Real Estate Transactions

High-rise apartment building held to be a private nuisance

/ Nuisance, Real Estate Transactions

In 1922, the U.S. Supreme Court upheld the power of municipalities to enact zoning laws that limit land to residential use and even to single-family homes. Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926). The Euclid decision suggested that apartment buildings might constitute nuisances and destroy the “residential character” of a neighborhood. Id. at 394–395. Is that a legitimate way to characterize apartment buildings and/or the people who live in them? In the 2014 case of Loughhead v. 1717 Bissonnet, LLC, 2014 WL 8774060 (Tex. Dist. Ct. 2014), final judgment at 2014 WL 8774079 (Tex. Dist. Ct. 2014), a Texas court actually found a proposed high rise building in the City of Houston, Texas, to be a nuisance. Houston is unusual in the United States because it lacks a comprehensive zoning law. The proposed structure would have been 21 stories tall and contain 228 residential units along with commercial development. The judge upheld a jury verdict that …

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Anticompetitive covenant in shopping center lease broadly construed

/ Leaseholds, Real Estate Transactions, Restraints on Alienation, Servitudes

Following Florida law, the Eleventh Circuit construed the terms of restrictive covenants in shopping center leases broadly. Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, 746 F.3d 1008 (11th Cir. 2014). The covenants were part of the leases granted to Winn-Dixie supermarkets and protected it from competition by limiting the ability of other stores to sell “staple or fancy groceries” to a discrete “sales area.” Traditionally, ambiguities in covenants were construed to limit the covenant, freeing the servient estate owner to a broader use of its property and Florida precedents have adopted that  position. Moore v. Stevens, 106 So. 901, 903 (Fla. 1925) (ambiguous “covenants are strictly construed in favor of the free and unrestricted use of real property”). However, applying a recent holding from a Florida state court, see Winn-Dixie Stores, Inc. v. 99 Cent Stuff-Trail Plaza, LLC, 811 So.2d 719 (Fla. Dist. Ct. App. 2002),  the Eleventh Circuit held that the term “groceries” applied not …

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Banks that foreclose without legal authority to do so commit the tort of wrongful foreclosure

/ Consumer Protection, Estates and Future Interests, Mortgages, Real Estate Transactions, Title Issues

The California Supreme Court held in Yvanova v.  New Century Mortgage Corp.,, 365 P.3d 845 (Cal. 2016), that a borrower has standing to prove that a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing entity purportedly took a beneficial interest was void, thereby depriving the foreclosing party of any authority to foreclose through a trustee’s sale.  In a follow up case, Sciarratta v. U.S. Bank Nat’l Ass’n, 2016 Cal. App. LEXIS 399 (2016), the Court of Appeals held that foreclosure by an entity with no power to foreclose is, by itself, the tort of wrongful foreclosure. Even if the borrower is in default, and someone has the right to foreclose, that does not mean that any person with a claim can bring the foreclosure. Only a party with a better claim to title — someone with the legal authority to foreclose — can oust a peaceable possessor from their home. …

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HUD Guidance on discriminatory refusals to rent to tenants with criminal records

/ Antidiscrimination Law, Fair Housing Act, Leaseholds, Real Estate Transactions

Now that the Supreme Court has definitively found that the federal Fair Housing Act, 42 U.S.C. §§3601-3631, prohibits practices that have a disparate impact on protected groups, see Tex. Dept of Hous. & Comty. Affairs v. Inclusive Comtys. Project, Inc., 135 S. Ct. 2507 (U.S. 2015), consequences of that decision are becoming more clear. On April 4, 2016, the Office of General Counsel for the U.S. Department of Housing and Urban Development (HUD) issued a Guidance on the application of the Fair Housing Act to decisions by landlords and sellers related to tenants and buyers with criminal records. Office of General Counsel on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real-Estate Related Transactions (Apr. 4, 2016). The Guidance notes that a greater percentage of African Americans and Latinos than whites have criminal records. The refusal to rent or sell to persons with criminal records may …

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Retroactive restraint on short term leasing by homeowners association upheld by Idaho Supreme Court

/ Condominiums and Homeowners Associations, Consumer Protection, Leaseholds, Real Estate Transactions, Restraints on Alienation, Servitudes

When a homeowner’s association voted to amend the declaration of covenants, conditions, and restrictions to prohibit short term leasing of units (rentals for less than six months), one of the townhouse owners sued to declare the retroactive restraint on alienation invalid. However, the Idaho Supreme Court found the retroactive restraint to be valid; it neither constituted an unreasonable restraint on alienation or exceeded the scope of the powers of the association to amend the declaration retroactively. Adams v. Kimberley One Townhouse Owner’s Ass’n, 352 P.3d 492 (Idaho 2015). The court held that the amendment to the declaration was merely an interpretation of what it meant to devote the property to single-family residential purposes and thus could not be unduly surprising to the owner. Moreover, the association had the power to amend the covenants and that amendment power subjected the individual owner to retroactive changes in ownership rights. While some courts would …

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Buyer may sue seller for fraudulent failure to mention flooding problem despite “as is” clause in real estate sales contract

/ Consumer Protection, Real Estate Transactions, Statute of Frauds, Title Issues

When real estate contracts contain an “as is” clause or state that the buyer is not relying on any oral statements made by the seller, some courts hold that the buyer cannot sue the seller for fraud even if the seller lied about the condition of the premises or failed to reveal material facts any reasonable buyer would want to know. But other courts allow claims for fraud on the ground that sellers cannot be allowed to immunize themselves from liability for fraud by contract language. In McNulty v. Chip, 116 A.3d 173 (R.I. 2015), buyers of a home experienced serious flooding within weeks of buying the place. Rather than an all-or-nothing solution, the Court held that the sales contract had not been worded specifically enough to protect the seller from a fraud claim. While the contract said that the property was being sold “as is,” nothing specific was stated about …

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House built on land leased from town is a fixture that belongs to the town at the end of the lease

/ Leaseholds, Real Estate Transactions, Trespass

Seasonal residents built homes on land leased from the town. The Massachusetts Court of Appeals held that the structures were fixtures that belong to the land owner when the leases terminated. Language to the contrary could have been inserted into the leases to classify the homes as personal property that could be removed at the end of the lease. Or the contracts could have granted the tenants an option to buy the land. Because the leases did neither of these things nor made any other arrangements, the common law presumption  prevailed that structures fixed to the land belong to the landowner. Touher v. Town of Essex, 36 N.E.3d 40 (Mass. App. Ct. 2015).

Forged acknowledgment in recorded deed means that it does not transfer title

/ Real Estate Transactions, Statute of Frauds

In a dispute between a brother and sister over ownership of the family home, the sister contended that a deed from her mother to her should prevail over an earlier deed from her mother to the brother because she was never made aware of the earlier deed and because the acknowledgment on the deed was forged. An acknowledgment is a notarized statement that the grantor personally signed the deed. In this instance, the grantor (the mother) had not personally signed the deed in the notary’s presence. The acknowledgment was therefore defective. The court held in Allen v. Allen, 16 N.E.3d 1078 (Mass. App. Ct. 2014), that state statute prohibited such a deed from providing constructive notice to a later purchaser. Thus the sister’s property claim prevailed over that of the brother.

Colorado Supreme Court holds that an option that can be canceled any time before its exercise does not violate the traditional rule against perpetuities

/ Real Estate Transactions, Restraints on Alienation, Title Issues

The Colorado Supreme Court has held that the traditional rule against perpetuities does not invalid an option, even if it has no time limit, if it can be canceled at any time before its exercise, at least where the price for the option is set at the market value of the property and it was agreed to by sophisticated parties. Atlantic Richfield Co. v. Whiting Oil & Gas Corp., 320 P.3d 1179 (Colo. 2014). The court reasoned that what mattered was not the lack of time limitation but whether the option imposed an unreasonable restraint on alienation and concluded that it did not under these circumstances.

No statute of limitations bars a claim to set aside a forged deed and subsequent mortgage

/ Adverse Possession, Consumer Protection, Mortgages, Real Estate Transactions, Statute of Frauds, Title Issues

The New York Court of Appeals had reaffirmed the traditional rule that forged deeds do not convey title. It has clarified that no statute of limitations bars a challenge to a forged deed even if the purported owner has subsequently transferred interests in the land to a subsequent mortgagee who had no notice of the forgery. Faison v. Lewis, 32 N.E.3d 400 (N.Y. 2015). The Court ruled that the third party purchaser is not a “bona fide” purchaser protected by the recording act because a forged deed can never be the basis of a valid transfer even if the third party did not know and could not have known about the forgery. To do otherwise would allow the forger to “steal” property and get away with it.

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