Keeping Current - Property

Keeping Current—Property Editor: Prof. Daniel B. Bogart, Chapman University School of Law, One University Drive, Orange, CA 92866, bogart@chapman.edu. Contributing editors: Prof. James C. Smith and Prof. William G. Baker.

Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

CASES

DEEDS: Conveyance to railroad creates fee simple determinable. The Paul Bunyan State Trail, 100 miles in length, runs from Baxter to Bemidji, Minnesota. (See http://paulbunyantrail.com.) In 1991, the state Department of Natural Resources (DNR) opened the trail on an abandoned railroad line, which it purchased from Burlington Northern for $1.5 million. In 1998, the owners of adjoining tracts of land blocked the trail. The DNR brought an action against the landowners to quiet title. The case turned on the interpretation of an 1898 deed, which granted railway rights to a predecessor of Burlington Northern.

The deed conveyed “a strip, belt or piece of land, one hundred feet wide, extending across” described lands and “[p]rovided that this Grant or Conveyance shall continue in force so long as the said strips of land shall be used for Right of Way and For Railway purposes; but to cease and terminate if the Railway is removed from the said strips.” The grantors’ wives signed the deed to convey their rights of dower. The landowners claimed the deed conveyed an easement, which Burlington Northern abandoned in the 1980s when it discontinued railroad service and removed the rails and ties. The court, however, held that the deed conveyed a fee simple determinable, focusing upon the “so long as” clause as a traditional marker of a determinable estate. The court also observed that the release of dower rights and the grant of a “strip . . . of land,” rather than the grant of a right-of-way, pointed against the easement interpretation. The fee simple determinable interpretation was fatal to the landowners’ case. They lost their possibility of reverter by application of the Minnesota Marketable Title Act, which terminates interests that are not re-recorded in the present owner’s chain of title, going back to a root of title over 40 years old. Many courts throughout the United States have struggled with the construction of ambiguous railroad deeds. The results are difficult to reconcile, often turning on fine nuances in language. A dissenting justice criticized the majority for failing to follow Minnesota precedents, which had uniformly identified ambiguous railway grants as easements. The outcome is a victory for rails-to-trails advocates, but does nothing to rationalize decision-making in the area. State v. Hess, 684 N.W.2d 414 (Minn. 2004).

EASEMENTS: Easement implied from prior use is created when probate court partitions land among heirs. A landowner died intestate. In 1942, a probate court divided the land into three parcels, which it distributed under an agreement among the heirs. An existing unpaved private road crossed all three parcels, providing access to a public road, but no easement was recorded to benefit the interior parcels. In 1998, the owners of the frontage parcel blocked use of the unpaved road by the owners of an interior parcel. The owners of the interior parcel claimed an implied easement. The owners of the frontage parcel argued that an easement by implication is based upon the grantor’s intent, which was lacking, because the intestate never intended to convey the land to his heirs or to partition his land. In a case of first impression for California, the court found an implied easement. It stated that the intestate’s lack of actual intent did not prevent an implied easement when all the other essential elements were satisfied. The result is consistent with decisions in the handful of states that have addressed claims of implied easements upon the division of land by court order. Larsson v. Grabach, 18 Cal. Rptr. 3d 136 (Cal. Ct. App. 2004).

ESCROWS: Escrow agent may not disburse earnest money to seller upon buyer’s apparent default, unless buyer consent to disbursement or the parties’ contract clearly allows that disbursement. A contract of sale for an apartment complex provided that “[t]he earnest money shall be held by [the broker] for the mutual benefit of the parties.” At the buyer’s request, the seller granted two extensions, which postponed the scheduled closing date from July to December 1998. The seller refused to grant further extensions. In April 1999, the broker disbursed the earnest money ($40,000) to the seller, over the buyer’s objection. The broker relied upon a letter from the buyer, which acknowledged that the earnest money was liquidated damages. The broker also obtained an indemnity from the seller covering any claims against the broker arising out the disbursement. The buyer sued the broker. The trial court ruled that the broker breached its fiduciary duty by making the disbursement and granted judgment for the amount of the earnest money. The appellate court affirmed the finding of breach of duty but remanded for a re-determination of damages. The buyer incurred little or no damage if the seller had the right to collect the earnest money as liquidated damages. International Capital Corp. v. Moyer, 806 N.E.2d 1166 (Ill. App. Ct. 2004).

MINERALS: Mineral owner may recover damages for conversion of sand and gravel even if zoning ordinance prohibits mining. A 1990 deed contained a broad reservation of minerals, expressly including sand and gravel. In 1993, the city where the land was located rezoned the property for residential use, prohibiting all mining activity. In 1999, a successor to the grantee began a residential development. As part of the grading and filling work, the developer exported sand and gravel to an adjoining parcel. The trial court dismissed the mineral owner’s trespass action, accepting the surface owner’s innovative argument that the zoning ordinance was an illegal regulatory taking of the mineral rights, and thus the subsequent removal of sand and gravel caused no damage. Alternatively, the trial court held there was no damage, because the surface owner was entitled to subjacent support, thus precluding the mining of sand and gravel. The state supreme court disagreed with both holdings, concluding that the mineral estate owner still owned the sand and gravel, regardless of whether the zoning ordinance amounted to a taking. Likewise, the court considered irrelevant the issue of subjacent support. The sand and gravel had value, regardless of whether mining was practical without removing subjacent support. Saddle Mountain Minerals, L.L.C. v. Joshi, 95 P.3d 1236 (Wash. 2004).

MORTGAGES: Lender pays $6 million in punitive damages for unfair debt collection practices. Many lenders and other merchants insert mandatory arbitration clauses in their form contracts in the belief that they are limiting their financial exposure by avoiding the hazards of juries and judicial review. It does not always work out that way. A mortgage company, EMC, purchased a mortgage loan covering the borrowers’ principal residence. The borrowers entered bankruptcy. Their attorney notified EMC that he represented the borrowers with respect to bankruptcy proceedings and the loan, advising EMC not to contact the borrowers directly. Ignoring this command and repeated reminders, over the next two years EMC and its attorneys contacted the borrowers by mail, telephone, or in person at least ten times. The borrowers filed suit against EMC and its attorneys in federal district court, alleging violations of the Fair Debt Collection Practices Act (FDCPA). After the filing, EMC continued to contact the borrowers directly. Under an arbitration clause in the mortgage, EMC had the court refer the dispute to an arbitrator. Meanwhile, the bankruptcy court lifted its automatic stay, allowing EMC to begin foreclosure proceedings on the borrowers’ home. The borrowers were temporarily living in another residence, but had not surrendered possession of their home. While arbitration was pending, EMC forcibly entered the home and posted a sign in the front window indicating the “Property has been secured and winterized. Not for sale or rent. In case of emergency call [name and phone number].” After the unlawful entry, the borrowers amended their complaint to allege intentional torts and to seek punitive damages. The arbitrator found EMC violated the FDCPA and awarded a total of $4,000 in statutory and actual damages, plus attorney’s fees and arbitration costs. The arbitrator also awarded $6 million in punitive damages, finding EMC’s conduct “reprehensible and outrageous.” EMC successfully challenged the punitive damage award in district court based upon a provision in the parties’ arbitration agreement, which denied the arbitrator the power to award “punitive . . . damages . . . as to which borrower and lender expressly waive any right to claim to the fullest extent permitted by law.” The court of appeals, however, reinstated the punitive damage award. Missouri law, which governed the transaction under the express terms of the parties’ contract, invalidated the waiver. The exoneration of future liability for intentional torts is not allowed. Moreover, the court rejected the lender’s claim that the $6 million award was excessive in amount, because judicial review of an arbitrator’s judgment is extremely limited. Stark v. Sandberg, Phoenix & von Gontard, P.C., 381 F.3d 793 (8th Cir. 2004).

OPTION CONTRACTS: Seal does not substitute for consideration. Generally, an option contract to buy real estate is revocable unless the optionee has paid consideration. Standard principles of contract law determine whether the consideration requirement is satisfied. At common law, an exception traditionally exists for option contracts executed under seal. Proof of consideration is unnecessary; the seal substitutes for consideration. This historic rule was reexamined in the context of a lease of real property. A tenant entered into a written lease for office space. The tenant did not pay monetary rent, but periodically provided services for the landlord. One year later, the landlord gave the tenant a right of first refusal to purchase the landlord’s property. This transaction was documented by an instrument reciting that it was executed “under seal” and “[f]or good and valuable consideration, the receipt whereof is hereby acknowledged.” The document was notarized and recorded. Subsequently, the landlord contracted to sell the property to a third party, subject to the tenant’s right of first refusal. Litigation involving all three parties ensued. The third-party buyer claimed that the tenant’s right of first refusal was invalid because of the lack of consideration. The lower courts held for the tenant, applying the common-law rule that a seal substitutes for consideration. The Massachusetts Supreme Judicial Court abolished the rule, reasoning that the seal is a formality that has “lost all practical utility.” The tenant, nevertheless, prevailed. The court refused to apply its decision retroactively because of the possibility that the tenant had relied upon the common-law rule. Knott v. Racicot, 812 N.E.2d 1207 (Mass. 2004).

SALES CONTRACTS: Buyer may rely on seller’s representations about soil tests without making independent investigation or checking public records. A sales contract covered two residential lots, improved only with an old cabin that the buyer planned to remove. Before contracting, the seller represented that he had soil tests revealing that the land “perked” (that is, had percolation) sufficiently for the installation of a septic system. The seller also represented that there already were two septic tanks on the property, which were still usable, because the county had “grandfathered” them. The seller repeated these representations several times. The contract provided that the property was being sold “as is,” and the buyer waived her right to receive a Residential Property Disclosure Statement. After closing, the buyer discovered that both representations were false. The buyer sued for fraud and for violation of the North Carolina Residential Property Disclosure Act. The trial court granted the seller a directed verdict on the fraud claim on the ground that the buyer’s reliance on the seller’s knowing misrepresentations was unreasonable. County health department records showed that the soil tests were unsatisfactory and that the existing septic tanks were not “grandfathered.” The appellate court reversed. Although a buyer’s reliance is usually deemed unreasonable when the buyer fails to make any independent investigation, here a jury could find no investigation was necessary because of the repeated and unequivocal nature of the seller’s representations. The buyer, however, had no claim under the Disclosure Act. The Act expressly grants the buyer the right to cancel the contract if the seller fails to deliver a disclosure statement before or at the time the buyer makes an offer to purchase the home. The court decided that cancellation is the buyer’s exclusive remedy for failing to deliver a disclosure statement. Little v. Stogner, 592 S.E.2d 5 (N.C. Ct. App. 2004).

SUBDIVISION REGULATIONS: Neighbor lacks standing to challenge illegal subdivision located on adjoining parcel. A 15-acre tract of land was ineligible for subdivision, because it lacked sufficient frontage on a public road. A subdivision ordinance, enacted under a state enabling act, provided an exception for a “family subdivision.” To qualify, lots could only be conveyed to members of the owner’s family. The ordinance prohibited use of a family subdivision to circumvent the generally applicable subdivision regulations. The conveyance by a family grantee to an outsider within one year after the county’s approval of the subdivision raised a presumption of intent to circumvent the ordinance, authorizing the county to take remedial action, including vacating the subdivision. The owner of the 15-acre tract created a family subdivision and conveyed lots to her mother and sister. Eleven months later, the mother granted the owner a power of attorney, authorizing her to sell the lot on the mother’s behalf. Several months after that, the mother’s and sister’s lots were sold to an outsider. The county refused to take action against the owner or the outside grantee. Neighbors brought an action against the family members and the grantee but did not sue the county or any county officials. They claimed that the family had circumvented the ordinance, causing injury to their property rights by increasing traffic, increasing the withdrawal of groundwater through extra wells, increasing the load caused by septic tanks, and diminishing their privacy and seclusion. The court dismissed the complaint because the state enabling act did not create an express private cause of action. The local government has the sole power to enforce subdivision ordinances. The court did not discuss whether any type of action against the government, such as mandamus, might have succeeded. Shilling v. Jimenez, 597 S.E.2d 206 (Va. 2004).

TAKINGS: Down-zoning that cuts land value in half is not a regulatory taking. The city of Glenn Heights, in suburban Dallas, zoned a 236-acre tract of land for planned development in 1986, allowing a density of 5.5 dwelling units per acre. The original developer built homes on 43 acres at close to the maximum density and sold the remaining acreage to another developer in 1996. A 1995 land use plan called for reducing residential density throughout the city. Before closing the purchase, the developer met with city officials to ascertain whether zoning changes were being considered for his tract. He received assurances that nothing was in the works, but one month after he closed the city declared a moratorium on development for all planned development zones. The city periodically extended the moratorium. Before lifting the moratorium 15 months after its inception, the city rezoned the property, cutting the maximum density by approximately 50%. The developer claimed that both the moratorium and the down-zoning were unconstitutional under the state takings clause. The trial court found that the down-zoning, but not the moratorium, amounted to a taking and awarded $485,000 in damages. The state supreme court reversed, finding that neither action was a taking. The court looked extensively to U.S. Supreme Court cases for guidance in interpreting the state takings clause. The court concluded that the city’s actions substantially advanced legitimate governmental interests. The down-zoning applied to a number of other planned development tracts, and thus the city did not single out the developer for negative treatment. The rezoning had a severe economic impact on the developer and significantly interfered with his reasonable, investment-backed expectations. The jury found the rezoning reduced the market value of the tract by 50%, from $5,000 to $2,500 per acre. The developer, however, had purchased the tract at a bargain price of $600 per acre from a seller who was going out of business. The court counted in favor of the government the fact that the land value after rezoning still greatly exceeded the price paid by the developer. Sheffield Development Co. v. City of Glenn Heights, 140 S.W.3d 660 (Tex. 2004).

WATER: Nuisance liability exists under the “common enemy” rule, regardless of whether the landowner’s acts were undertaken for the purpose of disposing of surface water. A landowner cleared 40 acres of South Carolina timberland in order to use the parcel for farming. Two years later, heavy rains caused flooding of the neighbor’s lower-lying land. Silt and debris, in addition to water, flowed onto the neighbor’s land from the cleared parcel. The clearing activity had substantially increased the water runoff. The neighbor sued, alleging negligence, trespass, and nuisance. The trial court held for the defendant on the negligence and trespass claims but awarded $128,000 in nuisance damages based on a jury verdict. South Carolina follows the traditional rule that treats surface water as a “common enemy,” allowing a landowner to make improvements that alter the flow, notwithstanding injury to neighbors. Many states that follow the common enemy rule presently have a negligence exception. South Carolina has a similar exception: a landowner is liable if his flow-altering activities constitute a nuisance per se. The intermediate court of appeals reversed the nuisance judgment, holding that the common enemy rule did not apply because respondents were merely preparing the land for farming and did not intend to influence the course of surface water. Thus, the landowner had no nuisance liability. The supreme court reversed, holding the common enemy rule (and thus the nuisance exception) applied regardless of whether the landowner intended to alter the flow of surface waters. Lucas v. Rawl Family Limited Partnership, 598 S.E.2d 712 (S.C. 2004).

LITERATURE

Caveat Emptor; Property Disclosure Forms. In Property Condition Disclosure Forms: How the Real Estate Industry Eased the Transition from Caveat Emptor to “Seller Tell All,” 39 Real Prop. Prob. & Tr. J. 193 (2004), Professor George Lefcoe provides a revealing treatment of the doctrine of caveat emptor in residential purchase contracts, as well as the seemingly inexorable judicial march away from this doctrine to a regime of implied warranties and obligations to disclose defects. According to the author, the real estate industry has been (not surprisingly) unhappy with the trend and has responded by requiring sellers to complete disclosure forms. Professor Lefcoe addresses many of the harder questions that have arisen in the wake of this new practice. Here are just two examples: “Should sellers be excused from being required to complete disclosure forms if they pay for physical inspections of their properties?” and “Should sellers be required to disclose the existence of area-wide natural and man made hazards, even if they would need to pay firms to gather this information for the benefit of prospective buyers?” As to the first of these questions, Professor Lefcoe states that “the use of a professional home inspection does not replace the need for the seller’s property condition disclosures. Without the seller’s disclosures, many significant matters—from roof leaks to flawed foundations—could easily escape the attention of even the most astute inspector.” As to the second, he suggests that such a disclosure requirement (which in California is mandated by the Natural Hazard Disclosure Law) is a mistake. He identifies numerous problems. These include: the law is costly to sellers, who must hire businesses that provide specialized information that is the subject of the disclosure; “natural hazard disclosures lull some buyers into assuming that these reports can substitute for an on site geology study, but nothing could be farther from the truth”; and “Buyers can be informed about natural hazards in ways less costly than mandated disclosures.”

Construction Defect Law; Mandatory Dispute Resolution Statutes. Melissa C. Tronquet takes on the subject of residential construction defect law in There’s No Place Like Home . . . Until You Discover Defects: Do Prelitigation Statutes Relating to Construction Defect Cases Really Protect the Needs of Homeowners and Developers?, 44 Santa Clara L. Rev. 1249 (2004). Ms. Tronquet announces first that the inability of developers to obtain construction defect insurance at reasonable costs, or to obtain the coverage at all, has increased construction costs for homeowners and, in some cases, forced developers to avoid certain construction projects altogether. (The author suggests that condominium development has been hardest hit.) The article is not empirical in nature. Ms. Tronquet does provide sources for her assertions about insurance costs and development, but the reader will have to decide for herself whether the problem is as severe as described by the author. In any event, Ms. Tronquet briefly and capably explains the bases of construction defect law (express warranty, implied warranty, negligence, and strict liability). She then examines recent California legislation that requires homeowner associations to engage in certain mediation actions “before proceeding with formal defect claims against builders.” A chief goal of this legislation is the efficient resolution of disputes before trial. As revised in 2001, the “Calderon Process” requires, among other things, that associations give builders a 180-day period to resolve the process without litigation. In other words, the association cannot go rushing off to file a complaint without first engaging the builder in some level of negotiation. In fact, the parties are required to meet with a mediator. In 2002, California adopted the similar “Senate Bill 800” governing the ability of owners of noncondominium residences to file defect claims. Ms. Tronquet generally likes the statutes and trumpets their strengths. But she notes weaknesses, such as the four-hour cap on mediation time in Senate Bill 800. This may not be enough time for even the most capable mediator to bring parties together in a complex defects case.

Environmental Law; Brownfields Revitalization. Real property lawyers necessarily confront environmental law on a regular basis and must remain conversant in this morass of legislation to advance their clients’ interests. In The Brownfields Revitalization and Environmental Restoration Act: Landmark Reform or a “Trap for the Unwary”?, 12 N.Y.U. Envtl. L. J. 672 (2004), Casey Cohn explains that, in recent years, policymakers have become increasingly concerned about the “proliferation of abandoned or underdeveloped sites where the threat of potential liability under the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) has scared off developers and lenders.” These sites are commonly referred to as “brownfields.” Mr. Cohn’s purpose is to evaluate the Brownfields Revitalization and Environmental Restoration Act (BRERA), which was made law in 2002. This legislation is supposed to encourage development of brownfield sites by, among other things, releasing “prospective purchasers from CERCLA liability if they comply with certain requirements,” by clarifying existing exemptions, and by inducing “state involvement in environmental remediation.” As the author honestly admits, the law is still new and it is impossible “to assess its effects in any quantitative way.” The author briefly describes the background (the “brownfields crisis”) leading to the enactment of BRERA. The author then provides a well-drawn hypothetical transaction to flesh out the operation of the statute. Although Cohn identifies weaknesses, he is hopeful that the Act will ultimately serve its purpose. He states: “Especially read in light of the strong bipartisan support of its goals, BRERA should be a powerful tool in solving the brownfields crisis.”

Property Law; Basic Principles. Professor Nancy Perkins Spyke examines the constant, if unthinking, repetition of the idea that “land is unique” as the basis for judicial determinations in cases concerning breach of real estate sales contracts, zoning variance requests, and compensation claims resulting from condemnation actions, in her article What’s Land Got to Do with It? Rhetoric and Indeterminacy in Land’s Favored Legal Status, 52 Buff. L. Rev. 387 (2004). She rightly points out that a court might determine land to be “unique” in one setting (for example, for the purpose of providing specific performance to a buyer under a real estate purchase contract), yet an administrative board may determine that same parcel to be “not unique” in another setting (for example, in fixing compensation in a condemnation proceeding). Professor Spyke asserts that, although particular parcels may have unique attributes in the context of specific transactions, in most cases courts are more concerned with the benefits that land ownership confers on parties and not on the land itself. She would prefer courts to more honestly provide a rationale for providing specific performance, or for awarding compensation or damages, than to rely on the quick and easy truism that is the subject of her article.

Real Estate Closings; The USA PATRIOT Act. As noted in prior columns, 9/11 will continue to have profound consequences on the practices of real property lawyers. The USA PATRIOT Act adds a new complexity—the requirement that “persons involved in real estate closings and settlements” create procedures to prevent money laundering. Kevin L. Shepherd examines and criticizes this aspect of the legislation in The USA PATRIOT Act: The Complexities of Imposing Anti-Money Laundering Obligations on the Real Estate Industry, 39 Real Prop. Prob. & Tr. J. 403 (2004). Mr. Shepherd capably examines one of the primary objectives of the drafter of the legislation—depriving terrorist networks of the cash necessary to fund their deadly operations. He then explains how purchases and sales of real estate might be used by terrorists to launder money. Mr. Shepherd reviews the Act itself and notes that a key phrase, “persons involved in real estate closings and settlements,” is “bereft of any meaningful legislative history.” As well as is possible at this time, Mr. Shepherd provides advice to attorneys attempting to comply with the law. He is particularly concerned with the tension between the demands placed on lawyers by the Act and the existing obligations of a lawyer to maintain attorney-client privilege. This article should be mandatory reading for real estate lawyers generally.

Zoning; Board Bias. In their article, Is the Wheel Unbalanced? A Study of Bias on Zoning Boards, 36 Urb. Law. 447 (2004), Professor Jerry L. Anderson and Erin Sass address a problem that some lawyers consider endemic to the zoning process—board member bias in favor of development projects. The reader might relegate this article to the file marked “Tell me something I don’t know,” but this would be a mistake. Focusing on one jurisdiction (Iowa), the authors conducted a survey to “determine whether Iowa zoning boards fairly represent a cross-section of the community” and “whether, based on occupations of zoning board members, one could discern a systemic slant toward development interests.” On the one hand, the authors found that, especially in more rural areas, boards were fairly representational of the population. On the other, the authors state that “the majority of those sitting on zoning boards stand to benefit, either directly or indirectly, from development.” The authors acknowledge that some states and cities have enacted conflict of interest rules. Nevertheless, “the vast majority of cities . . . operate without any explicit conflict regulations.” Anderson and Sass make the problem of zoning board bias concrete by furnishing a particularly egregious and actual example, in which a developer of a golf course community was pitted against existing residential rural property owners. At the behest of the developer, the property was rezoned for PUD use rather than its original agricultural use. In that case, it was alleged, members of the zoning board stood to gain from the development. But Anderson and Sass are perhaps more concerned with a systemic bias toward development rather than garden variety conflicts. In other words, they ask whether something in the nature of the zoning board naturally leads these entities to favor development interests. This excellent article represents a recent and very healthy trend in academic literature concerning the practice of law in which authors rely on empirical data and not anecdote.

LEGISLATION

California adopts the Vacation Ownership and Time-share Act. The Act substantially revises the regulation of time-shares in California. It contains comprehensive registration and disclosure requirements for developers and exchange companies. Regulation of time-share plans and exchange programs is declared to be the exclusive function of the state. 2004 Cal. Legis. Serv. 697.

California extends “Brownfields” protection to prospective purchasers and contiguous owners. Protection is limited to innocent landowners, bona fide purchasers, and contiguous property owners who comply with the site assessment and other requirements of the Act. 2004 Cal. Legis. Serv. 705.

California enacts the Electronic Recording Delivery Act. The Act authorizes the establishment of a system to permit the electronic delivery, recording, and return of instruments affecting title to real property. Title insurers, institutional lenders, and governmental entities, upon certification, may be exempted from the requirements of the Act. 2004 Cal. Legis. Serv. 621.

California authorizes electronic transmission of communications and transactions for corporations, limited liability companies, and partnerships. The Act is intended to meet the requirements of the Federal Signatures in Global and National Commerce Act (“E-Sign Act”). 2004 Cal. Legis. Serv. 254.

California requires home improvement contracts, including service and repair contracts, to be in writing and easy to understand. Change orders must also be in writing. Various disclosures, both in the contract and in advertisements, are mandated. 2004 Cal. Legis. Serv. 566.

California allows insurers to transmit a notice of cancellation of a policy of insurance to lienholders by electronic transmittal. The lienholder must consent to electronic transmission. 2004 Cal. Legis. Serv. 939.

California prohibits unreasonable delay in mortgage loan closing. Lenders and real estate brokers may be liable for the increased expenses of borrowers as a result of the expiration of an interest rate or a discount point agreement. 2004 Cal. Legis. Serv. 940.

Illinois authorizes exclusive brokerage agreements and establishes the minimum services required for such contracts. 2004 Ill. Legis. Serv. 93–957.

Illinois modifies the Rental Property Utility Service Act to allow tenants to vacate when a landlord fails to pay timely for required utility services resulting in a disruption of service. 2004 Ill. Legis. Serv. 93-994.

Illinois limits homeowner’s insurance requirements by lenders. As a condition of financing a residential mortgage, lenders may not require the borrower to obtain homeowner’s insurance in an amount exceeding the replacement value of the improvements on the property. 2004 Ill. Legis. Serv. 93–1021.

Massachusetts adopts the Predatory Home Loan Practices Act. Massachusetts also prohibits predatory refinancing of home loans. Any refinance of a home loan within 60 months is prohibited unless it is in the borrower’s interest. 2004 Mass. Legis. Serv. 268.

Rhode Island expands property disclosure requirements. The seller must disclose known easements, encroachments, covenants, and restrictions, and provide the buyer with a copy of any surveys that are in the seller’s possession. 2004 R.I. Pub. Laws 600.