Short-term rentals do not violate “residential use only” covenant

/ Concurrent or Common Ownership, Condominiums and Homeowners Associations, Leaseholds, Real Estate Transactions, Servitudes

The Mississippi Supreme Court has held that short term rental of property is not a commercial use that would violate a covenant limiting land to residential purposes. Lake Serene Prop. Owners Ass’n v. Esplin, 334 So.3d 1139 (Miss. 2022). There has been some disagreement among state courts on this question because the use of property as an Airbnb or other short term rental can be viewed as changing property to “hotel” use, at least when the owner does not share occupancy with the guest.

100 year fixed-price option to purchase land is an invalid and unreasonable restraint on alienation

/ Estates and Future Interests, Real Estate Transactions, Servitudes

A Texas court has held that an option to purchase an interest in land for a fixed price of $50,000 that would last for 100 years was an invalid and unreasonable restraint on alienation of land. Tiner v. Johnson, 2022 WL 2062478 (Tex. Ct. App. 2022). The court could have held it to be void under the traditional rule against perpetuities. Although Texas statutes have reformed the rule against perpetuities, the court found that none of those reforms applied in this case. The case is a useful reminder that the common law rule against unreasonable restraints on alienation is an independent limit on interests that may vest too far into the future and which might have the effect of inhibiting sale of land. The way to avoid the rule is to place a reasonable time limit on them and/or make the sale price equal to fair market value at the time the …

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Tenants have mostly lost “frustration of purpose” claims when they could not pay rent during Covid-19 lockdowns

/ Leaseholds

In accord with most courts, the Connecticut Supreme Court held that a restaurant lease was not void for “frustration of purpose” when the restaurant tenant could not make rent payments because of a gubernatorial order for restaurants to shut down during the early stages of the Covid-19 disaster. AGW Sono Partners, LLC v. Downtown Soho, LLC, 273 A.3d 186 (Conn. 2022). The court found that the lease did not prevent the restaurant from selling food for take-out rather than for consumption in a sit-down restaurant. Nor did the lease contain a “force majeur” clause which (depending on its wording) might or might not classify the pandemic as an “act of God” or similar problem that would entitle the tenant to get out of its lease obligations. A Massachusetts court came to the opposite conclusion when the lease language limited the tenant to operating “only a café with a sit-down restaurant menu and …

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Disparate impact claim unavailable against public water utility for increasing the security deposit required of public housing tenants

/ Antidiscrimination Law, Fair Housing Act

The Ninth Circuit held, in Southwest Fair Housing Council, Inc. v. Maricopa Domestic Water Improvement Dist., 17 F.4 950 (5th Cir. 2021), that no violation of the Fair Housing Act occurred under a disparate impact theory when public housing tenants were required to pay a new higher security deposit to obtain water services from a public water utility. The court found a disparate impact against Black and Native American customers, as well as unmarried women with children and found that the plaintiffs had shown the utility’s actions caused the impact. However, the utility had a legitimate business justification for its actions that outweighed the disparate impact. Its justification was the public housing tenants tended to have unpaid utility bills in excess of its prior security deposit amount and that they had higher unpaid bills than tenants in private housing. Plaintiffs lost on the disparate impact issue because they could not prove that …

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Parcel is landlocked after 90 year easement ends

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

Most courts granted an easement by necessity when an owner severs its land and leaves a parcel without access to a public road. The easement allows passage over land that had been connected to the landlocked parcel before it became landlocked. The courts differ on whether this is a mandatory rule of law (owners are not allowed to create land to which there is no access) or a default rule based on the implied intent of the parties, in which case the courts will allow a parcel to be landlocked if that is what the parties bargained for. The argument for a mandatory rule is that land has no use if the owner cannot get to it and no one will buy a landlocked parcel, making the land inalienable. The argument for a default rule is that the owner of the landlocked parcel can always give or sell it to …

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Does an “as is” clause in a contract of sale immunize the land seller from a fraud claim?

/ Real Estate Transactions

Continuing the conflicts among state courts on this question, a Florida court chose a “yes” answer to the question of whether a seller can get away with fraud if the land sales contract contains an “as is” clause or a “merger clause” making the express terms of the written agreement the only legitimate source of obligations between the parties. Fla. Holding 4800 v. Lauderhill Mall Inv., LLC, 317 So. 3d 121 (Fla. Dist. Ct. App. 2021). In so doing, the court adopts the majority rule in Danann Realty Corp. v. Harris, 157 N.E.2d 597 (N.J. 1959), and rejects the position of dissenting Judge Fuld, a view that has been adopted in several other states and may be the more popular rule now, see Snyder v. Lovercheck, 992 P.2d 1079 (Wyo. 1999); Golden Cone Concepts, Inc. v. Villa Linda Mall, Ltd, 820 P2d 1323 (NM 1991); TIAA Global Invs., LLC v. One Astoria …

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State court affirmation of public rights below the high tide line do not take property without compensation in violation of the 14th amendment

/ Takings

After the Indiana Supreme Court held that private property rights end at the high tide land, giving the public the right to use the wet sand area between the low and high tide lines, see Gunderson v. State, 90 N.E.3d 1171 (Ind. 2018), an owner sued state officials to have that judicial ruling declared to be a taking of property rights without just compensation. But the Seventh Circuit held that the state courts were competent to determine whether private property ownership extended to the tidelands in the first place and because they did not, no property rights were taken from the owner. Pavlock v. Holcomb, 2022 WL 1654038 (7th Cir. 2022). The converse, however, may not be true. Since the high courts of both Massachusetts and Maine have limited public rights in the tidelands, a statute recognizing such rights might be held to take away vested property rights. On the other hand, …

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Recorded covenants can run with lands the grantor does not own if owners of those lands ratify the covenants

/ Real Estate Transactions, Servitudes

The Utah Supreme Court has held that a landowner who recorded covenants on land he did not own were potentially binding on subsequent owners of that land if they engaged in acts that ratified the covenants (for example, by making payments to the homeowners association (HOA)). WDIS, LLC, as Trustee of MDMG Trust, dated Apr. 25, 2016 v. Hi-Country Estates Homeowners Ass’n, Phase II, 2022 UT 17, 2022 WL 1252425 (Utah 2022). Oddly, the grantor who recorded the covenants owned only eight acres out of the 2000 acres that were purported to be limited by those covenants. Ordinarily, one landowner cannot unilaterally impose covenants on owners of neighboring property. But the Utah Supreme Court held that those covenants were not absolutely void but merely voidable because owners could ratify those covenants after acquiring title to their properties. It did not seem to matter to the court whether all the owners derived their …

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No prescriptive easements for light and air

/ Easements, Nuisance, Servitudes

Re-affirming a longstanding common law rule, a Maryland court has held that land use that interferes with a neighbor’s desire for unobstructed light and air neither constitutes a nuisance nor can the neighbor acquire such rights by prescription. Gestamp Wind N. Am., Inc. v. All. Coal, LLC, 2021 WL 3612747 (Md. Ct. Spec. App. 2021). A neighbor whose wind turbines were losing effectiveness because the neighbor was piling coal remains on its property could not get a remedy for the change in wind to run those turbines since the neighbor had a right to use its property without regard to any interference with the neighbor’s light and air.

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