Articles Posted in Real Estate & Property Law

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Plaintiffs are homeowners in centrally-planned neighborhoods in Thompson’s Station, Tennessee. The developers established and controlled owners’ associations for the neighborhoods but have transferred that control to third-party entities not controlled by either the developers or homeowners. While under the developers’ control, the associations each entered into agreements granting Crystal the right to provide telecommunications services to the neighborhoods for 25 years, with an option for Crystal to unilaterally renew for an additional 25 years. The Agreements make Crystal the exclusive agent for homeowners in procuring services from outside providers. Homeowners must pay the associations a monthly assessment fee, which the associations use to pay Crystal, regardless of whether the homeowner uses Crystal's service, and must pay Crystal $1,500 for the cost of constructing telecommunications infrastructure. Crystal uses service easements within the neighborhoods. Crystal had no prior experience in telecommunications-services and contracts with another provider, DirecTV, and charges homeowners a premium above the rate negotiated with DirecTV. Crystal does not provide services outside of the neighborhoods. The plaintiffs claimed that the Agreements constituted self-dealing, unjust enrichment, unconscionability, unlawful tying, and unlawful exclusivity. The Sixth Circuit reversed dismissal, in part, finding plaintiffs’ allegations plausible on their face with respect to the tying claim, but affirmed dismissal of the exclusivity claim. View "Cates v. Crystal Clear Technologies, LLC" on Justia Law

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The Herrs bought property on Crooked Lake in the Upper Peninsula of Michigan, hoping to use the lake for recreational boating and fishing. Most of Crooked Lake lies in the federally-owned Sylvania Wilderness but some remains under private ownership. Congress gave the Forest Service authority to regulate any use of Crooked Lake and nearby lakes “subject to valid existing rights.” The Forest Service promulgated regulations, prohibiting gas-powered motorboats and limiting electrically powered motorboats to no-wake speeds throughout the wilderness area. After noting “nearly a quarter century of litigation over the recreational uses of Crooked Lake,” the Sixth Circuit concluded that both regulations exceed the Forest Service’s power as applied to private property owners on the lake. Under Michigan law, lakeside property owners may use all of a lake, making the Herrs’ right to use all of the lake in reasonable ways the kind of “valid existing rights” that the Forest Service has no warrant to override. Michigan law permits motorboat use outside the Sylvania Wilderness. The Forest Service long allowed motorboat use on all of the lake after it obtained this regulatory authority and it still does with respect to one property owner. View "Herr v. United States Forest Service" on Justia Law

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After the 2008 financial crisis, many banks foreclosed on many properties used to secure the underlying loans. According to the City of Cincinnati, Wells Fargo adopted a policy of violating local and state property regulations when the cost of compliance outweighed the value that could be recouped through the resale of a foreclosed property. The city claimed the violations created a common law public nuisance that lowered property tax revenues, increased police and fire expenses, and added other administrative costs. The parties resolved claims arising from any individual code violations and associated fines attached to properties named in the complaint. The district court rejected the city’s claim as a matter of law. The Sixth Circuit affirmed. The economic-loss doctrine forecloses the claim for damages for a qualified public nuisance under Ohio law. The doctrine bars tort plaintiffs from recovering purely economic loss that “do[es] not arise from tangible physical injury” to persons or property. Absent allegations of an intentional nuisance or an inherently dangerous context, the city cannot pursue an absolute nuisance claim. The city did not identify specific nuisance properties and offered no evidence that the alleged “policy” of selective non-compliance with health and safety codes will inevitably result in a public nuisance. View "City of Cincinnati v. Deutsche Bank National Trust Co." on Justia Law

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LCS, a nondenominational Christian school in Livingston County, Michigan, sought to relocate after operating for several years in Pinckney, LCS entered into a lease agreement to operate its school on the property of Brighton Nazarene Church in Genoa Charter Township. The Township informed LCS that an amended special-use permit was required. The Church applied for a permit on LSC’s behalf. The Township denied the application, citing traffic concerns, inconsistency with the surrounding area’s single-family residential zoning, the failure of the Planning Commission’s proposed conditional approval to mitigate these problems, and the Church’s history of noncompliance with the zoning ordinance and with conditions on its prior special-use permits. The district court rejected, on summary judgment, LCS’s claim that the denial violated the Religious Land Use and Institutionalized Persons Act, 42 U.S.C. 2000cc. The Sixth Circuit affirmed. When a religious institution has an available alternative outside of a desired jurisdiction, and where the distance from the desired location to the alternative property is reasonably close, the artificial boundaries of a particular jurisdiction become less important. The record here does not indicate that traveling roughly 12 miles to Pinckney would be unduly burdensome to LCS’s students. Nor does the record demonstrate that LCS’s religious beliefs required it to locate within Genoa Township. View "Livingston Christian School v. Genoa Charter Township" on Justia Law

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Debtor-landlord did not retain sufficient rights in rents assigned to lender for those rents to be included in landlord's bankruptcy estate. Town Center owns a 53-unit Shelby Township residential complex; its construction was financed by a $5.3 million loan owned by ECP. The mortgage included an assignment of rents to the creditor in the event of default. Rents from the complex are Town Center’s only income. Town Center defaulted. ECP sent notice to tenants in compliance with the agreement and with Mich. Comp. Laws 554.231, which allows creditors to collect rents directly from tenants of certain mortgaged properties. ECP recorded the notice documents as required by the statute. ECP filed a foreclosure complaint. A week later, Town Center filed for Chapter 11 bankruptcy relief, then owing ECP $5,329,329 plus fees and costs. The parties reached an agreement to allow Town Center to collect rents, with $15,000 per month to pay down the debt to ECP and the remainder for authorized expenses. Town Center’s bankruptcy petition resulted in an automatic stay on the state-court case, 11 U.S.C. 362(a). ECP unsuccessfully moved to prohibit Town Center from using rents collected after the petition was filed. The district vacated. The Sixth Circuit reversed; Town Center did not retain sufficient rights in the assigned rents under Michigan law for those rents to be included in the bankruptcy estate. View "In re: Town Center Flats, LLC" on Justia Law

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In 2014, Brown filed a voluntary Chapter 7 bankruptcy petition, disclosing her ownership of a residence in Ypsilanti, Michigan, valued at $170,000 and subject to $219,000 in secured mortgage claims held by two separate creditors. Brown’s initial petition stated her intent to surrender her residence to the estate and did not claim any exemptions for the value of her redemption rights under Michigan law. The Trustee sought the court’s permission to sell the house for $160,000 and to distribute the proceeds among Brown’s creditors and professionals involved in selling the home. Brown objected and sought to amend her initial disclosures to claim exemptions for the value of her redemption rights (about $23,000) under Mich. Comp. Laws 600.3240, citing 11 U.S.C. 522(d). The bankruptcy court granted the Trustee permission to sell the property and denied Brown’s requested exemptions. The district court and Sixth Circuit affirmed, reasoning that Brown lacked any equity in the property after it sold for substantially less than the value of the secured claims. View "Brown v. Ellmann" on Justia Law

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Plaintiffs each owned real property in Van Buren County, Michigan in but failed to pay property taxes for 2011. In 2012, the properties became subject to forfeiture and foreclosure. In 2014, the circuit court issued a foreclosure judgment; title to the properties passed in fee simple absolute to the county. Months later, the county sold the properties at an auction. The minimum bid for each of the properties was calculated by totaling “[a]ll delinquent taxes, interest, penalties, and fees due on the property” plus the “expenses of administering the sale, including all preparations for the sale.” Wayside Church’s former property had a minimum bid of $16,750, but sold for $206,000. The minimum bid for the Stahl property was $25,000; the property sold for $68,750. The Hodgens property required a minimum bid of $5,900, but sold for $47,750. Plaintiffs sought return of the surplus funds, citing 42 U.S.C. 1983, and alleging that they had a cognizable property interest in their foreclosed properties and in the surplus proceeds generated by the sales, so that Defendants were required to pay just compensation under the Fifth Amendment. The Sixth Circuit vacated dismissal for failure to state a claim and remanded for dismissal for lack of subject matter jurisdiction. the district court erred in finding that the claims were not barred by the Tax Injunction Act, 28 U.S.C. 1341, and the doctrine of comity. View "Wayside Church v. Van Buren County" on Justia Law

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In 1949, the federal government deeded a large parcel to the Muskingum Watershed Conservancy District (MWCD), the entity responsible for controlling flooding in eastern Ohio. The deed provided that the land would revert to the United States if MWCD alienated or attempted to alienate it, or if MWCD stopped using the land for recreation, conservation, or reservoir-development purposes. MWCD sold rights to conduct hydraulic fracturing (fracking) operations on the land. Fracking opponents discovered the deed restrictions and, arguing that MWCD’s sale of fracking rights triggered the reversion, filed a “qui tam” suit under the False Claims Act, 31 U.S.C. 3729. alleging that MWCD was knowingly withholding United States property from the government. The Sixth Circuit affirmed dismissal of the claim. The court noted recent legislative amendments that replace a fraudulent-intent requirement in two FCA provisions with a requirement that the defendant acted “knowingly,” but concluded that the plaintiffs failed to state a claim even under the more lenient scienter requirement; they did not specify whether or how MWCD knew or should have known that it was in violation of the deed restrictions, such that it knew or should have known that title to the property reverted to the United States. View "Harper v. Muskingum Watershed Conservancy District" on Justia Law

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East of Youngstown’s Center Street Bridge, Allied owns land containing the “LTV tracks.” Mahoning Railroad Company has an easement to use those tracks. Mahoning began parking rail cars on the tracks, which Allied considered a violation of the easement. A state court referred the matter to the Surface Transportation Board. Allied challenged the Board’s jurisdiction, arguing that the tracks were “spur, side, or industrial tracks,” excepted tracks under 49 U.S.C. 10906. The Board concluded (erroneously) that it had previously authorized Mahoning to provide common-carrier service using the LTV tracks; that Mahoning, therefore, was a “railroad carrier”; and that the easement did not forbid the use. Allied introduced an affidavit from a former Mahoning employee, asserting that the LTV tracks had been built as part of a strictly in-plant system and were never subject to Board control, then argued that the LTV tracks were private tracks outside the Board’s jurisdiction, rather than excepted tracks. The Board agreed that it had not authorized Mahoning to use the tracks, but concluded that the LTV tracks were mainline tracks, over which it had jurisdiction. Because Allied waited five years to clarify its position, the Board did not consider the “new evidence” and reaffirmed. Mahoning alleges that it owns lot 62188, west of the bridge; Allied alleges that it bought the lot and sought to evict Mahoning. The Board concluded that the 62188 tracks are either excepted or mainline tracks, within its jurisdiction, and remanded to state court for determination of land title. The Sixth Circuit denied an appeal. Mahoning’s use of the tracks fits the statutory definition of “transportation by rail carrier . . . by railroad” and is within the Board’s jurisdiction View "Allied Erecting & Dismantling Co., Inc. v. Surface Transp. Bd." on Justia Law

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In 2006, plaintiffs procured a mortgage from Regions to purchase a home near the Cumberland River. The National Flood Insurance Act (NFIA) requires mortgagors to obtain flood insurance for properties in flood zones, 42 U.S.C. 4012a(b)(1). CoreLogic provided Regions with flood-zone certification. The National Flood Insurance Program Flood Insurance Rate Map (FIRM) showed that the property was in a Special Flood Hazard Area (SFHA), but CoreLogic informed plaintiffs that their property was in a non-SFHA zone. FEMA issued a revised FIRM for the area months later. Regions informed plaintiffs that their home was in a flood zone and that they must procure flood insurance within 45 days. Plaintiffs hired Vandenbergh, who procured for them a Nationwide Standard Flood Insurance Policy for a home constructed before the effective FIRM. Plaintiffs’ home, built in 1984, after the 1981 FIRM, required a post-FIRM policy, under which they could receive full coverage only after obtaining an elevation certificate showing sufficient elevation above the base flood zone. A 2010 flood submerged plaintiffs’ home in 16” of water. Nationwide informed plaintiffs of pre-/post-FIRM discrepancy and required an elevation certificate, which showed that the home’s lower level was below the base flood-zone elevation. Because plaintiffs’ home was post-FIRM and situated below the base flood-zone elevation, their SFIP did not cover all losses “below the lowest elevated floor.” FEMA upheld Nationwide’s coverage determination. The Sixth Circuit affirmed partial summary judgment for Vandenbergh, but vacated dismissal of claims against Regions, CoreLogic, and Nationwide. The NFIA did not preempt state-law claims arising from procurement of the SFIP: that plaintiffs would not have purchased their home absent defendants’ negligence and breach of fiduciary duty. View "Harris v. Nationwide Mut. Fire Ins." on Justia Law