Real Estate Law Final

Associated Builders, Inc. v Coggins
-Contractor sued retail business owner for balance on grounds that late final payment breached accord
-Tardiness (of three days) was not a material breach
-Breach must be material (so serious that it threatens the transaction)
-Even if material breach occurred contractor waived contractual right from breach by accepting payment
-Contractor was estopped from demanding strict performance of contract
Barney v. McLaughlin
-Older of junior deed of trust sought declaration that modifications to senior deed of trust warranted rearrangement of priorities
-Also sought a temporary restraining order to prohibit foreclosure of senior deed of trust
-Court granted the temporary restraining order
-Burneys sold front parcel for cash and lien of second deed of trust on property
-One year later the buyers borrowed more money from bank to refinance debt and construct additional units
-Secured against the property
-Burneys executed a Subordination Agreement
-Buyer defaulted and bank went to foreclose
-Burneys wanted to block the foreclosure, argued that the Subordination Agreement was void
-“If a senior mortgage or the obligation it secures is modified by the parties, the mortgage as modified retains priority against junior interests in the real estate, except to the extent that the modification is materially prejudicial to the holders of such interests and is not within the scope of a reservation of the right to modify as provided”
-There was material impairment – increased interest diminished the value of what the Burneys were owed
Dunlap v. Hinkle
-Mechanic’s lien claimants filed lien against respective property interests of lessee and lessor
-Supreme Court held complaint sufficiently alleged a contract
-Mechanic’s lien that binds interest of owner of real estate must be based on contract
-Contract read, “Any improvements made to lease premise shall, upon termination of lease, become property of lessor”
-Lessor hired appellants to do electrical and carpentry work
-Lessor went out of business and owed merchants
-There was evidence mechanic act for the lessor
-Court concluded mechanic should not be precluded from lien since the lessor took ownership of repairs
National Bank of Washington v. Equity Investors
-Columbia Wood Products completed work
-Received partial payment but much was due at completion
-Columbia’s claim of lien superiority based on contention that the advances made by the bank under the construction loan agreement as the work progressed were optional advances that could not have been enforced by the bank
-Mechanic’s materials went into the project to increase bank security
-If under the contract the advances are optional and not obligatory, then the lien priority for the advances is determined as of the time the advances are actually made
-Lender had right to withhold money from borrower and right to apply money to Columbia
Irwin Concrete v. Sun Coast Properties
-Subcontractor contends his lien was not foreclosed by the trustee sale because it was senior to that of the construction lender
-Unlike previous case contract between lender and developer did not allow Continental to disburse funds based on own criteria
-Lender was not free to advance or retain money as it saw fit
Comerica v. Harris
-First and second mortgagee sought award of rents from real property after mortgagor’s default
-Rents awarded rents to borrower (mortgagor), who was in actual possession of property
-Mortgagee must be in possession of property before it can collect rents; or, mortgage agreement must permit mortgagee to obtain prejudgment possession
-Mortgagee not entitled to rents until mortgagee or receiver appointed on mortgagee’s behalf has taken actual possession of the property after default
SEC v. MJ Howey Company
-Orange groves were sold to out-of-state purchasers along with management agreements
-Profits pooled a distributed
-Court said investment contract is any transaction in which:
-1. A person invests money
-2. In a common enterprise
-Horizontal commonality: profits distributed pro rata
-Vertical commonality: focuses on relationship among invests
-Some courts require at least vertical commonality, some courts require both
-3. Is led to expect profits (or a change in investment position)
-4. Solely from the efforts of others
Aldrich v. McCulloch
-Determined that sale of lots could be considered a security based on investment intent
-Developer promised an appreciation of value
-Purchase not deemed a security if for residential purposes
Adam v. Cavanagh Communities
-95% of lots to-be-developed sold to out-of-state investors
-¾ criteria met
-Common enterprise up for debate
-Value of properties rose and fell together
-Considered an investment contract
Wade v. Jobe
-Jobe rented house from Wade
-Jobe discovered defects after taking occupancy
-Sewage in basement made property unfit for human occupancy (landlord unable to rectify situation after numerous attempts)
-Tenant had not been paying rent due to problem
-Tenant moved out and Wade sued for unpaid rent
-Landlord awarded rent in trial court, but the concept of warranty of habitability was consistent with widespread housing codes
-Case was returned to trial court for reconsideration
Harrison v. Housing Resource Management
-Tenant and daughter sued property manager after daughter was sexually assaulted at apartment complex
-Circuit Court found in favor of tenant
-Tenant and daughter appealed, seeking a new trial on the issue of damages
-Court held that:
-A rational jury could not decline to award the tenant and her daughter damages for pain and suffering after accepting the evidence offered in support of the claim for medical expenses
-Remand was necessary for a new trial on liability and damages, not just on damages
-However, appellants not entitled to a new trial on damages alone
-New trial on issues is required
-Trial court erred in excluding from evidence police incident reports revealing the crimes that occurred on the premises
Home Rentals Corp. v. Curtis
-Landlord brought action against tenants for breach of lease, and tenants counterclaimed for constructive eviction
-Circuit Court found in favor of tenants and the landlord appealed
-Appellate Court held:
-There was constructive evication
-Supported award of damages
-Construction eviction where landlord has done something of grave and permanent character with intention of depriving tenant of enjoyment of premise
-Tenants were paying $740 per moth for a home with sewage in the basement
-House also inhabited by roaches
-Tenant must give lessor reasonable opportunity to correct defects to claim constructive eviction
-Must vacate property to claim constructive eviction
-Constructive eviction relieves tenant of responsibility to pay rent
Holy Properties Ltd., v. Kenneth Cole Productions
-Commercial landlord brought action against tenant seeking rent arrears and damages
-County Supreme Court found in favor of landlord and the Court of Appeals upheld
-Landlord did not have duty to mitigate damages after tenant’s abandonment of premsises and subsequent eviction
-Provision of lease said tenant was liable for rent after eviction was enforceable
-Kenneth Cole leased the space for 10 years
-Defendant said owner did not mitigate dmamges
-Law says party subjected to injury should minimize extent of damages, although leases not subject to this general rule
-Owner could:
-Do nothing and collect rent
-Accept tenant surrender and re-let
-Notify tenant it was re-letting for tenants benefit
Jones v. O’Connell
-Parties to proposed sale of co-op residential apartment brought action against co-op corporation to block their disapproval of contemplated sale
-Jones wanted to buy another apartment in the building
-Sought monetary damages from individual directors
-Superior Court found in favor of directors
-Consent to allow co-op corporation to block certain activities
-Trial court made correct call that co-op corporation acted reasonably
-Consent of Board of Directors needed for all transfers of shares
-Consent clauses reasonable tailored to protection of legitimate interest of corporation
Pekelnaya v. Allyn
-Does proportionate interest in common elements of a condominium held by owners of individual units subject them to liability for injury sustained by their party?
-Fence fell from roof of condo and fell on father and son on sidewalk
-Each condo has about a 9% interest in common elements
-Unit owners said:
-No duty to maintain roof
-No prior notice to defects
-Access to roof restricted to two units (this argument thrown out)
-Multiple Dwelling Law places responsibility to maintain the premises in safe condition upon the owner
-Unit owners argued that according to Condominium Act, duty to maintain common elements is on the condominium’s board of directors
-The prerogative of a board of managers to conduct business as it sees fit is well established
-Since the owners have no control over, or direct responsibility for, the common elements and neither statutory nor common law renders and individual condo unit owner liable for injuries sustained as the result of defects in the common elements, the unit owners are not liable for the plaintiffs damage
Levandusky v. One Fifth Avenue Apt. Group
-Supreme Court of NY County directed lessee to restore a steam riser in his apartment to its original position and denied co-op corporation’s attempt to compel lessee to remove air conditioning units that allegedly violated landmark preservation regulations
-Supreme Court, Appellate Division affirmed placement of air conditioning claim, but annulled determination directing lessee to stop improvements
-Co-op corporation’s claim that lessee should be compelled to remove air conditioning units was properly dismissed
-Standard of review analogous to challenges to decisions of board of directors of residential co-op corporation, and thus, so long as board acted for purposes of cooperative, within scope of its authority, and in good faith, courts would not substitute their judgments for the board’s
-Co-op corporation’s board would not be precluded from rescinding decision approving renovations after lessee had spent considerable sums on renovations