Estates and Future Interests

Homeowners’ Association dues lost because the property was taken by eminent domain are held not to be compensable under the takings clause

/ Estates and Future Interests, Servitudes, Takings

When a government took 14 units from a homeowners association by eminent domain, the remaining owners lost the dues and assessments that those owners would have contributed to the homeowners association. However, the Fifth Circuit has ruled that those lost assessments represent mere “contractual rights” that are not compensable under the takings clause as lost property rights even though they ran with the land. United States v. 0.073 Acres of Land, — F.3d —, 2013 WL 322242 (5th Cir. 2013). The court looked to Louisiana law to determine whether the assessments should be considered to be “property” rights and found that they were. However, it interpreted the case of United States v. General Motors Corp., 323 U.S. 373 (1945) to mean that loss of future profits from land is not compensable. The court acknowledged that it was adopting a minority view and that most courts have held that covenants are property …

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New York high court exempts options to renew leases from the rule against perpetuities

/ Estates and Future Interests, Restraints on Alienation

The New York Court of Appeals joined the majority of states in holding that the rule against perpetuities does not apply to options to renew leases. Bleecker St. Tenants Corp. v. Bleeker Jones LLC,  945 N.E.2d 484 (N.Y. 2011). It should be noted that only a minority of states have the traditional rule against perpetuities and New York’s rule is codified by statute. “No estate in property shall be valid unless it must vest, if at all, not later than twenty-one years after one or more lives in being at the creation of the estate and any period of gestation involved.” N.Y. Est. Powers & Trusts §9-1.1(b).

Court rules that designated open space on plat is insufficient to establish an easement absent proof the developer induced buyers to purchase in reliance on promises of open space

/ Consumer Protection, Easements, Estates and Future Interests, Real Estate Transactions, Statute of Frauds

Disagreeing with the ruling of the Massachusetts Supreme Judicial Court in Reagan v. Brissey, 844 N.E.2d 672 (Mass. 2006), an appeals court in New Mexico held that open space designated on a recorded plat is not sufficient to create an easement of access by owners of lots on the map in the absence of evidence the developer made representations to buyers inducing them to buy in reliance on promises those lots would remain open. The mere presence of open space on the map was insufficient to prevent the developer from selling that open space for development purposes. Agua Fria Save The Open Space Ass’n v. Rowe, 255 P.3d 390 (N.M. 2011)

Possibility of reverter enforced by Tennessee court with award of damages for lost rental income

/ Estates and Future Interests, Real Estate Transactions

An appeals court in Tennessee correctly interprets a conveyance which provided that the lot “shall automatically revert to Seller in fee simple” if the buyer did not comply with stated conditions created a fee simple determinable with a possibility of reverter. Lasater v. Hawkins, 2011 WL 4790971 (Tenn. Ct. App. 2011). The court not only enforced the condition, finding title to have automatically reverted to the seller but granted the seller (and possibility of reverter owner) five years of rent that the present estate owner had collected since the condition was violated.

Automatic reverter creates fee simple determinable

/ Estates and Future Interests, Real Estate Transactions, Restraints on Alienation

In a straightforward application of traditional doctrine, a Tennessee court ruled that a deed condition that stated that a lot “shall automatically revert to Seller in fee simple” if the buyer does not comply with stated conditions (to install a waterline within a year) creates a fee simple determinable that transfers title automatically. Lasater v. Hawkins, 2011 WL 4790971 (Tenn. Ct. App. 2011)

Another state abolishes transfer fee obligations

/ Estates and Future Interests, Real Estate Transactions

The New Jersey legislature joined an increasing number of states that have passed statutes prohibiting enforcement of transfer fee obligations. 2010 N.J. Laws 102, codified at  N.J. Stat. 46:3-28 to -33. read article The act applies prospectively only. Transfer fee obligations are duties to pay moneys to a prior seller of the land every time it is sold. Such fees restrain alienation of land and were held to constitute illegal vestiges of feudalism in the mid-nineteenth century. See DePeyster v. Michael, 6 N.Y. 467 (1852).

Increasing regulation of transfer fee covenants

/ Estates and Future Interests, Servitudes

More and more states are passing statutes prohibiting “transfer fee covenants” which purport to require owners of property to pay a portion of the sales price (or a fixed amount) to the original developer whenever the property is sold. Such provisions were held to be unenforceable restraints on alienation in the 1852 New York Court of Appeals case De Peyster v. Michael, 6 N.Y. 467 (1852), a case that is apparently not well known to those peddling these covenants today. De Peyster involved a “quarter sale” clause that required one-fourth of the sale price to go to the heirs of the van Rensselaer family. The court found the arrangement to be a vestige of feudalism akin to quitrents paid to a lord and held that such property relationships had been outlawed in New York by both statute and common law. Recent statutes prohibiting transfer fee covenants (at least prospectively) were …

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