Articles Posted in Real Estate

Rhode Island real estate transactions often involve several parties in addition to a buyer and seller. Both the buyer and seller frequently use real estate agents, who, in turn, may be associated with brokerage firms to affect the transaction. Although real estate agents generally owe a fiduciary duty to their clients to act in good faith during transactions, a recent decision by the Rhode Island Supreme Court demonstrates that a brokerage firm associating with the agent may not owe any duty to a client in the event the agent acts in bad faith.

The plaintiff in the recently decided case is a real estate investor from Australia, who hired a real estate agent to assist him in purchasing and managing investment properties in Rhode Island. The agent he hired was associated with a real estate firm that is the defendant in this appeal. In the course of her dealings with the plaintiff, the agent allegedly mismanaged the plaintiff’s assets and properties by securing multiple mortgages on a property without the consent of the plaintiff, and using the money from the mortgages for her own purposes, essentially defrauding the plaintiff of equity in his real estate.

After discovering the actions of the agent, the plaintiff filed a lawsuit in Rhode Island district court against the agent and the brokerage firm and sought damages, alleging that both defendants violated their fiduciary duty to handle his assets in good faith. The plaintiff claimed to rely on the relationship between the agent and the brokerage firm in making a decision to trust the agent to handle his investments. The brokerage firm responded to the allegations by claiming that the agent was an independent contractor of the agency, and that the agency did not owe any duty to the plaintiff or bear any responsibility for the agent’s wrong actions. The district court agreed with the agency’s arguments, finding that the agent’s alleged wrongdoing did not benefit the defendant, and that they owed no special duty to the plaintiff to supervise the agent or prevent any fraudulent actions.

There are many circumstances where a Rhode Island property owner may wish to transfer ownership and title of their property to another individual or organization. The most common reason for a conveyance is when one party sells real estate to another party. However, transfers may also be made in the course of a larger business transaction, or as a result of a divorce or other legal settlement. Transferring the title of real estate is not as simple as accepting payment and signing a contract, as a deed must be executed and recorded for a property transfer to be valid.

In Rhode Island, several types of deeds are used to transfer real estate. The most common type of deed used in a real estate purchase transaction is a general warranty deed. The term warranty in this type of deed is used because the deed is warrantied by the grantor (or a title company) to be valid and marketable. Because of this, the grantor must foot the expense of defending a claim against the deed by a third party after it has been executed and recorded. A valid general warranty deed usually contains the following information: The amount of consideration (purchase price), the names and addresses of the grantor and grantee, a legal description of the property, and a notarized signature of the parties.

Deeds known as special or limited warranty deeds are also used to transfer properties. These deeds only hold the grantor responsible for title defects that originated during the time that the grantor owned the property. While this type of deed does not offer as much protection to the grantee, it may be desirable for certain transactions where the grantor is handling investment properties and only wishes to prove she has acted in good faith while owning the property, but is unwilling or unable to warranty the validity and marketability of the title throughout the full chain of title.

The global pandemic caused by the coronavirus known as COVID-19 has affected the United States tremendously. In addition to a death toll in the U.S. that exceeds 120,000, the virus (as well as the measures taken to slow its spread) has caused the U.S. economy to enter the worst recession since the 1930s. As a result of the economic downturn attributed to COVID-19, many renters and homeowners are facing eviction or foreclosure because they’re unable to afford their rent or mortgage payments. The U.S. Congress passed the CARES act to alleviate some of the economic harms related to the pandemic. Some of the provisions of the Act, in addition to state laws passed by the Rhode Island legislature, can be used to prevent both landlords and tenants in Rhode Island from losing their homes or investments.

The first actions taken to affect landlords and tenants was a moratorium that was placed on evictions in April, which has since expired. While it was in effect, this moratorium prevented landlords from evicting their tenants for nonpayment of rent. However, it did not eliminate the burden to pay rent. Since the courts are now open and processing evictions, many tenants who couldn’t afford to pay one month’s rent before are now facing demands for multiple months worth of rent and may be evicted. Some tenants are still protected from eviction by a moratorium that remains in effect for public and assisted housing, as well as for tenants living in a home that is financed by a federally backed mortgage. A tenant who is protected by this moratorium and receives an eviction notice can legally challenge the eviction and remain in possession of the property, however, the past-due rents must still be paid after the moratorium expires.

Rhode Island has also established a rental assistance program for renters who have been affected by COVID-19 and are at immediate risk of homelessness. Renters who qualify may receive a grant of up to $5,000 to help them with past-due rent payments and other fees. However, restrictions apply, and the funds are limited. Information about this program is available at www.housinghelpRI.com.

Several states, including Rhode Island, allow mortgage holders to pursue a non-judicial foreclosure of a mortgaged property if a borrower allows a loan to go into default. As a result of this legal framework, mortgage holders can seize and sell property from an owner without pursuing a formal judicial proceeding, potentially limiting a borrower’s ability to challenge the foreclosure.

To protect borrowers from this framework that generally favors lenders, state legislatures and courts have established detailed notice and procedural requirements that lenders must follow to pursue a foreclosure successfully. If a lender does not strictly follow these requirements, a borrower has the right to challenge the foreclosure in a state court proceeding. Courts are not hesitant to invalidate foreclosures, even when the procedural defect by the lender may appear minor, as evidenced by a recent ruling by the Rhode Island Supreme Court.

The plaintiff in the recently decided case is a homeowner whose home was foreclosed on after he failed to pay mortgage payments to the bank for several years. The bank pursued a non-judicial foreclosure of the property, and sent the plaintiff notice of his rights and options to prevent or challenge the foreclosure. The plaintiff failed to meet the bank’s demands, and the bank ultimately seized and sold the property.

Courts are often said to favor landlords and property owners in Rhode Island residential evictions or other landlord/tenant disputes. While the majority of judgments in summary landlord/tenant cases fall in favor of the landlord, this is not always the case. A recently decided appeal from an eviction judgment in nearby Massachusetts demonstrates that landlords must follow strict procedural guidelines to be successful in pursuing an eviction or monetary damages from a tenant.

The plaintiff in the recently decided case was a landlord, who filed an action against the defendant tenant to recover possession of a property and damages for rent that was past due. The lawsuit was filed fourteen days after the landlord had posted a notice on the front door of the subject property, which demanded payment of the rents or the tenant to leave the property. The tenant responded to the claim with several counterarguments, primarily stating that the landlord acted unfairly in demanding payments for utilities without such a condition written into the lease. Additionally, the tenant sought dismissal of the claim because the lawsuit was filed less than fourteen days after the tenant actually saw the notice on the front door, and the law requires at least fourteen days between the receipt of a notice and the initiation of proceedings.

At a bench trial in the housing court, the tenant’s request to dismiss the case was denied. The court found that the notice was posted on the front door at least fourteen days before the filing of the action, and the tenant’s failure to see the notice until the next day was not relevant to the validity of the claim. The housing court ruled that the tenant needed to pay the amount of past-due rent to remain in their home, or else a judgment would be entered against them, and they would be forced to move out. The housing court found little merit in the tenant’s counterclaims, and noted that state law requires some of the utilities to be paid by the tenant. While the lease would ideally include those terms, failure to do so would not eliminate the requirement for the tenant to pay rents.

When large tracts of property in New England are broken up and subdivided into smaller lots for development, disputes can arise between the new owners of the properties over rights-of-way and access to public roads. In a recent state appellate case decided by the New Hampshire Supreme Court, a defendant was estopped, or forbidden, from denying a plaintiff’s claim of an implied easement to use a private road owned by the defendant that went along the plaintiff’s property.

According to the court’s opinion, the plaintiff purchased three lots which had been part of a larger tract of land that was divided into smaller lots by the original owner in 1968. The deed which conveyed the lots after the division noted a private roadway formed part of the border of the smaller lots. The defendant later purchased the land adjacent to the plaintiff’s property which included the private road that was noted as a border to the plaintiff’s land in the earlier deed. Relying on established state law, the plaintiff continued to assert his right of way to use the private road to access his property. Because the plaintiff’s land also directly bordered on a public road, the defendant restricted the plaintiff’s access to the private road and denied the plaintiff any use of the right of way.

The plaintiff filed an action in state court against the defendant, seeking a declaration from the court that the plaintiff did have an implied easement to use the private roadway, and that such easement was not affected by the existence of alternate access to the public road from the plaintiff’s property. The district court ruled in favor of the plaintiff, finding that under established state law, if a deed states the border of conveyed property is along a private road, that there is an implied easement from the new owner to use the road to access the property. The court further noted that the law clearly stated that the easement is not affected by alternate access to a public road from another part of the property.

State governments or municipalities in New England and nationwide have the right to issue tax liens on real property if the owner fails to pay property taxes. In these situations, the government entity may ultimately be able to seize and sell off the property to recoup the unpaid taxes. However, this process may be subject to constitutional limitations, as demonstrated by a recent decision issued by the New Hampshire Supreme Court involving a case filed by a property owner challenging the city’s intention to sell his property and keep all of the proceeds, even those in excess of the unpaid amount of taxes.

The plaintiff in the recently decided case is a man who inherited a property in 2008, but failed to pay property tax on the property for three years following his inheritance. The city where the property is located issued several tax liens on the property in the amount of unpaid taxes and other fees. After the plaintiff failed to redeem the property and pay the past-due taxes, the city initiated proceedings to take title to the property and sell it at auction to compensate themselves for the unpaid taxes. In addition to the amount of unpaid taxes, the city relied on a New Hampshire law to keep any proceeds from the sale in excess of the past-due tax amount.

The plaintiff filed suit against the city, challenging their intention to take and sell the property without compensating him for the value of the property in excess of the amount of unpaid taxes. Although the plaintiff relied on several theories in his initial lawsuit, the trial court eventually ruled that his claim had merit, based on the argument that the law relied on by the city to keep all of the proceeds of the sale of the property violated the state constitutional provision protecting citizens from government taking of their property without just compensation. As a result of the court’s ruling, portions of the state law relied upon by the city to seek the full value of the plaintiff’s property will no longer be enforceable.

Settlements, municipalities, and property associations in Rhode Island are often developed upon property lines that can date back as far as the 1700s. Over the centuries, claims to property can become distorted from the original lines, and determining the actual size and shape of a piece of real estate can be a difficult, forensically intensive process. The legal doctrine of adverse possession allows property owners who possess and occupy property that may not have originally been a part of a lot to take title to the property along new lines consistent with the present-day use. The Rhode Island Supreme Court recently released an opinion in a case filed by a property owner asserting an adverse possession claim over a waterfront lot that she assumed she had purchased when purchasing the home across the street.

The plaintiff in the recently decided case was a woman who purchased a semi-beachfront home in Warwick, Rhode Island in 2009. According to her testimony at trial, the woman was under the impression that her purchase of the home included the beachfront property across the street from the house. After she purchased the property, the plaintiff closed off the beachfront property (which previously had been accessible to the public for leisure and fishing activities), and placed no trespassing signs along the property. After having a survey performed on the property, the plaintiff realized that most of the waterfront lot was actually owned by the homeowners association of the neighborhood where it was located, and she filed suit against the association for legal title to the disputed property.

At trial, the district court heard testimony to determine if the plaintiff’s claim to the disputed land met the standards for a Rhode Island adverse possession claim. To succeed in an adverse possession claim, a plaintiff must prove that they or their predecessors had actual, open, notorious, hostile, continuous, and exclusive use of the disputed land for at least ten years. The district court determined that while the plaintiff’s predecessors in title did use the land as if it were part of the property for a period of at least ten years, their use was not hostile or exclusive, because they let the public onto the land at will and also sought permission from the defendant before modifying the property. As a result of these findings, the plaintiff’s claims were rejected at trial, and the plaintiff appealed.

Rhode Island and other state’s laws grant cities and other municipal associations the ability to purchase land from private property owners as is necessary for the construction or maintenance of sewer and drainage systems which are needed for the public convenience, health, or welfare. If a private property owner cannot agree with the municipality on the terms of such a purchase, the municipality may be able to take title to the land using the power of eminent domain against the landowner’s objections. The power of eminent domain is not absolute, however, and the New Hampshire Supreme Court recently issued an opinion ruling against a city attempting to use this power to seize the land of an objecting property owner.

The plaintiff in the recently decided case is the city of Portsmouth, NH, which made an eminent domain claim to take title to 4.3 acres of land owned by the defendant. The city had constructed a sewer line on part of the land with oral permission from the previous landowner, however, they had no written easement for the sewer line. In a separate lawsuit, the property owner sued the city for a nuisance resulting from the sewer line and backed up water, and the city sought to condemn the land in response.

The property owner objected to the city’s taking, arguing that the city did not have the statutory authority to seize his land. The trial court agreed with the property owner that the public need for maintaining the sewer line did not outweigh the burden on his property rights, and ruled that the condemnation was not justified. Further, the trial court found that the city’s actual motivation for the condemnation was to stifle the property owner’s other nuisance lawsuit, and it was therefore improper.