property owners in tax foreclosure in the jurisdiction, in particular, the opportunity to redeem the property, the court could not say that mere tax arrearage constituted actionable waste. Although the ancient text of the Statute of Gloucester has remained largely unchanged over time, it could not now be read to intend the drastic consequences of forfeiture “each and every time one cent is missing from a tax payment.” The court dismissed as speculative Willow’s concern about having to wait until the property was lost before seeking relief, Nelbach v. Nelbach, 291 A.3d 1129 (D.C. 2023).
BROWNFIELDS: Brownfield projects offer significant potential for sustainable property development. In Beyond Brownfields Redevelopment: A Policy Framework for Regional Land Recycling Planning, 5 J. Comp. Urb. L. & Pol’y 468 (2022), Joseph Schilling offers a strategy for the efficient repurposing of brownfields to productive use. He begins by outlining the three waves of the development of brownfield policies, showing how each was lacking in some respect, leading to rethinking in the next phase. The first wave, from 1995 to 2002, focused on pilot programs and grants for assessment and cleanup. The second wave aimed to institutionalize brownfield redevelopment with the Brownfields Act of 2002. The third wave, from 2006 to 2019, saw the integration of brownfields into broader land revitalization efforts. Schilling suggests the need for a cohesive policy and planning framework for recycling and repurposing vacant properties, abandoned buildings, and vacant land—expanding the brownfields policy beyond brownfields to link redevelopment and revitalization to other emerging urban planning and policy movements, such as sustainability, climate change, and equitable development. This would address land shortages for housing and economic inequalities in climate-vulnerable communities. Toward this end, Schilling describes a National Brownfields Regional Planning Act. This act would involve four interdependent components: crafting a national strategy for land recycling, developing regional land recycling plans, chartering regional land recycling consortiums, and investing in and elevating the roles of capacity-building intermediaries. These ideas are insightful and worthy of serious examination.
In Redeveloping Brownfields and Other Contaminated Sites for Renewable Energy Projects: Benefits and Liability Protection, 52 Tex. Envtl. L.J. 1 (2022), Katelyn Fulton discusses how using brownfields and other contaminated lands may factor into the growing demand for renewable energy sources, in particular for project siting. The author states that the use of contaminated sites (and there are more than 450,000 in the country) offers many advantages and cost savings—they often already have the infrastructure, such as substations, roads, and power lines in place, and land costs are cheaper due to the contaminated status. The Re-Powering initiative of the Environmental Protection Agency (EPA) is an important aid in this respect, as it identifies potentially contaminated sites with renewable energy generation potential. To be sure, there are obstacles to this use, most significantly the cleanup costs and burdens. The 2002 Brownfield Amendments created liability protections for “bona fide prospective purchasers,” but these may not apply to renewable energy developers seeking to develop brownfields with specific site conditions. Other liability-limiting mechanisms, however, including contractual indemnity provisions, comfort letters from EPA or governing state entities, ready-for-reuse determinations, negotiation of partial deletion from the Superfund National Priorities List, and administrative agreements between developers and regulators, may serve to fill the gap. And there are a host of programs and incentives (including taxes and grants) to turn otherwise unusable sites into energy-producing systems. The author suggests the need for more carve-outs and liability exceptions under the Comprehensive Environmental Response, Compensation, and Liability Act and other cleanup laws to encourage renewable energy developers seeking to build site renewable projects on brownfields and contaminated lands. In these ways, sustainable brownfield redevelopment becomes realistic.
INSURANCE: In Insuring Justice, 101 N.C.L. Rev. 729 (2023), Prof. Allyson E. Gold asserts that because many landlords do not carry liability insurance, their tenants have little chance of recovery after being harmed by dangerous housing conditions. She states that disabling injuries are more frequent in homes than in the workplace and motor vehicles combined. Even as a tenant might be able to hold a landlord liable for injuries suffered during the tenancy, collecting on the judgment is often an impossible hurdle. The risk of not being insured affects low-income, minority tenants disproportionately. This state of affairs is made possible in part by the absence of state laws requiring landlords to carry liability insurance, which leads to property owners reaping the financial benefits of the long-term rental housing market while passing the risk of injury and cost of harm to their tenants. There is a troubling incongruity in the treatment of short-term rentals, such as Airbnb, where a growing number of states are requiring liability insurance, compared to long-term rentals. Underlying all of this, Prof. Gold suspects a degree of racial bias in insurance regulations. She suggests that liability insurance coverage should be properly understood as an access-to-justice issue that negatively affects the health of minority long-term renters. The article gives a history of property insurance and reveals the pernicious practice of insurance redlining that impairs the availability of property insurance in minority neighborhoods. This history and the descriptions of frightening substandard housing conditions across the country make the case for mandated liability coverage to fill the gap created by market failure in the case of long-term rentals. She is not concerned that mandated insurance might increase rents, any more than the effect of the requirement that landlords keep premises habitable.
LAND USE: Balancing the interests in regulatory control and facilitating the development of affordable housing options have long been in tension. In Small Suburbs, Large Lots: How the Scale of Land-Use Regulation Affects Housing Affordability, Equity, and the Climate, 22 Utah L. Rev. 1 (2022), Eric Biber, Giulia Gualco-Nelson, Nicolas Marantz, and Moira O’Neill shed light on the unintended consequences of excessive land-use regulations on housing availability and affordability. The authors assert that overly burdensome local regulations produce a host of negative externalities, including hindering housing supply, leading to increased prices and exacerbating socioeconomic inequalities. Local governments do not have strong incentives to provide an optimal level of housing. The article offers a primer on the history and theory of land use and shows how various land use tools, in particular rigid zoning, have operated to produce the negative externalities, which we are now seeing as affecting not only the housing supply but also the climate crisis. The authors survey the literature on the economic analysis of land use regulations and suggest several strategies to mitigate their negative effects, starting with greater state or regional roles in land use regulation and reducing local control. They outline several measures that can serve to facilitate housing access and lower costs, as well as work to respond to climate change and societal inequalities —from energy efficiency in housing construction and transportation, land use standardization across projects and communities, and protections against displacement of vulnerable populations by new projects.
SALE-LEASEBACK: In Sale-Leaseback Transactions: Solutions to Liquidity And Returns?, 22 Appalachian J. L. 1 (2023), Judge John M. Tyson analyzes the merits and cautions of sale-leaseback transactions. A sale-leaseback means the sale of a real property asset and concurrent leasing back of the real property to the seller for a defined term of use. These devices allow businesses with substantial real property assets to enjoy the use of real property while avoiding the burdens and limitations of ownership. Among the benefits to the seller-lessee are the reduction of occupancy costs and the diversification of asset portfolios. These benefits may be secondary to the tax advantages—the lessee can deduct rental payments and occupancy expenses to reduce income at a faster rate than the reduction rate from deducting interest on debt service and longer-term depreciation and amortization from owning the real estate. Benefits to the purchaser-lessor include income streams from the lease, depreciation, potential tax credit and deferral incentives, and appreciation accruals to the residual value of the real estate. Sale-leaseback transactions are used for a wide array of properties, including office buildings, retail centers, and manufacturing facilities. The article offers advice on the provisions a knowledgeable buyer will insist on including in the deal, including who will pay for the day-to-day expenses of managing and operating the property and property taxes during the lease term. Among the precautions the seller-lessee should take is to record a memorandum of the lease and to include clauses dealing with subordination and rights in case of bankruptcy. Perhaps the most important advice given is that clear language should be used to ensure that the agreement is enforced as a sale-leaseback and not some other kind of financing.
ARKANSAS adopts the Uniform Relocation of Easements Act. A servient estate owner, at his expense, may relocate an easement under this chapter, if the relocation does not materially lessen the utility of the easement, burden the easement holder, or otherwise impair the value or use of the easement or the interests of security holders. A civil action is required. 2023 Ark. Acts 505.
MAINE makes creditors, assignees, and servicers liable for failure to timely make payments from an escrow account. The law requires these persons to rectify the results of any failure, including causing corrections to the consumer’s credit report and causing the discharge of any liens against the consumer’s real estate. The holder of escrow funds for the payment of insurance premiums must notify the insurer that provides the insurance coverage upon the sale or transfer of the mortgage loan by providing a copy of the document evidencing the sale or transfer. 2023 Me. Laws 69.
MONTANA amends real property law to define material facts for disclosure. A material fact is that which should be recognized by a broker or salesperson as being significant enough to affect a person’s decision to enter into a contract to buy or sell real property. It includes a fact that materially affects the value of the property, affects its structural integrity, or presents a documented health risk to occupants of the property. It also includes a fact that materially affects the buyer’s ability or intent to perform the buyer’s obligations under a proposed or existing contract. 2023 Mt. Laws 375.
NEW MEXICO adopts a scrivener’s error affidavit. The affidavit may be used to correct minor drafting or clerical errors or omissions in recorded instruments, including legal descriptions, misspellings of names, parties’ addresses, a party’s marital status, a missing exhibit or addendum, and the legal type or state of domicile of a corporation or other legal entity. The law states who may execute such an affidavit and prescribes a form of affidavit. 2023 N.M. Laws 153.
WASHINGTON amends property law to specify priority of loans under future advance clauses. The first-in-time, first-in-right rule of priority applies to all mortgages and deeds of trust and any future advances thereunder without regard to whether such future advances are optional or obligatory. The amendment does not repeal any other statute that expressly provides for special priority over mortgages and deeds of trust. 2023 Wash. Ch. 76.