Title Issues

Bank with actual knowledge of intent to create homeowners association bound by covenants even though the mortgage was recorded before the homeowners association declaration

/ Condominiums and Homeowners Associations, Mortgages, Real Estate Transactions, Servitudes, Title Issues

An appellate court in New Jersey held that a bank that received a mortgage on a piece of property was bound by a later-recorded homeowners association covenants because it had actual knowledge that the developer planned to subject the property to the declaration. Fulton Bank of N.J. v. Casa Eleganza, 473 N.J. Super. 387, 281 A.3d 252 (N.J. App. Div. 2022). This was the case even though New Jersey had a race-notice recording act and the declaration was recorded after the mortgage was recorded. The court used the equitable doctrine of equitable subrogation to change the order of priorities to avoid injustice. Because the bank was subject to the covenants, it was obligated on foreclosure to pay past due fees to the association. This result conflicts with the approach taken by the California Supreem Court in Riley v. Bear Creek Planning Committee, 551 P.2d 123 (Cal. 1976), which freed an owner from covenants …

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Real estate sellers cannot change their minds once a contract is signed

/ Real Estate Transactions, Title Issues

The Massachusetts Land Court has reaffirmed a traditional rule of law that parties to a real estate contract involving the sale of land have the right to demand specific performance. In this case, that meant that, once a land sales contract is signed by both parties, the buyer is entitled to a judgment ordering the seller to go through with the sale; the seller has no right to change their mind and refuse to sell. The court noted that this rule applies equally to buyers and sellers. Niziak v. Daniels, 2021 WL 6013961, at *7 (Mass. Land Ct. 2021).

Loan modification agreements unenforceable unless in writing

/ Mortgages, Statute of Frauds, Title Issues

An appellate court in California has held that the state’s statute of frauds require loan modification agreements to be in writing to be enforceable. Reeder v. Specialized Loan Serv., LLC, 2020 WL 4345001 (Cal. Ct. App. 2020). This is an expected application of the statute of frauds but it does not mean that some courts, in other factual settings, might make exceptions if the lender engaged in fraud (made a false statement that induces reliance on the part of the borrower), or estoppel (a lender statement that the borrower reasonably relies on in changing their behavior), or that there might be a consumer protection claim for deceptive business practices if something short of fraud but nonetheless deceptive communications wind up hurting the borrower.

Marketable title act extinguishes easement by necessity

/ Easements, Servitudes, Title Issues

In a surprising decision, the Vermont Supreme Court held that an easement by necessity must be recorded or it will be lost by operation of the state’s marketable title act. Gray v. Treder, 2018 VT 137, 204 A.3d 1117 (Vt. 2018). The facts of the case were unusual, however, because the easement in this case was not clearly visible by physical evidence of its use. That will ordinarily not be the case because easements by necessity are required to obtain access to the land and most owners will visibly use those easements to obtain access. In this case, however, because the landlocked ninety-acre parcel had remained undeveloped for the period defined by the Marketable Title Act. The court’s ruling was based on its interpretation of the statute and because it was bound by that statutory language. In addition, the statute provided the landlocked owner a method to preserve an easement by …

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Easement by necessity extinguished by marketable title act

/ Easements, Servitudes, Title Issues

Vermont’s marketable title act, Vt. Stat. tit. 27, §604(a), allows preservation of claims established more than forty years ago if they are re-recorded but does not require easements to be re-recorded if they are visible or evidenced by a “recorded agreement.” In Gray v. Treder, 2018 VT 137, 2018 Vt. LEXIS 237 (Vt. 2018), the Vermont Supreme Court held that easements by necessity fit into neither of those categories and thus need to be re-recorded every forty years to preserve them. While the case resulted in a landlocked parcel, the Court found the statutory policies of clearing title to be more important than ensuring access to a landlocked parcel.

Access easement found even though not noted on certificate of title to registered land

/ Easements, Real Estate Transactions, Title Issues

Massachusetts courts have several times ruled that access easements may be recognized even though language creating an express easement may be missing or ambiguous in the deeds to the servient estate. Hickey v. Pathways Ass’n, 37 N.E.3d 1003 (Mass. 2015) (access easement recognized over registered land even though it is not in the certificate of title to servient estates when mention of it appears in titles to the dominant estates and maps indicating the easement were recorded at the registry and available to the servient estate owners before purchase); Reagan v. Brissey, 844 N.E.2d 672 (Mass. 2006) (right to use lots as parks found from recorded map). See also Loiselle v. Hickey, 107 N.E.3d 1205 (Mass. App. Ct. 2018); Leahy v. Graveline, 971 N.E.2d 307 (Mass App. Ct. 2012) (both interpreting ambiguous recorded maps and deeds to determine if neighboring owners have access easements).

City has no sovereign immunity from suit by its tenants when it leases land in a “proprietary capacity”

/ Leaseholds, Real Estate Transactions, Title Issues

Although cities enjoy sovereign immunity from suit when they act in a sovereign capacity, they can be sued by tenants of land they have leased when they act in a “proprietary” capacity. Wasson Interests, Ltd. V. City of Jacksonville, 2018 Tex. LEXIS 999 (Tex. 2018). Cities act in a governmental capacity (and are immune from suit) when they perform traditional government functions for the benefit of the public or when they act at the direction of the state. Here the court found that the leases were made  in a proprietary fashion (a) when they engage in acts solely for the benefit of those in the cities; and (b) when it had no obligation to lease the lots to private parties; and (c) it was not acting as a branch of the state when it leased the property.

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