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Probate & Property

May/June 2024

Keeping Current—Property

Shelby D Green and Darryl C Wilson

Summary

  • In cases, Homeowner’s view of lake is not protected by covenants.
  • In literature, Property and the Problem of Disuse, believes idle property is just that—idle—particularly when its use is sorely needed by non-owners and society.
  • In legislation, Pennsylvania enacts legislation making null and void racially restrictive covenants.
Keeping Current—Property
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Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

Cases

COMMON INTEREST COMMUNITIES: Homeowner’s view of lake is not protected by covenants. A homeowners’ association approved plans for the Hamptons to build an RV garage on their property notwithstanding the objection of their neighbor, Pietrowski, who claimed that the garage would block her view of Lake Mead. Pietrowski sued, alleging that the homeowners’ association breached various duties in failing to consider the effect of the garage on her view. The trial court granted summary judgment to the homeowners’ association, and the supreme court affirmed. Nothing in the Covenants, Conditions & Restrictions (CC&Rs) protected lot owners’ unobstructed views of the lake. And, although the CC&Rs did contain restrictions on the size and placement of buildings on lots, they did not prohibit blocking an owner’s view in whole or in part, but only required the homeowners’ association to consider the effect of the height of proposed improvements on the views of other lot owners in the approval process. Here, because the homeowners’ association measured the height of the proposed garage and considered its effect on Pietrowski’s view, the association had discretion to approve notwithstanding the impact. Pietrowski v. Hampton, 540 P.3d 1054 (Nev. 2023).

DEEDS: Statements made by grantor years after executing transfer-on-death deed are not grounds for revocation. Brandt and Sanders were in a romantic relationship, parted, and re-united a decade later. When in 2016 Brandt got sick, Sanders cared for him, prepared his meals, and took him to doctor’s appointments. During his treatment, different doctors gave conflicting diagnoses of his mental condition, some noting cognitive impairment, others finding his thinking appropriate. In 2017, Brandt executed a transfer-on-death deed, called a beneficiary deed in Arizona, naming Sanders as the beneficiary of his home and rental property. Brandt had earlier executed a beneficiary deed to these properties to his niece, Rosenberg. The deed to Sanders was promptly recorded, which Ariz. Rev. Stat. § 33-405(E) requires for a beneficiary deed to be valid. Nearly 14 months later, Brandt became very ill and was hospitalized. Rosenberg visited Brandt at the hospital, where he told her that he was afraid of Sanders and feared she was trying to kill him and steal his assets. Rosenberg claimed that Brandt asked her to cancel the credit card he gave Sanders and collect the contents of his safety deposit box to keep Sanders from getting them. At the same time, a hospital psychiatrist found Brandt “alert, oriented, and pleasant and cooperative,” but also noted in a report that Brandt said he no longer trusted Sanders. When Brandt was discharged from the hospital, he went back to live with Sanders and died several months later. Rosenberg brought an action to set aside the deed on the ground of undue influence. The trial court entered summary judgment for Sanders. The court of appeals reversed on account of the trial court not considering Brandt’s alleged statements while hospitalized. The supreme court in turn reversed. It explained that undue influence takes place when one person exerts power over the mind of another person, makes the latter’s desires conform to his own, thereby removing volition. Post-execution statements are relevant to an undue influence claim if they address the grantor’s state of mind or mental condition, or the circumstances present at the time of the execution of the document. Brandt’s alleged post-execution statements in the hospital were made 14 months after he executed the 2017 deed. Because the statements spoke only to Brandt’s state of mind and mental condition at the time of his hospitalization, and not the circumstances when he executed the deed, they were not relevant or admissible on the issue of undue influence. Rosenberg v. Sanders, 539 P.3d 120 (Ariz. 2023).

EASEMENTS: Tacking is allowed to satisfy period of use for prescriptive easement only when consecutive adverse users own interests in the benefitted land. In the 1990s, Edmondson began hunting on the property currently owned by Boles based on permission from the prior owner. To access the Boles property, Edmondson used a road across a neighboring 25-acre property owned by Riley. In 2016, Edmondson received a lease to use the Boles property and sent a letter to Riley seeking an agreement to allow Edmondson to use Riley’s road. Riley refused the request and threatened arrest if Edmondson continued to use the road. After Boles acquired title to the property in 2021, he filed a complaint seeking a declaratory judgment that he had a prescriptive easement across Riley’s road. The trial court agreed, and Riley appealed. The supreme court reversed for several reasons, concluding that Boles failed to establish adverse use for the statutory period of 20 years. First, Edmondson’s use of the road before his 2016 letter was presumed permissive because there was no evidence of adverse use. Second, there was no evidence that Riley knew or should have known of the use of his road. Third, even if Edmondson’s use was adverse, tacking of his period of use to Boles’ period was not permitted because he was not a predecessor in title, except for the period of his two-year lease from 2016 to 2018. At the other times, he was merely a licensee, whose period of use is not eligible for tacking. Riley v. Boles, 2024 Ala. LEXIS 51 (Ala. Jan. 12, 2024).

EASEMENTS: Expression of purpose in road easement does not limit its use. In 1998, the Thirty-One Bar Ranch Company granted “an easement for a private road” across an existing 2.47-mile portion of Brush Creek Road to the owner of the Richeau property. At the time, both properties were operated as a common agricultural operation, and the easement stated it was reciprocal. Later, the easement was used for access for the construction of a house on the Richeau property. In 2020, the then-owner of the Richeau property entered into an agreement allowing a hunting outfitter to hold guided trips on the Richeau property, using the easement road as access. Thirty-One Bar objected to this use, installed gates to prevent access, and brought an action seeking a declaratory judgment that the road easement was not valid and that the user exceeded its permissible scope. After a bench trial, the court ruled that use by the commercial outfitter exceeded the scope of the easement. The supreme court reversed. The court began with the well-settled proposition that, in interpreting easements, a court must rely on the plain language in the instrument creating it and context cannot be invoked to contradict the clear meaning. Because the easement’s only statement of purpose was “for a private road,” the trial court erred when it looked to the uses of the property at the time the easement was granted to limit it to agricultural uses. Moreover, the court explained, even when purposes are stated, in the absence of contrary intent, both the uses of the dominant and servient estates are subject to adjustment consistent with the normal development of their respective lands. For context to be relevant, it must serve as evidence of intent that the easement was not to be used for purposes other than those stated. Here, there was no evidence of intent to restrict other uses of the easement. Testolin v. Thirty-One Bar Ranch Co., 541 P.3d 455 (Wyo. 2024).

FORECLOSURE: Claim preclusion does not bar foreclosure action after earlier dismissal for lender’s failure to comply with statutory notice provisions. Finch defaulted on his mortgage loan, and the bank commenced an action to foreclose and to recover the unpaid debt. The bank failed to comply, however, with a statute that prohibited foreclosure of a residential mortgage unless the lender first gives the borrower a notice of default and acceleration in the form specified by a statute. 14 Me. Rev. Stat. § 6111. After the foreclosure action was dismissed, Finch sought a judgment declaring the note and mortgage unenforceable, relying on a 2017 ruling from the supreme judicial court, Pushard v. Bank of America, 175 A.3d 103 (Me. 2017), which established the right to discharge in the same circumstances. The court granted relief and ordered the mortgage discharged. The bank appealed. The supreme judicial court held for the bank and overruled Pushard. The court explained that Pushard relied upon doubtful legal premises and had proven to be quite draconian and unfair in its effect. In its reassessment of Pushard, the court noted that it rested largely on the principle of claim preclusion—that after dismissal of an action to foreclose, relitigation is not allowed. But the application of that rule was flawed, the court concluded, because when a complaint is dismissed for failure to comply with the statutory notice requirements, the lender had no right to enforce the mortgage in the first place. This means that the lender’s action was not and could not be litigated, such that a subsequent foreclosure action should not be barred. The court found no other jurisdiction followed Pushard and it was out of step with the Restatement (Second) of Judgments §20(2). Thus, when a lender fails to prove in a foreclosure action that it has issued a valid notice of acceleration or fails to prove that the borrower has breached the parties’ contract, the parties are returned to the positions they occupied before filing of the action (except as to any claim for an unaccelerated amount due that could have been litigated). Finch v. U.S. Bank, 307 A.3d 1049 (Me. 2024).

LANDLORD-TENANT: A landlord cannot prohibit a tenant’s guest from entry onto the property absent authority that is expressly part of the lease agreement. Greenbelt Place Apartments banned Antonio Randolph from the apartment complex. Later the property manager responded to a noise complaint at the unit rented by Randolph’s uncle and found Randolph inside the unit. Randolph was then arrested and charged with criminal trespass. At trial, Randolph testified that his uncle had invited him over. The City of Toledo provided no evidence that the uncle’s lease authorized the landlord to exclude anyone from the leased apartment. The trial court found Randolph guilty, however, concluding that he lacked a privilege to enter his uncle’s unit because he was banned from the complex. The court considered the ban justified by a landlord’s duty to ensure the quiet enjoyment of the property for all neighbors. The appellate court reversed, and the supreme court affirmed. The court noted the state criminal trespass statute provides that no “person, without privilege to do so” shall knowingly enter or remain on the land or premises of another and defines privilege to include “an immunity, license, or right . . . bestowed by express or implied grant.” Ohio Rev. Code. §§ 2911.219(A); 2901.01(A)(12). Randolph was privileged to enter because landlords cede possessory interests in leased properties to their tenants. This means that a tenant may invite any person onto the leased premises, including a person whom the landlord has sought to ban, unless the lease has a provision restricting the tenant’s authority to invite guests. A landlord can protect neighboring tenants’ rights to quiet enjoyment by evicting an offending tenant. State v. Randolph, 2023 Ohio LEXIS 2565, 2023 WL 9007535 (Ohio Dec. 29, 2023).

LANDLORD-TENANT: Agreement giving tenant option to purchase does not create contract for deed. The parties signed a “Rental/Option Agreement” under which the tenant rented a single-family home for five years. The agreement contained a provision labeled “Option,” which gave the tenant the option to purchase the property for $89,000 at the end of the rental term and required the tenant to pay $5,000 as “option earnest money” to be applied to the purchase price, which was non-refundable if tenant did not complete the purchase. Also, $84 of each rental payment was credited to the purchase price. The tenant made all payments, including the $5,000 option price, and several months before the term ended, notified the landlord that he would not purchase the property. Thereafter, the landlord gave the tenant a notice to quit. When the tenant did not vacate at the end of the term, the landlord sought eviction, but the tenant responded with a claim for a writ of possession. The trial court ruled that the agreement was unambiguously a lease with an option to purchase, not a contract for deed, and therefore the tenant had no equitable interest in the property. The supreme court affirmed. The court explained that when an agreement does not hold the purchaser liable for the full purchase price in the event of default, it is an option contract, not giving rise to an equitable interest. The parties’ agreement consistently used “option” language and did not obligate the tenant to purchase the property. Pratt v. Agel Corman Realty, Inc., 2023 N.H. LEXIS 224, 2023 WL 8622209 (N.H. Dec. 13, 2023).

NUISANCE: Statute of limitations for permanent nuisance starts when injury becomes observable. In 2000, Forsyth County and the Georgia Department of Transportation completed a roadway widening project near the property of Wise Business Forms. In 2016, Wise noticed a sinkhole in its parking lot, which he attributed to an increase of surface and stormwater flowing underneath its property because of the road expansion project. In 2020, Wise sued the county and the department, raising various claims, including inverse condemnation by permanent nuisance. The defendants successfully moved for dismissal of Wise’s claims as being barred by the four-year statute of limitations. Ga. Code § 9-3-30(a). The appellate court affirmed, finding the action time-barred on the ground that the cause of action accrued in 2000 when the project was completed. Wise appealed further, and the supreme court reversed. The court stated that permanent nuisance cases vary in relation to when the alleged harm to a plaintiff’s property becomes observable, thereby providing alternative options regarding how a plaintiff may proceed against a defendant and when the statute begins to run. When harm is not immediately observable when a defendant completes construction of improvements, the nuisance, by its nature, continues and will continue indefinitely. In such instances, pinpointing when the statute of limitations starts to run is challenging. A plaintiff may elect to sue upon occurrence of each harm, or to file a single suit for harms that occurred within the past four years, or to sue for all prospective harms that might occur in the future. Here, Wise’s complaint alleged a permanent nuisance, and Wise elected to pursue the single lawsuit option. Because the alleged harms to Wise’s property did not become observable until 2016, his suit filed in 2020 was not time-barred. Wise Business Forms, Inc. v. Forsyth Cnty., 893 S.E.2d 32 (Ga. 2023).

PREMISES LIABILITY: Ownership of dam depends on whether it is fixture or personal property, which is determined by parties’ intent. Under a stream bank stabilization project funded by the federal Flood Control Act of 1944, a federal agency designed, constructed, and installed a series of dams on Buffalo Creek. Pursuant to the federal statute, in 1949 the state created the Erie-Wyoming County Soil Conservation District to act as sponsor of the dams. In 1959 and 1984, when the dams needed reconstruction, the federal agency and the district entered into operation and maintenance agreements, which required the district to obtain permanent easements from landowners for the construction and operation of the dams and to inspect and maintain them. The 1984 agreement also provided that “title to real property shall vest in the [district]” and that “real property means land, including land improvement, structures, and appurtenances thereto, excluding movable machinery and equipment.” In 2012, a teenager drowned after swimming near a “low-head” dam, which created an undertow effect. The teenager’s mother sued the district and other defendants seeking to hold them liable for failing to warn of the danger posed by the structure. Whether the district could be liable in negligence depended on its ownership of the dams. The jury returned a verdict for the district, but the trial court entered a directed verdict for the plaintiff, holding as a matter of law that the district acquired ownership of the dams from the federal agency under the 1984 agreement. The intermediate appellate court reversed, ruling that the agency could not have transferred ownership of the dams because the dams were “permanently affixed to land underlying Buffalo Creek” and thus were “fixtures,” the ownership of which runs with the land. The Court of Appeals reversed, finding the fact that the dams were attached to the creek did not establish as a matter of law their ownership. The court relied on cases finding railroad structures and appurtenances installed under easements to be personalty, absent intent that they merge with the realty. Thus, whether the dams were fixtures must be determined by examining the intent of the federal agency and the district. The court remanded because neither party introduced evidence showing that the 1984 agreement transferring title to “real property” included the dams. Pearce v. Erie-Wyoming Cnty. Soil Conservation Dist., 2024 N.Y. LEXIS 62 (N.Y. Jan. 16, 2024).

ZONING: Exaction fee for parks and open space is lawful based on essential nexus and rough proportionality between fee and city’s purpose to preserve parks and open space. Puce applied to the City of Burnsville for permits to develop his small parcel of land for commercial use. The city approved his application subject to the condition that he pay a park dedication fee, at first set at $37,804, then reduced to $11,700. The city assessed the fee pursuant to its ordinance that requires all developers who are platting or replatting land to contribute a park dedication or an equivalent fee. Puce contested the fee on the ground that his planned development for retail business use did not increase the need for parks. The city asserted that the redevelopment of the open land created a higher intensity use and a simultaneous need for more open space. Puce appealed the fee imposition, and the district court found the fee was lawful as an essential nexus was present. Specifically, the city planned to build a trail next to the property, and Puce’s development would draw more people to nearby parks and trails. The appellate court reversed, finding the fee violated a state statute that regulates municipal dedications and fees, Minn. Stat. § 462.358, because there was no rough proportionality between the fee and the need created by the proposed development. The supreme court reversed. The court noted that the statute codifies language from both US Supreme Court cases and its own prior decisions regarding development fees, specifically requiring an “essential nexus” between the fee and the city’s “purpose sought to be achieved by the fee” and “rough proportionality” between the fee and “the need created by the proposed subdivision or development.” The court first found an essential nexus because the fee was necessary to fund the acquisition or improvement of open space and parkland, which Puce’s development would diminish. Second, rough proportionality was present based on the city’s application of its dedication formula and subsequent steps further to reduce the fee based on the specific traits of Puce’s property as opposed to average commercial land values. The court also found that the city’s determination of the need to acquire or improve a reasonable portion of land based on the approval of Puce’s development plan was sound and based on historical data of prior acquisitions in accordance with developments and the city’s comprehensive plan. Puce v. City of Burnsville, 997 N.W.2d 49 (Minn. 2023).

Literature

PROPERTY THEORY: Prof. Nate Ela, in Property and the Problem of Disuse, 100 Wash. U. L. Rev. 995 (2023), believes idle property is just that—idle—particularly when its use is sorely needed by non-owners and society. Indulging property owners in disuse seems contrary to the oft-expressed idea that property’s purpose is to help people put things to use. Indeed, the right to exclude is often offered as property’s essential core because it helps serve this purpose. Yet the right to exclude empowers owners to leave resources idle, even if using the resources would help others. Prof. Ela discusses solutions to this seeming paradox through a case study of urban agriculture in Chicago. He proposes the “use fix,” which incorporates four property practices: matching idle resources with potential users, mapping the extent and location of disuse, articulating social interests in use, and cultivating a norm against letting resources lie. By following the use fix, Chicago’s reformers have activated idle land and alleviated poverty and unemployment. Looking outside of Chicago, he notes similar practices in efforts to house people in vacant homes, restart idled workplaces, and provide space for quarantine and isolation during the COVID-19 pandemic. Still, he states, the use fix has failed to become an enduring institution, despite its proven record as an efficacious and promising strategy for making cities more productive, equitable, and resilient.

RENT CONTROL: In Commercial Rent Stabilization: One Local Response to Skyrocketing Rents, 25 N.Y.U. J. Legis. & Pub. Pol’y 603 (2023), Prof. Julian M. Hill makes the case for rent control for commercial tenancies, particularly those held by small business owners, who suffered disproportionally from the pandemic shut down and who feel the brunt of market shifts more acutely. He shows that when small businesses are forced to shut down or relocate because of unaffordable rent rises, the community suffers as well—from disruptions in social and economic connections to reduced tax revenues. His focus is on a proposed measure from the New York City Council, CRS Bill 2019, which would put an annual cap on the percentage increase owners can impose on their tenants. The bill met with opposition in the City Council and remains stalled. Although the proposed measure has problems, he believes a small commercial rent control ordinance that balances landlords’ property interests and profit motive against the long-term needs of the community can be drafted. He offers some ideas for calibrating the best rent adjustments and for evaluating the various interests that should be considered. Prof. Hill believes the CRS Bill, like residential rent control, would survive constitutional challenge based on a legitimate exercise of police power. And, he notes, there is precedent for upholding such an ordinance—the Supreme Court has consistently upheld price control laws, including commercial rent control, with substantially more prohibitive language and triggers than the New York proposal. Although commercial entities do not evoke the same sort of sympathy as working-class families needing shelter, the plight of some small, struggling commercial tenants, serving their communities, seems equally precarious.

TAX LIENS: Randall K. Johnson, in What Is the Optimal Basis for Imposing Government Liens?, 2023 U. Ill. L. Rev. Online 128 (2023), reports on a study of the enforcement of tax liens in Illinois. Using a newly released Department of Revenue dataset, he concludes that similarly situated debtors may be treated in non-standard ways without adequate justification. In his view, this unequal treatment is not only unfortunate but may also violate the federal constitution, although in a different way than was alleged in Tyler v. Hennepin County, 143 S. Ct. 1369 (2023). Prof. Johnson ventures an explanation for the unequal treatment of certain similarly situated debtor-citizens, which is that the state may be reticent to impose government liens on more politically organized groups, such as business debtors, but not so much about encumbering the properties of more politically marginalized groups like poor individual debtors. Prof. Johnson asserts that the disparate treatment is not justified by any rational grounds, such as cost savings, because it may give rise to litigation in more complex factual situations than what was described in Tyler. The disparate treatment also increases the risk of unjustified violations of the Fifth and Fourteenth Amendments by an already cash-strapped state. The article analyzes data from 1994 to 2020 and reports that there were 475,838 liens imposed on debtor-citizens, which had a combined economic value of $3,377,850,783. Most liens were imposed on individual debtors, as opposed to business ones: 72 percent to 28 percent, respectively, and this was so even as most lien debt was owed by business debtors. Prof. Johnson suspects that business debtors may be gaming the system—late payments often serve as hidden subsidies that may conceal business losses—and that they may have different views about the morality of paying late than individual debtors, and the state may share in the view that late payments by business debtors are less blameworthy than late payments by individuals. These findings make a compelling case for a deeper examination of what seems a troubling system.

Legislation

PENNSYLVANIA enacts legislation making null and void racially restrictive covenants. The law allows an owner to repudiate such covenants on a prescribed form. Instruments in the declarations in common interest communities can be repudiated by the board of the association without the need for individual votes of the owners. 2023 Pa. Laws 54.

NEW YORK creates a commission on reparations to address the legacies of slavery. The New York State Community Commission on Reparation Remedies is charged with examining the institution of slavery and its lingering negative impacts on persons of African descent, including overt discrimination in access to government supported housing, redlining, and segregationist urban planning. The commission is directed to recommend ways to educate the public on its findings and recommend appropriate remedies. 2023 N.Y. Laws 729.

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