Category: Real Estate Law

Landowner Responsible For Hazard On Someone Else’s Property

July 21, 2015

The Elephant Rock Beach Club is a private club in Massachusetts. It’s named after Elephant Rock, a natural formation about 250 feet offshore.

Many members swim out to the rock. One day a guest swam out to the rock, dove off it, and injured herself on a dangerous part of the rock that was submerged just under the water. She sued the club for not warning of the danger.

The club claimed that it couldn’t be held responsible for the accident because it didn’t own the rock. The rock was beyond its property line, in waters owned by the state.

But a federal court said that the club had effectively taken control of the rock, because it had established rules prohibiting small children from using it, and because lifeguards often whistled people away from it on days when there were difficult swimming conditions.

Although the rock wasn’t on the club’s property, the court said landowners sometimes have a legal duty to prevent people from being hurt on a neighboring property. For instance, it pointed to an earlier case where a city was sued for not putting up a fence between a city-owned playground and a railroad track.

Tax Free Gains from Home Sales

May 13, 2014

One of the most significant tax advantages to owning a home comes at the back end of ownership, when you decide to sell it for a profit. A homeowner can exclude up to $250,000 of such profit from the federal capital gains tax. For married couples filing a joint tax return, the exclusion jumps to $500,000.

This big tax break does come with some basic requirements. It applies to the sale only of a principal residence, not of a vacation home or investment property. With some limited exceptions for poor health, job changes, and unforeseen circumstances, the taxpayer must have owned and used the home as a primary residence for at least two of the five years preceding the sale of the home. (But the two years need not be an uninterrupted time span.)

If the history of the home includes some business use, the owner cannot exclude that part of the gain that is equal to the depreciation claimed while the house was used as rental property. This scenario could arise when the owner rents out the house for a period of time but then moves back in, sells it, and otherwise qualifies for the exclusion related to that sale.

There is another two-year rule that comes into play after a taxpayer claims the home-sale exclusion. There is no limit to the number of times that the exclusion can be claimed for multiple sales, but, as a rule, once the exclusion is claimed, the taxpayer must wait two years before claiming another such exclusion.

For a married couple to qualify for the exclusion, it is sufficient if either spouse meets the ownership requirement. However, both spouses must meet the use requirement. Neither spouse is rendered ineligible for the exclusion because he or she had already excluded the gain on a different primary residence during the two years preceding the date of the current sale.

Public Use Required for Eminent Domain

April 13, 2014

“Eminent domain” is the power of the federal, state, or local governments (and, in some limited circumstances, private parties, such as utilities and railroads) to take, or to authorize the taking of, private property for a public use without the owner’s consent and upon payment of just compensation. That right to compensation is rooted in the federal and state Constitutions. While the delegation of the power of eminent domain is for legislatures, the determination of whether the condemnor’s intended use of the land is for “the public use or benefit” is a question of law for the courts.

The public use or public benefit issue has spawned countless legislative and judicial reactions, especially since a controversial U.S. Supreme Court decision on the topic in 2005. In that case, owners of condemned property challenged a city’s exercise of eminent domain power on the ground that the takings were not for a public use but, rather, for the benefit of private developers.

The Court held that the city’s exercise of eminent domain power in furtherance of an economic development plan satisfied the constitutional “public use” requirement even though the city was planning to lease the condemned land to private developers for execution of the city’s plan. The plan nonetheless served a public purpose, in the form of enhanced economic development, including such beneficial effects as the increased tax revenues and new jobs expected to come with such redevelopment.

Recently a city withstood a similar challenge to its use of eminent domain to acquire an easement on a private landowner’s property in order to expand a sewer system by connecting city-owned property to a sewer pump station underneath the landowner’s property. The taking was for a public use even though the city ultimately planned to sell its property to a private affordable housing developer, because the sewer easement area would be available to the public at large in accordance with the appropriate rules, regulations, and standards of a metropolitan sewer district.

Apart from the constitutional requirements, the taking of the easement satisfied a state statutory mandate that a taking by a governmental entity must be for a “public use or benefit.” Under the public benefit test for eminent domain, the city’s desired use of the condemned property was for “the public use or benefit” because that use would contribute to the general welfare and prosperity of the public at large, not just particular individuals or estates.

In the case before the court, extending the sewer lines would allow development of the city’s neighboring property, which the city sought to sell to the private developer to construct affordable housing. The existing pump station had sufficient capacity to service the city’s land, and requiring the city instead to construct a sewer pump station on its land would have resulted in wasteful and unnecessary duplication of the city’s resources. These facts added up to a public use or benefit justifying the taking, notwithstanding some benefits undeniably accruing to private parties as well.

Homeowner’s Associations Can Regulate Common Areas

October 13, 2013

Kirk owned a home in a residential community that was overseen by a homeowners association. His property abutted one of a handful of lakes in the community. Legally, the lakes were regarded as common areas controlled by the association. When Kirk bought his home many years ago, the only recorded document imposing restrictions on his use of the property was a two-page document with general restrictions for all homeowners in the community. The only mention of the lakes was an irrelevant limit on how far a boat pier could extend into a lake.

The association amended its rules to prohibit the use of pontoon boats having more than two pontoons on the lake next to Kirk’s property. As it happened, Kirk had planned to use just such a vessel, called a “tritoon boat,” on that lake. When the association expressed its determination to enforce its regulation, litigation ensued.

Kirk’s strategy, which, with the benefit of hindsight, may have been flawed, was to argue that the association did not have the power to impose the ban on tritoon boats, because there was nothing in the recorded covenants that referred to or authorized such a restriction. The court that ruled against him at least intimated that his lawsuit may have gained more traction had he challenged the regulation as unreasonable, even if it was within the association’s powers.

It is a legal truism that restrictive covenants should be strictly construed in favor of full and unlimited use of property by the property owner and that restrictions against the free use of property are generally not favored. However, these brakes on the power of homeowners associations usually are applied to restrictions that are imposed on a homeowner’s use of his own property.

In this case, the lake was common property for the benefit of all in the community and subject to management by the association; it was not Kirk’s property. The absence of any explicit references to pontoon or tritoon boats in the recorded covenants was not fatal to the association’s position. The homeowners association had the responsibility of administering the lakes for the common good of the members, and with that responsibility came the implicit power to make reasonable regulations regarding the use of that common property. Kirk would have to settle for the usual two pontoons on his boat.