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States and municipalities often find it necessary to procure private lands in order to complete development or infrastructure projects. State laws in Rhode Island and other states are designed to encourage government entities and private landowners to reach an agreement for the purchase of private land when the government desires such land for a development or infrastructure project. If a state or municipality is unable to reach an agreement to purchase private land to complete a project, the public entity may pursue a “taking” of the land, where the owner is forced to transfer title of the land to the government, and is to be compensated a fair price for their property. However, the government’s power to seize land in this manner is not unfettered, as is demonstrated by a recent state supreme court ruling in such a case.

In the recently decided case, the plaintiff is the state of New Hampshire, which sought to purchase a part of a parcel of land that was owned by the defendant to expand a highway that was adjacent to the land. According to the facts discussed in the judicial opinion, the state and the defendant could not reach an agreement to transfer the land. The state initiated a proceeding with the New Hampshire Board of Tax and Land Appeals to seize title to the land. The request was granted, and the defendant objected to the taking, bringing the issue to court. At the lower court level, the state argued that the board’s decision to grant the taking was not based on fraud or a mistake of law, and the court found the argument sufficient to uphold the taking.

The defendant appealed the ruling to the state supreme court, arguing that the lower court applied the incorrect legal standard to review the board’s decision to grant the taking. Rather than the standard of fraud or legal mistake, the defendant argued that the lower court was required to evaluate the plaintiff’s claim and defendant’s objection anew, and determine whether the necessity, public use, and net public benefit to taking the land would outweigh the infringement on the defendant’s property rights. The high court agreed with the defendant, holding that the legal standard applied by the lower court was not proper, and ultimately reversed the decision and sent the claim down to the lower court for reconsideration under the new standard. Although the defendant has not definitively prevented the taking with this legal victory, the lower court will be more likely to rule in their favor when applying the required legal standard.

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A residential real estate transaction in Rhode Island is a complicated and delicate process that usually includes several professionals in addition to the buyer and seller. Purchases and sales of real estate also require the preparation and review of many documents, including an examination of a title for marketability, preparation of a deed, drafting a durable power of attorney, drafting a residency affidavit, and conducting a closing of the transaction, among other activities. The Rhode Island Supreme Court recently addressed the question of which of these duties must be performed by (or under the supervision of) a licensed attorney, and which, if any, can be performed by another type of real estate professional.

The recently decided case was brought to the Rhode Island Supreme Court by a unique procedure. Specifically, the case came about when a committee of the Rhode Island Bar Association requested the court to give its interpretation of a law pertaining to cases in which the committee was determining whether several parties should be charged with the unauthorized practice of law for fulfilling several duties in a real estate transaction without the supervision of a licensed attorney.

Before addressing the questions of whether each of the specific duties in question must be performed by a licensed attorney, the court made clear that all parts of a real estate transaction are best performed under the supervision of a licensed attorney. The court seemed to encourage both parties of a real estate transaction to employ a qualified Rhode Island real estate attorney throughout the process, although the Court ultimately answered the question of whether a non-attorney could perform some of the duties without committing the unauthorized practice of law slightly differently.

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Access to water greatly affects the value of developed and undeveloped property in Rhode Island. In areas outside cities and towns that do not have access to municipal or other public water systems, wells may provide the only water for residential or commercial development. A recently decided appeal by a state Supreme Court demonstrates the types of conflicts that may arise when tracts of property served by a well are divided up and sold to different owners.

The plaintiffs in the recently decided case were the owners of a property in rural New Hampshire. The defendants had purchased a part of the original property from the plaintiffs nearly 20 years ago. They were granted a temporary easement to use the well on the plaintiffs’ property to allow water for the home they intended to build on the property. According to the deed, the easement was temporary, and valid only until another water source became available for the defendants to use. After the defendants had used the well on the plaintiffs’ property for 19 years without constructing another well or obtaining an alternate water source, the plaintiffs filed a lawsuit seeking to prevent the defendants from using the well.

At trial, the plaintiffs argued that the deed’s language was not clear as to the term of the easement, but the fact it was stated to be a temporary easement implied that the defendants would be responsible for obtaining their own water at some point. The trial court agreed with the plaintiffs, finding that the deed’s language gave an easement to the defendants until another source of water “becomes available” must have implied that the defendants were to make reasonable efforts to obtain another water source. As a result of the ruling, the defendants were given three years to construct a well and stop using the plaintiffs’ well, as the easement would no longer be valid. The defendants appealed the ruling to the state Supreme Court.

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Rhode Island tort law generally sets a statute of limitations that mandates when a claim can be pursued against an architect, developer, or construction company for defects in the construction of a building. If a Rhode Island construction lawsuit is not filed within the statute of limitations, a plaintiff will not be able to obtain relief for their claim. Thus, it is essential to know the time when the statute of limitations period begins to run.

A recently decided case out of Massachusetts demonstrates the uncertainty surrounding statutes of limitations for tort claims, especially when building defects occur in a multi-phase project that is completed over a matter of years.

In the recently decided case, the plaintiffs include the owners of several condominium units that are part of a multi-phase development that was completed between 2008 and 2015. The plaintiffs discovered alleged design and construction defects in the common and limited common elements of the condominium, which may have entitled the owners to damages from the defendants. The plaintiffs filed a lawsuit against the defendants based on their claim. Because Massachusetts has a six-year statute of repose for the type of claim filed, the defendants asked the court to dismiss all of the portions of the claim applicable to units in the development that were completed more than six years before the filing of the case. The federal district court denied the defendant’s motion, and the case was appealed to the Massachusetts Supreme Judicial Court (the Court).

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A Rhode Island divorce can be an extremely difficult and complicated legal dispute, often because the stakes of a child custody dispute are always very high. Although there is limited statutory direction to guide the courts when awarding custody of a child to one parent or the other, the courts have developed legal principles that are used consistently in deciding how to award custody. A case recently decided by the Rhode Island Supreme Court explains the primary factors courts should use in making a custody determination and deciding whether to permit a parent to move out of state with their children against the other parent’s wishes.

In the recently decided case, the parties were a married couple with children who sought a divorce in Rhode Island family court. The mother, who was awarded primary physical custody of the children, sought to relocate to Ohio to be near her family after the divorce. The father, who was awarded joint legal custody of the children, as well as visitation privileges, challenged the mother’s relocation because he wanted to be closer to the children. The family court denied the mother’s request, requiring her to remain in Rhode Island with the children. The mother appealed the ruling to the Rhode Island Supreme Court.

On appeal, the high court discussed the factors for awarding child custody used in Rhode Island. According to the opinion, the courts focus broadly on factors to make a decision concerning relocation that is in the best interests of the children. These factors include considering the nature and quality of the relationship between each parent and the children, the reasonable likelihood that the relocation would enhance the general quality of life, including economic and educational opportunities, for both the parent and the children. Additional factors to be considered include the feasibility of maintaining a relationship and suitable visitation between the non-relocating parent and the children and the existence of extended family and other support systems available to the child in both locations.

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Short-term rentals offer a way for investors and homeowners to generate an income by renting out their property for a period of less than one month. Rhode Island short-term rentals can include vacation homes managed by the owner or an agency, as well as homes or parts of homes that are rented through Airbnb or a similar service. A recent policy analysis published by a real estate industry group discusses some of the regulations that apply to short-term rentals as well as issues that are relevant to all property owners and residents who may seek to rent their property as a short-term rental or are affected by other’s decision to do so.

Sales Tax Requirements for Short Term Rentals

Property owners interested in renting out a property as a short-term rental may not be aware that the Rhode Island legislature expanded the hotel sales tax requirement to include the short-term rental of residential properties in 2015. Property owners who use a rental agency or online booking system like Airbnb will not have to worry about collecting or paying the sales tax on their rental property, as the agencies are responsible for including the tax in the rent that they collect from the short-term tenants. However, property owners who independently advertise and rent out their property as a short-term rental must collect and pay the sales tax themselves. Owners who rent out an entire home as a short term rental must collect and pay a seven percent sales tax and a one percent local hotel tax on any income from the short term rental. Owners who rent out a single room or portion of a home must collect and pay the seven percent sales tax, the one percent local hotel tax, as well as a five percent state hotel tax on all proceeds from their rental.

Community Issues with Short Term Rentals in Rhode Island

The analysis acknowledges that the increase in the short-term rental market has many positive effects on local economies and property owners in recent years. However, several issues arise as a result of the increased amount of short-term rentals on the market. A primary issue within a community is the nuisance caused by an increase in short-term rental properties. Neighbors complain of loud noise, traffic issues, and increased trash, among other problems. Increased regulations and the diversion of tax revenues to address these problems may alleviate the nuisance complaints caused by short-term rentals.

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The state and federal guidelines and regulations that have been established to protect Rhode Island tenants from eviction during a global pandemic have worked well to prevent homelessness among vulnerable populations and prevent the spread of Covid-19 that could be worsened by housing insecurity. Although the eviction moratoriums and other tenant protections were established to protect financially unstable residents from becoming homeless as a result of the economic effects of the pandemic response, these protections have also served to make it more difficult for landlords to evict tenants for reasons other than the simple inability to pay rent. A local news article discusses one such case, where a problematic tenant was eventually ordered to vacate a leased property after a long legal battle.

The tenant referenced in the recently published article had entered into a short term lease with the owner of a waterfront condominium in Newport during the winter and spring of 2019-2020. Although the lease expired on April 30 and the tenant stopped making payments after the lease term ended, she refused to move out of the condominium. The landlord could not pursue an eviction case against the tenant for her failure to leave until July 1st, as a moratorium on evictions was placed into effect because of the Covid-19 pandemic. The landlord was especially prejudiced by the moratorium in this case, as the value of the waterfront property varies significantly based on the season, and the tenant’s refusal to leave before the summer was especially harmful.

After the Rhode Island eviction moratorium expired in July, the landlord filed a case to evict the tenant. However, the tenant successfully delayed the eviction several times because of an alleged Covid-19 diagnosis. Eventually, in late September, a superior court judge finally heard the landlord’s claim, and ordered the tenant to vacate the property and pay over $30,000 in past-due rents and penalties. It is important to note that while eviction moratoriums and other protections for tenants may prevent them from being removed from a property, their contractual obligations to pay a fair value for the property do not cease. Thus, once a case is sorted out, the tenant can be held responsible for all that they owe, as well as additional fees for nonpayment and violation of other lease terms.

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The federal Fair Housing Act, originally passed in 1964 and amended several times since its passage, protects Rhode Island home buyers and renters from certain types of discrimination based on race, ethnicity, national origin, religion, sex, familial status, disability, marital status, sexual orientation, and age, among other protected statuses. Real estate agents, developers, property owners, landlords, banks, insurance providers, and other organizations must all meet the Fair Housing Act requirements when advertising, selling, or renting a home to the public, or they may face significant legal penalties.

Housing discrimination can take many forms, and it is not always obvious whether a practice is discriminatory. Some types of discrimination that are illegal under federal law include advertising property in a way that reveals a preference for or exclusion of people of a protected class. This prohibition on discriminatory advertising extends to realtors, who are forbidden from discouraging or denying members of a protected class the ability to view or purchase property. Furthermore, realtors may not steer members of a protected class into properties in a certain neighborhood that reflects the ethnic makeup of the prospective buyers or renters.

Housing discrimination protections extend into the banking and mortgage market as well. While mortgage lenders are permitted to consider a borrower’s ability to pay a mortgage payment and their credit history, a lender may not refuse a borrower’s loan because they are a member of a protected class. In addition to prohibitions on the outright refusal of a loan, lenders also may not try to steer people into certain types of loans or offer them different terms and conditions for a loan based on the borrower’s membership in a protected class.

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Protecting familial assets from unnecessary taxation upon the death of a spouse, parent, or other beneficiary is one of the primary benefits of effective New England estate planning. Establishing trusts, wills, and other estate planning instruments is essential to protecting assets within a family. A recent decision by the Massachusetts Supreme Court demonstrates the importance of following the proper estate planning procedures to prevent substantial tax burdens to the heirs of a property owner upon their death.

In the recently decided case, the appellants consist of the heirs of a Massachusetts woman who died in 2011. Before her death, the woman’s husband created a qualified terminable interest trust in New York to support his wife after his death. The trust was created to guarantee the wife income from the husband’s assets while reducing the tax burden to the parties’ heirs when the husband and wife eventually passed away. After the husband died in 1993, his estate was not taxed for the value of the trust assets, and the assets remained in trust to benefit the wife until her passing. The wife later moved to Massachusetts, where she lived until she died in 2011. The wife’s estate filed both federal and state estate tax returns after her death, noting the trust assets on the federal documents, but omitting them from the state return, and paying no state estate taxes on the trust assets.

The Massachusetts Commissioner of Revenue selected the estate tax return for an audit, and determined that the value of the trust assets should be assessed for Massachusetts estate tax. As a result of the audit, the estate was required to pay over $1.8 million in taxes and interest. The estate disputed the decision, and the Massachusetts Supreme Court took up the resulting appeal. The high court agreed with the tax commission that the transfer of the assets from the wife to her heirs occurred in Massachusetts and was not eligible for and protection by their inclusion in a qualified interest terminable trust. This was because Massachusetts law only protected such assets if the trust created in Massachusetts, and this property was placed in trust in New York. Because of the high court’s decision, the estate will be required to pay the full amount of Massachusetts estate tax on the trust assets.

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As communities in New England continue to grow at a rapid rate, businesses and property developers may plan Rhode Island construction projects that require the rerouting or elimination of public roads. Occasionally, other residents or businesses who oppose eliminating or changing a public road for a private purpose may object to the construction plans. In these cases, the municipality must decide whether to allow the development or not. This issue was addressed in a recently published decision by the New Hampshire Supreme Court, where a neighboring business challenged a town’s decision to allow construction of a development that required a public road to be discontinued and replaced by a private boulevard.

In the recently decided case, the plaintiffs are the owners of a hotel that is adjacent to a business development owned by another party. According to the facts discussed in the court’s opinion, the adjoining property owners sought to expand their business development with new construction on an adjacent lot, which they also owned. To complete their construction, a public road, which was one of three accesses to the plaintiff’s hotel, would need to be eliminated and reconstructed as a private road that would be in the middle of the newly-proposed development. The town ultimately approved the developers’ plan, with the condition that the discontinued road would be replaced by a road that was open to the public and allowed the same access to the plaintiff’s property as the current road.

After the development plan was approved, the plaintiffs challenged the decision, ultimately taking their case to the state supreme court. The plaintiffs argued that the replacement of a public road with a private one infringed on their rights and threatened their business interests. The high court evaluated the balancing test applied by the town in making its decision, and ruled that the town followed the law and was within its discretion to determine that approving the proposed development was in the town’s best interest. The town properly determined that discontinuing the public road did not substantially affect the plaintiff’s rights because the developers would be required to maintain the private road and grant an easement to the plaintiffs. As a result of the high court decision, the developers will continue the construction of their proposed development, and the public road will be discontinued.

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