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Wednesday, August 3rd, 2011

When you own land, you need a right of access.

VALPARAISO, IN–In August 1985 John and Susan Hall acquired two parcels here in rural Indiana, one fronting County Road 50 North and the other 800 feet to the rear. Neighbors to the east were John’s brother and his wife.

The rear parcel, shown highlighted, with the front (Wilusz) parcel above it and the eastern (Luna) parcel to its right. The public road is at the top of this image.

John and Susan soon mortgaged the front parcel and built a home.

Our story continues in 1998, when John and Susan were delinquent and their mortgage lender, First Federal Savings, filed a judicial foreclosure action. In March 1999, the front parcel was sold at sheriff’s sale and promptly resold to William and Judith Wilusz.

John and Susan remained owners of the rear parcel, about two acres, which was undeveloped. By 2007, they determined to sell the property but, problem was, there was no legal right of access to connect it with the public road. The Wiluszes would not grant an easement over the front parcel, and the eastern parcel was now owned by Benjamin Luna who likewise denied the Halls’ plea for an easement. So the Halls filed suit against the Wiluszes and Mr. Luna, seeking an “easement of necessity.”

The trial court ruled in favor of defendants Wilusz and Luna, reasoning that the Halls had failed to arrange for access when they easily could have, and waited too long to raise the issue with innocent newcomers Wilusz and Luna. The Halls appealed.

The Court of Appeals reversed in part (against Wilusz), and affirmed in part (for Luna).

Porter County Courthouse, at Valparaiso, Indiana

The Court explained that an easement of necessity may arise, by implication, when land under a “unity of title” (having one owner) is divided “in such a way as to leave one part without access to a public road.” In such a case, the law presumes an intention of the owner that none of the land be made inaccessible by the division.

In this case, the effect of the mortgage against the front parcel, and subsequent foreclosure and sale to Wilusz, was to render the rear parcel inaccessible. It follows that an easement of necessity was created, by operation of law, over the Wilusz parcel at the time the Halls’ ownership of the two parcels was “divided,” and this easement benefits the rear parcel indefinitely even as one or both parcels are acquired by new owners.

The Luna parcel, on the other hand, was never owned by John and Susan Hall and, the Court said, “an easement of necessity cannot arise against the lands of a stranger.”

Moral: Key words here are “easement by implication,” and “unity of title.” The common law favors productive use and enjoyment of land, hence this rule to preserve rights of access when lands are divided and dealt off.

A legal right of access to land is typically covered by title insurance, at least in subdivisions and established neighborhoods. But real estate buyers and investors should always assure themselves that covered or “legal” access meets expectations.

The case is William C. Haak Trust v. Wilusz, ___ N.E.2d ___, 2011 WL 1842735 (Ind. App. 2011).

Rules of the Road

Sunday, June 6th, 2010

A fixed easement blocks development.

WASHOE VALLEY, NV–Washoe Valley lies east of the Sierra Nevada mountains, midway between Reno and Carson City.  It’s a scenic place, with native pines, panoramic views and, until recently, few residents.

Washoe Valley, Nevada

But with a gaming capital up north, and the state capitol to the south, Washoe Valley is attracting developers who want to exploit its obvious growth potential.

The push for “growth” has been strongly opposed by long-time residents, who fear losing their rural lifestyle and dread “urbanization.”

Battle lines have been drawn, and in the face of local opposition developers have gone to court to advance their interests.  Some have filed lawsuits to force municipal entitlements, such as water and sewer services, for new subdivisions.

One prominent developer here is St. James Village, Inc., owner of a 1,600 acre project known as “St. James’s Village.”  St. James’s Village is a master-planned gated community of custom homesites, on acre-sized lots.

Main Gate to St. James's Village

On St. James’s drawing board is a plan to subdivide one of its parcels into 28 lots.  This parcel is adjacent to lands owned by families named Cunningham and Saladin (collectively, the Cunninghams).

In 1974, a predecessor of the Cunninghams acquired an easement over what is now the St. James parcel to provide access for the Cunninghams’ properties to an existing road, now known as “Joy Lake Road.”  The deed creating this easement used a metes and bounds description, making it clear where the easement would be located on the ground.

In drawing their subdivision plan, St. James determined they would have to relocate the 1974 easement in order to create 28 buildable lots, instead of a lesser number.  So the plan was drawn with a curved road to replace the easement, still connecting Joy Lake Road to the Cunninghams’ properties.

The St. James Parcel, showing Joy Lake Road (top), the 1974 easement (yellow), and the proposed relocated road (red). The Cunninghams' properties are lower right (not shown). (Click to enlarge.)

Problem was, the Cunninghams would not agree.  So St. James filed a lawsuit against the Cunninghams, contending “property owners can unilaterally relocate easements, if such relocation does not materially inconvenience the easement holder, in order to allow the development of their property.”

The Cunninghams responded, denying “inconvenience” as the issue, and instead asserting an absolute right to keep the easement in place based on Nevada case precedents.  Mainly, the 1969 case of Swenson v. Strout Realty, Inc., holds that location of an easement, once selected, cannot be changed by either the owner of the burdened property or an owner of benefited property without consent of the other.

The trial court ruled for the Cunninghams, and the case headed up to the Nevada Supreme Court.

While acknowledging Swenson and other precedents, the Supreme Court said the traditional rule no longer reflects public policy, and it fails to fairly deal with interests of a land owner and easement holder as they may change over time.

So the Court announced a new rule, holding an easement may be unilaterally relocated when no one’s rights will be impaired; except that an easement created with an agreed-upon location or dimensions cannot be changed without mutual consent of the land owner and easement holder.

In this case the 1974 easement was created with a fixed location and dimensions, so it can’t be relocated by St. James acting unilaterally.  Back to the drawing board.

1974 easement deed, showing metes and bounds description. (Click to enlarge.)

Moral:  This new rule in Nevada follows a modern trend to allow relocation of easements, while giving deference to the intentions of parties who created the easement.

This is basic contract law, and it hews to the rules of interpretation of contracts.  It’s a little known secret that much of “real estate law” is simply contract law, applied to real property.

The case is St. James Village, Inc., v. Cunningham, 210 P.3d 190 (Nev. 2009).