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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Municipalities cannot regulate political content of signs

/ Free Speech, Zoning

In the 2015 case of Reed v. Town of Gilbert, 135 S.Ct. 2218 (2015), the Court struck down a local ordinance that banned “ideological signs” that “communicat[e] a message or ideas.” The ordinance also limited “political signs” to election season and limited the times when plaintiff church was allowed to post “directional signs” bearing the name of the church and the time and location of the next service. The Court noted that content-based restrictions on speech are presumptively unconstitutional and could only be justified if they serve a compelling government interest, a showing that could not be made by the town. Further, the town had ample alternative ways to regulate the placement and size of signs to satisfy public safety and aesthetic concerns.

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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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Second Circuit follows HUD regulation requiring plaintiffs in disparate impact cases to prove a less discriminatory way to achieve the defendant’s legitimate interest

/ Antidiscrimination Law, Fair Housing Act, Transactions, Zoning

In MHANY Mgmt., Inc. v. County of Nassau, 2016 U.S. App. LEXIS 5441 (2d Cir. 2016), the Second Circuit adopted the burdens of proof for disparate impact claims under the Fair Housing Act spelled in the regulations of the U.S. Department of Housing and Urban Development. Those rules place the burden on the plaintiff to prove a discriminatory effect either by showing a disparate impact on a protected group or a segregative effect. If that can be shown, the burden shifts to the defendant to show a “substantial, legitimate, nondiscriminatory interest” that justifies the discriminatory effect. At that point, the HUD regulations, now adopted and approved by the Second Circuit, put the burden of proof on the plaintiff to show that the “substantial, legitimate, nondiscriminatory interest” of the defendant “could be served by another practice that has a less discriminatory effect.” 24 C.F.R. § 100.500(c)(3). The Second Circuit, and some other Circuits,

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Prescriptive easement granted for underground utility lines

/ Easements, Title Issues, Trespass

An easement may be acquired by prescription if one engages in visible (“open and notorious”) use of another’s property in a continuous manner for the period of the statute of limitations. Most state presume such uses are permissive although a growing minority of states presume permission. A crucial requirement is that the use be visible to the servient estate owner. How then could underground utility lines (which are obviously hidden) be sufficiently visible to be acquired by prescription? The Massachusetts Land Court ruled that an owner can acquire an easement by prescription for underground utility lines if physical clues on the land would put a reasonable owner on notice that the lines exist. Dunning v. Larsen, 2015 WL 5920263 (Mass. Land Ct. 2015). In this case the dominant estate owner also was using a road over the servient estate and the utility lines were underneath that road. While the lines themselves

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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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Eleventh Circuit rejects publicity rights claim for Rosa Parks

/ Intellectual Property, Personal Property

In a well-known case, the Georgia Supreme Court upheld a publicity rights claim brought by the estate of Martin Luther King. Martin Luther King Jr. for Social Change v. American Heritage Products, 296 S.E.2d 697 (Ga. 1982). The court enabled the estate to prevent the sale of plastic busts of Dr. King by a seller who had not been authorized to do so by the estate. However, in Rosa and Raymond Parks Inst. for Self-Development v. Target Corp., 2016 WL 25495, the Eleventh Circuit found that the Michigan Constitution’s guarantee of free speech rights prevented recognition of publicity rights in the estate of Rosa Parks. The seller in that case marketed various items adorned with images of Rosa Parks or which concerned her life, including a plaque showing Parks with Dr. Martin Luther King, Jr., six books, and a movie. The court found that Michigan’s state constitutional protections for free speech included

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