REAL ESTATE LAW PRACTICE “KEYPOINTS”

(SEPTEMBER, 2002)

 

By Steven B. Bashaw

Steven B.  Bashaw, P.C.

Suite 1012

1301West 22nd Street

Oak Brook, Illinois  60523

Tel.: (630) 472-9990

Fax.: (630) 472-9993

e-mail:  sbashaw @bashawlaw.com

(Copyright 2002- All Rights Reserved)

 

In addition to encouragement from the Illinois Institute of Continuing Legal Education and the Illinois State Bar Association’s Real Estate Section Council,  it should be noted that Chicago Title Insurance Company helps underwrite the monthly production of these real estate law “Keypoints”. Chicago Title is committed to the role of attorneys in real estate transactions and their continuing education in this area.  Its staff attorneys are pleased to offer their view points on various developments in the law as set forth below from the perspective of a title company serving the public and the attorneys who represent their clients in real estate transactions.

 

1.          TAX DEEDS; EXTENSION OF REDEMPTION PERIOD AND 1 YEAR RECORDING PERIOD LIMITATION:

Tax deeds are fraught with pitfalls…for both the owner who fails to pay taxes as well as the tax buyer. This is apparent from the recent case of  In re Application of the County Treasurer, (1st Dist., August 2, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/August/Html/1013279.htm.  Jerome Sirt, the assignee of the tax buyer, appealed the order of the Circuit Court finding that the deed was void and of no effect and vacating the prior order directing the issuance of the tax deed.  There is some good discussion of the standing of parties in the proceeding, but the crux of the case turned upon the motion to vacate filed by the manager of the property sold for non-payment of taxes.  That motion was  based on the fact that the deed was not recorded within one year of the expiration of the redemption period.   35 ILCS 200/22-85 provides that unless the holder of the certificate of sale of the taxes obtains and records the tax deed within one year from the expiration of the   redemption period, the certificate or deed shall “be absolutely void with no right of reimbursement.”  The facts of this case had an interesting twist in that the redemption period was extended as permitted by 35 ILCS 200/21-385.  That section permits the purchaser to extend the redemption period at any time before the expiration not more than 3 years from the date of sale.  The extension must be in a writing filed with the clerk and pursuant to notice.  Here, however, there was a “gap” between the extensions of the redemption period, (i.e., the further extension was not within the time period of the prior extension and before its expiration).  Accordingly, the Court held that there was no toll of the redemption period and the deed was not acquired and recorded within the one year period.   The impact was, of course, devastating to Sirt  because of the  fact that he had no right to reimbursement of the amount of the sale under the statute.  It was clear that there was no impediment to obtaining and recording the deed.  The order to issue the deed was properly and timely entered,  and then a motion to vacate was filed. The result was that the deed was void based on the failure to timely record, but the sale was not vacated and the bid amount not refunded.

 

2.  MORTGAGE RELEASES; THE MORTGAGE CERTIFICATE OF RELEASE ACT: 

Closing attorneys and title companies have struggled over the years to obtain mortgage releases of loans which they or their clients know have been paid off.  In the past, the usual “culprit” was the homeowner who put the release in a drawer and forgot it rather than recording it upon receipt. During the last decade, however, the dilemma of the missing release has become an epidemic because of the fact that so many mortgage lenders have merged, sold their portfolios, or simply gone out of business, leaving it difficult if not impossible to track down and obtain releases.  The first reaction of many transactional attorneys had been to “blame the title company”, assuming that they had received and lost or misplaced the releases.  In some part that was true.  In a larger part, however, the lender’s release was not received and could not thereafter be obtained without significant investment of time and effort. The Illinois Mortgage Certificate Release Act,    http://www.legis.state.il.us/publicacts/pubact92/acts/92-0765.html is a concerted attempt by the legislature and title industry, with the support of transactional attorneys and the ISBA Real Estate Section Council, to solve this problem.

The Act is limited to residential real estate and mortgages with original principal balances of less than $500,000.  In those circumstances,  an officer or duly appointed agent of a title insurance company may execute and record a certificate of release of the mortgage setting forth the details of the mortgage instrument and a statement that the mortgage was paid in accordance with a written payoff statement received from the mortgagee or mortgagor servicer. The recording of the certificate shall constitute prima facie evidence of the release of the lien of the mortgage.  The Act provides that before  the certificate can recorded, a Notice of intention to file a certificate of release must be send to the lender stating that if the title insurance company or agent does not receive a release or objection to issuance of the certificate of release by the title insurance company from the mortgagee  within 90 days, the certificate will be recorded.  The notice must be sent by certified mail, return receipt requested,  mailed no sooner than the day of closing and no later than 30 days after receipt of payment, directed to the address or location identified in the payoff statement, and may  accompany the payoff funds.  If a written objection is received during the 90 day period, a certificate can not be issued.  The issuance of a wrongful or erroneous certificate will not relieve the mortgagor of liability on the mortgage debt, and a title company knowingly issuing a false certificate shall be responsible to the lender for damages and attorneys fees will be awarded to the prevailing party in resulting litigation.

The Act sets forth forms for the Certificate of Release, Notice of Intent to File Certificate of Release, Appointment of Title Insurance Agent for Issuance of Certificates of Release. (Is there a ‘cottage industry’ here?)

 

3. RESIDENTIAL REAL PROPERTY DISCLOSURE ACT; EFFECTIVE DISCLOSURE: 

Over the last few years a steady stream of decisions has interpreted the “actual knowledge” and “prevailing party” aspects of the Illinois Residential Real Property Disclosure Act.   Now, in Hogan v. Adams, (4th Dist., August 19, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/4thDistrict/August/Html/4010974.htm ,  we have the first indications of what the Courts will consider a sufficient disclosure of facts relating to an issue disclosed on the Report.

The facts are the gravaman of this decision, and  the Court begins by noting that between May, 1993, when Adams purchased the property,  and May, 1998, when they sold it to Hogan, there were three specific instances of flooding in the house. The first instance occurred in 1995, when, after a tornado which caused a power outage disabling the sump pump, a large portion of the basement was flooded.  Then, in 1996, another large rainfall occurred, significantly flooding the basement despite the fact that the sump pump was operating.  The third instance occurred when an outside drain became clogged and a small amount of water entered the basement under a door.   When Adams listed the property in April, 1998, they completed the Disclosure Report by noting that  “yes” they were aware of flooding or recurring leakage problems in the crawl space or basement, and then writing below on the lines provided for explanation that “tornado in 1995 interrupted power for 3 hours[--]sump pump was unable to operate and water entered the lower [-] level well.”

The Fourth District reversed the trial court’s finding in favor of the sellers.  First, the decision notes that the Illinois Act, (unlike similar Alaska and South Dakota statutes), does not use “good faith” as a criteria for judgment of the effectiveness of the disclosure.  Accordingly, the buyer need not prove the seller actively concealed the defect, or acted in ‘bad faith’ under the Act for liability to attach.  In fact, what the seller’s reasonable belief or state of mind as to what was necessary to disclose “is not at issue in this case.” as far as liability is concerned. (Although this may be an issue in awarding damages after liability is determined.)   The Act requires the seller to disclose known defects and imposes liability for failure to do so.  What is at issue is what the seller knows and the completeness of the disclosure to the buyer. Finding that the buyer is entitled to “rely on the truthfulness, accuracy, and completeness of the statements contained” in seller’s disclosure, the Court held that here the disclosure of  only one of three instances of flooding was a violation of the Act rendering the seller liable to the buyer. The explanation of the seller on the Disclosure Report did not suggest or disclose the actual extent of the flooding in 1995, did not disclose the 1996 flood at all, and was “misleading because it suggests flooding would only occur if the sump pump was not properly functioning.”  The fact that the seller consulted with his Realtor before filling out the Disclosure Report, and believed that only an “example” of the flooding was necessary to comply with the Act was not a defense, either.  “William knew Steward was a realtor, not an attorney.  The disclosure report itself suggests a seller should consult an attorney before completing the disclosure report.  See 765 ILCS 77/35.”

The impact of this decision may be quite profound in residential real estate transactions. The reasoning holds that full and complete disclosure is necessary,  and unequivocally states that consulting an attorney is appropriate to protect a seller’s interests. It makes one wonder what the result would have been  had Adams indicated “yes” to a prior flooding issue and not provided any explanation at all. The current custom  is that most sellers rely upon the Realtor’s  judgment in disclosing defects and the extent of the explanation in the Disclosure Report at the time they list the property.  A movement toward complete disclosure under the direction of an attorney may be necessary in the future.

 

 4. MORE SUMMER READING; MECHANIC’S LIENS AND THE ELECTRONIC FUTURE OF REAL ESTATE TRANSACTIONS :

If you ever want to get a really nasty look from your spouse and family, try bringing a that pile of unread bar journals and newsletters to the beach with you…Catching up on your professional reading seems to be tolerated in airplanes and doctor’s offices, but is frowned upon at the beach…unless you have a great tan that suggests this where you spend most of your time, so it is the only place you can read.  Without regard to social niceties, I did take some of my journals and newsletters on vacation, and to save you the embarrassment, offer the following:

In the June Newsletter of the General Practice Section, http://www.isba.org/sections/Generalpractice/6-02b.htm,  Thomas F. Harzell’s article “Mechanic’s liens: Oh, those old cases—how they haunt you”,  offers a real sense of how  forbidding two complex areas of the law impacting real estate can be when they combine to confront a general practitioner.  Tom had a case that involved a lumber yard that was a subcontractor material man on a residential project when the general contractor filed a Chapter 7 Bankruptcy.  After admonishing us numerous times that mechanics liens are governed by a statute that must be carefully read and will be strictly construed , he tells us how an 1894 Illinois Supreme Court case, (Ryerson v. Smith,   152 Ill. 641), holding that  a subcontractor must file its notice of claim for lien prior to the general contractor’s bankruptcy filing to preserve it lien rights in the property,  left his client without a source of payment.  After warning us of the impact of this ruling,  Tom goes on to explain why he believes the result is an inequitable imposition of the risk of dealing with a bankrupt general contract solely on the subcontractor. He suggests that it is inequitable for the homeowner to have the benefit of the material without payment, and that the homeowner ought share in the risk of dealing with a bankrupt general contractor. 

The July, 2002 Real Estate Section Newsletter, http://www.isba.org/sections/RealEstate/7-02a.htm is FULL of interesting and important thoughts from other practitioners.  First, is the Letter to the editor from John O’Rourke. John comments on the pieces both Dick Bales and I wrote earlier in the year reviewing the scope of authority granted to an agent by a power of attorney set forth in Amcore Bank v. Hahnaman-Albrecht, Inc.  After stating that our articles were well reasoned and nicely written, John  said: “Nonetheless, I’m take aback that neither author thought to comment on the apparent unfairness of the result.”   Noting that “The bank that trusted them lost $17 million”, John reveals his own moral indignation and concern for the fabric of our system of lending and commerce when he states, “I sincerely hope that I would not find the temptation to default as irresistible as it appears to have been for the defendants in Amcore.”  The newsletter editor, Gary Gehlbach was pleased to know that “this publication has at least one reader, and he’s John O’Rourk, an attorney in Chicago.” Both Dick and I were relieved that our treatment of the case was considered accurate. We’ve decided we can “live with” our failure to recognize the unfairness of the result; otherwise we’d soon ‘overload’ considering the impact of each decision on the individuals involved.

The same Newsletter also contains a well crafted analysis of the recent United States Supreme Court decision,  (U.S. v. Craft, (2002), 535 U.S. _____), which found that holding title as a tenant by the entirety did not affect that right of the IRS to enforce a federal tax lien against the interest of only one spouse.  Gary Gehlbach’s article is worth the reading for those of us who still can not quite accept this pronouncement of the impact of federal law on our state’s public policy.

Finally, for those of you who are concerned about the two great issues facing all of us, (i.e., “how to be in two places at one time” and “make the most out of technology for your law practice”), the article “Electronic Closings: a cure for the closing nightmare”, by Beth Brush and Eleanor Sharpe, is just the thing to read as you are falling off to sleep to dream about your  transactional practice in the new millennium.   Noting that the statutory infrastructure for electronic signatures is already in place, (The Electronic Signatures in Global and National Commerce Act, and the Illinois Electronic Commerce Security Act),  the authors lament that only adoption of the Uniform Electronic Transaction Act is needed in Illinois for their dream to become a reality. (UETA ”was drafted in 1999 and  has been enacted in over half of the 50 states with all but a few of the remaining considering doing so. Illinois has not adopted UETA”) Most of the benefits are obvious, (automated scheduling and notices, document preparation,  and distribution), but a few are surprising --- by at least their nomenclature; i.e. “autopopulation” occurs when data is entered once into an electronic media and then ”autopoplulated” throughout the system, (sounds like a virus or very powerful ‘cut-and-paste’ to me);  “PKI” refers to the “Public Key Infrastructure” used to establish the identity of a person electronically signing a document and to ensure that the document has not been intercepted, altered or electronically corrupted; and soon we may all be subject to “biometrics” such as thumbprint scanners, voice verification, face recognition and eye scans “for our own protection”.  Amazingly, this may not be as futuristic  as it seems. We all recognize the crisis that exists in the delivery of legal services to consumers in residential transactions. The time and effort required  of the attorney to competently represent clients is simply not justified by the fees that the marketplace is willing to pay these days.  The alternative to lawyers abandoning this area of practice may well lie in the industry adopting electronic transaction processing that will reduce the time investment and inefficiencies that currently exist to return profitability to the lawyers as well as the mortgage lenders and title companies.

 

5.  QUIET TITLE THROUGH PAYMENT OF TAXES OVER SEVEN YEARS; ELEMENTS OF GOOD FAITH AND POSSESSION VERSUS ADVERSE POSSESSION:

In Dotson v. Former Shareholders of Abraham Lincoln Land and Cattle Company, Inc., (4th Dist., August 9, 2002) 6/21/02), http://www.state.il.us/court/Opinions/AppellateCourt/2002/4thDistrict/August/Html/4010989.htm ,   the Court was confronted with a suite to quiet title over a parcel of real estate that once belonged to Abraham Lincoln.    Attorney L. Stanton Dotson brought the case on behalf of his minor son, Joseph S. Dotson, in Coles County,  claiming that since he had paid real estate taxes for seven years, the title to the real estate should be quieted in his name pursuant to Section 13-110 of the Code of Civil Procedure.  That Section provides that one who pays real estate taxes with color of title on vacant land for seven successive years shall be deemed to be the legal title holder of the land.  Dotson’s ‘color of title’ emanated from a deed to a 1/1,672,640th undivided interest, (approximately one square inch), in Lot 1 of the Abraham Lincoln Memorial Farm Plat.  The deed was the contrivance of Raymond Phipps, who owned the 36 acres once part of the 40 acre Lincoln farm and established the Abraham Lincoln Land & Cattle Company, Inc. to sell nominal deeds as souvenirs to Lincoln history aficionados. He created the Farm Plat in 1975 consisting of a four acre portion designated as Lots 1, 2, 3 and 4, and then sold the miniscule interests as deeds to a portion of  Lot 1.  The scheme was initially more successful than one might think. Nieman-Marcus offered the deeds in its Christmas Catalog of unusual gifts in 1977, and  L. Stanton Dotson purchase one of the deeds  in 1976.  Instead of being relegated to a memento drawer, the Dotson deed was recorded in the Coles County Recorders Office shortly after it was received.  In the mid 1980s, Phipps’ scheme lost steam,  the corporation was insolvent and dissolved by the Secretary of State.  Dotson, however, discovered this and formed a new not-for-profit corporation with the same name upon learning of the dissolution. He conveyed his interest by deed to his wife.  The deed, however, failed to note the fractional interest of the grantor and simply referred to Lot 1; thereby suggesting a conveyance of the entire parcel, and specified that future tax bills be sent to Dotson.  In the coming years, Dotson paid the real estate taxes, (which never exceeded $40),  for the tax years 1990 through 1996, and the title was conveyed by successive deeds to and from Dotson’s wives during divorces and through the second corporation known as the Abraham Lincoln Land & Cattle Company, Inc., until title was vested his son, Joseph, (the plaintiff).  During this same period, Phipps continued to pay the taxes on the remaining Lots 2, 3 and 4 in the Abraham Lincoln Memorial Farm Plat, and was not aware that the taxes on Lot 1 were being mailed to and paid by Dotson.

In 1998, Dotson posted no trespassing signs on the south boundary of Lot one and strung a single, loose strand of barbed wire as a fence.  This was the “possession” basis of his action to quiet title to the property.   A three day trial resulted in judgment in favor of Dotson, finding that he had established “color of title, made in good faith” under the Limitations Act  and sufficient possession of the parcel to support granting quiet title to him.  On appeal, the Fourth District reversed.

After dealing with the procedural quagmire over the time within which a notice of appeal must be filed that was created when the trial court issued a memorandum opinion without a written final  judgment, the decision turns to the elements of proving title under Section 13-110 as opposed to strict adverse possession.  To the statutory elements requiring (1) color of title,  (2) in good faith, (3) to vacant land, (4) with payment of real estate taxes for seven consecutive years, the Court noted (5) the “long-standing judicial construction requiring a person seeking to perfect title under section 13-110 also take possession of the property.”  The standard of review and proof of the elements was held to be by the same clear and convincing burden of proof adopted in adverse possession cases.  The claimant is entitled to no presumptions in his favor, and all presumptions should be made in favor of the holder of legal title rather than the holder of mere color of title.  The element of “good faith” is “defined negatively as the absence of an intent to defraud the holder of better title or as the absence of bad faith”.  While the decision held that the deed conveying more land than actually was owned by Dotson, (i.e., conveyance without reference to the fractional ownership in Lot 1), was sufficient to establish color of title under existing precedent, the deeds were not made in good faith.  Stanton Dotson testified he prepared the deeds and at one point told his wife Judith “I will sell it to you, the whole acre, because they probably won’t pay taxes on it, and, if they don’t and you pay taxes and you go though the proper procedures, you will own it in seven or eight years.”  On this basis, the trial court’s finding that the Plaintiff had established good faith was reversed with the remark that “We conclude section 13-110’s good faith requirement is meant to protect innocent transferees from loss of their investment by misrepresentations of the transferor, rather than to provide a shortcut around the 20-year possession period required of an adverse possessor.”

The Court also rejected the trial court’s determination that Dotson had established the requirement of taking possession of the property. The test, the decision holds, is the “community’s perception of the ownership”  rather than an attempt to establish possession  in a manner not visible to the public.  Here the single strand fence strung along one side of the parcel with placement of no-trespassing signs was insufficient. “The critical aspect of possession is to provide notice to the community”. Plaintiff failed to meet this burden, and testimony of neighbors that they believed Phipps continued in possession and had never seen Dotson on the property was to the contrary.  Section 13-110 requires “visible possession” of the premises that is plain to the community.

 

 6. RIPARIAN RIGHTS; ACRETION AND BOARDERING LAND OWNERS:

In Hasselbring and Balding v. Lizzio, (3rd Dist., August 8, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/3rdDistrict/July/Html/3010393.htm , the issues of riparian rights in a non-navigable pond  were addressed.  The pond was on the  property in Iroquois County owned by Irene Lizzio. To the north of the parcel was land owned by Mike Balding and to the south was land owned by the Hasselbrings.  The Balding property had a cabin facing the pond approximately 60 feet from the water’s edge, and over the years Mike Balding had installed a floating dock on  which he fished and kept a boat.  The Hasselbrings property had a stream which flowed between the pond and their home, and they built a bridge to access the pond in order to fish and canoe in the pond.   Both Balding and Hasselbring believed their that property was adjacent  and gave them access to the pond.  In 1997, Lizzio began draining the pond in order to create a wildlife refuge.  Balding and Hasselbring objected and then filed suite to prevent the draining and sought a permanent injunction against Lizzio, stating that they were entitled to riparian rights to use of the pond.  Lizzio, in turn, filed a counter complaint seeking to quiet title to the pond and to enjoin his neighbors from trespassing.  The focal issue at trial became the contradictory testimony of surveyors relating to whether or not the neighbor’s property lines were actually adjacent and contiguous to the shore of the pond. It was clear that the depth and area of the pond had changed over time, and, regardless of the current location of the edge of the pond relative to the boundaries of the various parcels, at one time the pond edge extended to the Balding and Hasselbring property lines.

Applying the doctrine of accretion and riparian rights, the Third District affirmed the decision of the trial court in favor of Balding and Hasselbring,  enjoining Lizzio from interfering with their use of or draining the pond.  Turning to the doctrine of accretion applied to navigable waters, (which holds that the owner of lands bounding the water acquires a right to any natural or gradual accretion formed along the shore in order to avoid litigation challenging the location of the original waterlines), the decision holds that (1) This doctrine applies to lakes and ponds regardless of how large or small they may be.”, and (2) There is no requirement that a part of the description of these lots must include this lake for the doctrine apply.”   Since it was clear that at one time the edge of the pond extended to the neighbor’s property line, the fact that the water had receded did not deprive the neighboring owners of their riparian right to access to the pond, and the land created between their actual property line and the edge of the pond was the product of “accretion”. The owner of lands bordered by water owns riparian rights to access to the water, and “The right to preserve his contact with the water is one of the most valuable of a riparian owner.”

7. ZONING; DOWN-ZONING AND RELIANCE UPON THE CLASSIFICATION OF PROPERTY:

Howard and Craig Wakefield were developers in Champaign-Urbana who saw great potential for profit by building apartments near the campus for rental to students.  Accordingly, after building a six-unit apartment building in the 800 block of Main Street, in October, 1986, they bought three lots next to the apartment building , intending future development.  The lots had older homes in various stages of disrepair which had been converted to rental property by the prior owners.  The Wakelands testified that they intended to tear the homes down in three to four years and redevelop the lots as apartment buildings.  In the interim, they continued to rent the properties, did not proceed with any drawings or designs, or  apply for any permits to redevelop the lots.  In May, 1995, one of the structures burned down, and the Wakelands took no action to build anything in its place after receipt of the insurance proceeds.  As the years past, however, the City formed a planning commission to study the area in 1988, and following public hearings and investigation, the Commission issued its “Downtown to Campus Plan” calling for down-zoning many properties to lower the density of the area and preserve the area’s single family dwelling qualities.  As a result, the Wakeland’s property was down-zoned from an R4 (which would allow apartment buildings) to an R2 area that resulted in their buildings being non-conforming uses and  prohibited multifamily development.   The Wakelands filed suit challenging the re-zoning as unconstitutional as applied to them,  presented evidence that the value of their property diminished from $320,000 to $68,000 as a result of the down-zoning, and argued that there were properties of higher density and mixed uses within a few blocks surrounding their lots.  The trial court upheld the re-zoning ordinance, and Wakeland appealed.  The Fourth District affirmed.  Wakeland v. The City of Urbana, (4th Dist., July 31, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/4thDistrict/July/Html/4010991.htm .

An attack upon a zoning ordinance by a property owner requires that the plaintiff prove by clear and convincing evidence that the application of the ordinance to his particular property is unreasonable,  arbitrary, and does not bear a reasonable relationship to the public health, safety and welfare.  The elements to be considered by the court are (1) the uses and zoning of nearby properties, (2) the extent to which the zoning diminishes the property value, (3) the public good which is promoted by the zoning, (4) the benefit to the public compared to the hardship upon the owner, (5) the suitability of the property to the zoning purpose, (6) the time period in which the property has remained vacant as zoned,  (7) the community need for the zoning, and (8) the care and consideration given to the overall planning and land use in arriving at the zoning restriction. The burden on the challenger of the zoning ordinance is great because a municipality is presumed to have the right to regulate land use within its purview. 

The Wakeland’s provided evidence that there were more intense uses within blocks of their property to appeal to the Court’s concern that the zoning be in conformity and uniform  with surrounding existing uses. The decision found that “A more intense use of land nearby does not necessarily determine the character of an area. For example, a residential area and commercial area can exist across the street from one another and yet be separately identifiable.”  Likewise, the reduction in the value of their property by virtue of the re-zoning was not a persuasive argument; “…it is not determinative that the property would be worth more  if the zoning were not reclassified because this would be true in virtually all reclassified  cases.” The ‘public good’ versus “owner hardship” was also a balancing test that the Wakelands lost.  “Density is a legitimate concerned in a zoning case and an adequate basis for classification.”   The public good includes “preserving historical continuity, limiting congestion and restricting burdens on existing infrastructure”, and the historical element does not require formal designation of specific houses or streets as historical landmarks to uphold an ordinance aimed at protecting the historical appearance or ambience of an area.  “If a city can make an aesthetic judgment that large signs are undesirable in an area of commercial and residential buildings, (citation), we see no reason why it cannot make an aesthetic judgment that building a row of modern apartment buildings on a street of old, architecturally ornate houses is undesirable.”

Most importantly, the decision holds that under these facts, the Wakelands did not have a vested right in the continuation of the R4 zoning classification that existed at the time they purchased the lots.  While prior decisions, (including  the Pioneer Trust case, 71 Ill.2d 522, 377 N.E.2d 26),  have held that a party has a vested property right  in a zoning classification where they have in good faith substantially changed their position or expended funds in reliance on a building permit or probability of its issuance,  the good faith element requires that they take some action within a reasonable time.  Here, the Wakelands purchased the lots and then did not begin construction or take any action to that end.  When the one building was destroyed by fire, they took no steps to build on the empty lot. “A buyer cannot count on an indefinite continuance of a zoning classification….To come within the rule of Pioneer Trust , the buyer must take action to develop the property within a reasonable time, or else zoning ordinances would effectively nonamendable.”

 

8. LANDLORD/TENANT; DUTY TO MAKE REPAIRS AND THE VOLUNTARY UNDERTAKING THEORY OF LIABILITY:

You can’t help but wonder  if the outcome would have been different had the landlord/defendant not been the Chicago Housing Authority,  but McCoy v. The Chicago Housing Authority, (1st Dist., August 19, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/August/Html/1012937.htm , nonetheless sets forth some excellent law on the liability of a landlord for injury to a tenant based on failure to make repairs.

Tewanda McCoy was five years old when she fell seven stories from the window of the CHA apartment she lived in with her mother, Edna Jones.  In her suit against the CHA, the mother  alleged that it negligently caused her daughter’s injuries by failing to repair the window locks in the apartment.  When she moved in, Edna Jones filled out a report complaining of the absence of window screens and locks on the windows.  The CHA workmen “only came out one time to plaster the hole in the wall and around the bathroom. That was it. They didn’t come out for my windows and it was the main thing I need(ed)…” She then went to the building office at least once a month, and was told on several occasions that the CHA workman would come out to do the repairs. No one ever came. After a few months, she continued to complain, and then was advised that the CHA would not be able to make repairs because they had laid off workers and did not have any repairmen available.  At the trial, a sworn statement  from a former CHA employee was presented stating that there were several complaints requesting window locks be replaced or repaired, and “It was common knowledge to the staff at 5041 S. Federal that the window locks were bad.”

The trial court granted the CHA’s motion for summary judgment, finding that it did not have a duty as a matter of law to prevent the injuries to Tewanda by making repairs to the window.   The First District opinion by Justice Theis,  concurred by Justice Hoffman and Hartman, affirmed the trial court.

Landlord/tenant law applied regardless of the fact that the CHA is the landlord.   Under those principals, where the landlord retains control of a portion of the leased premises, it has a duty to use ordinary care in maintaining the safe condition of those premises.  On the other hand, where the leased premises are in control of the tenant, the landlord has no duty to maintain or repair the portion under the tenant’s control.  An exception occurs,  however, where the landlord voluntarily undertakes to maintain or repair.   The theory of voluntary undertaking requires both action by the landlord and reliance by the tenant so that the tenant forgoes other remedies or precautions against the risk presented by the condition of the property.  Here, as in the prior case of Vesey v. CHA,  the tenant failed to produce evidence of any reasonable expectation or reliance on the CHA to make repairs.  Over a course of several years, the CHA failed to make the  repairs requested, and as late as a month prior to the accident, a CHA official told Ms. Jones that there were no repairmen available to do the work.   The Restatement (Second) of Torts, Section 324A also makes an increase in the risk that worsens the plaintiff’s position an element before liability will be imposed under the theory of voluntary undertaking.  There was no “consistent practice of making repairs” upon which to rely, and any reliance under the circumstances would have been unreasonable. There was no promise by the CHA to repair that would have induced Ms. Jones to forgo other remedies such as fixing the window lock herself, getting someone else to fix it, or finding other housing, and  the CHA did nothing voluntarily that increased the risk  further.  Without evidence of the existence of a duty and no evidence to support a voluntary undertaking or a reasonable reliance thereon, summary judgment in favor of the CHA was affirmed.

 

9. FORCIBLE ENTRY  AND DETAINER; UNKNOWN OCCUPANTS LEGISLATION:

Public Act 92 – 0823, http://www.legis.state.il.us/publicacts/pubact92/acts/92-0823.html, (Senate Bill 1934)  amends the Code of Civil Procedure, Sections 9-104, 9-107, and 9-107.5 of the Forcible Entry and Detainer Act relating to the demand for possession,  service of summons,  and eviction of  “unknown occupants” on property.   The amendments provide that the demand for possession may be made upon an “unknown occupant” who is not a party to a written lease, rental agreement,  or possession agreement.  (Section 9-104) Service of process may also be made upon an “unknown occupant”  so named in the complaint and delivered to a tenant, unknown occupant, or person  in possession. (Section 9-107.5)  In the event service is unsuccessful, the plaintiff may then obtain jurisdiction over “unknown occupants” by publication. (Section 9-107)  Finally,  if “unknown occupants” are not named in the judgment for possession, but the Sheriff determines that there are “unknown occupants” in possession of the premises at the time of execution of a judgment for possession or eviction, he shall leave a copy of the order with the person in possession, or post the same with a notice addressed to “unknown occupants”,  that unless they file a written petition with the clerk of the court within 7 days setting forth their legal claim for possession, they will be evicted.

The Act takes effect immediately, and was signed by the Governor on August 21, 2002.

The problem of dealing with “unknown occupants” has been ongoing in foreclosure as well as forcible cases for quite some time. These specific amendments apply only to forcible entry and detainer, but may provide the pathway to resolving a recurring and incipient difficulty. 

 

10.    FROM THE TITLE COMPANY PERSPECTIVE: 

Twice in as many weeks I have been asked to fax or otherwise comment on special warranty deeds.  Thinking that I might be on the cusp of a trend, I thought that I would discuss these and two other items of interest this month.

“Grant, Bargain, and Sell” deeds are found in 765 ILCS 5/8.  Warranty deeds are noted in section 5/9, and quit claim deeds appear in 765 ILCS 5/10.  But these statutes make no mention of special warranty deeds.

Special warranty deeds are a step below their powerful relative, “general” warranty deeds.  When a grantor executes a special warranty deed, the grantor warrants that he or she has done or suffered to be done nothing to encumber the premises and will warrant and forever defend the same.  The grantor, however, is not responsible for the acts of the preceding grantors.  In other words, the grantor will warrant the condition of title for only that period during which he or she (or it) has owned the property.

I have seen these deeds used only occasionally, usually by corporations, railroads, or municipalities.  In one recent instance, a builder customer had contracted to give a special warranty deed at closing, but then showed up with a quit claim deed!

Clearly buyers’ attorneys must examine the deed proffered at closing to make sure it conforms to what was agreed in the contract between buyer and seller.  So what are the operative words of a special warranty deed?  I have an old Cole form in my files, and its key words are “remise, release, alien and convey unto the said party of the second part, and to    [his/her/their/its]    heirs and assigns, forever, all the following described land. . . .”  On the other hand, Logan Fitch, in his timeless book, REAL ESTATE TITLES IN ILLINOIS, writes (while citing HOLBROOK v. DEBO, 99 Ill. 372 and GLOS v. FURMAN, 164 Ill. 585) that “where the words ‘convey and warrant all interest in’ are used the instrument is a special warranty deed rather than a warranty deed, and does not warrant more than the grantor’s present interest.”

Long time readers of the ISBA’s REAL PROPERTY newsletter will remember two fine articles on warranty deeds that were written by Ron Guild and Mike Ranz.  These appeared in the January 1996 and the September 1996 issues.

Secondly, real estate attorneys will take more than a passing interest in Public Act 92-0765, which took effect on August 6 as the Mortgage Certificate of Release Act.  (See http://www.legis.state.il.us/publicacts/pubact92/acts/92-0765.html for the complete text of this Act.)  This new legislation allows title companies (or their agents) to record a certificate of release of mortgage under certain circumstances.

Before recording a certificate, the title company must first deliver a “notice of intention to file a certificate of release” to the lender.  The notice states that if the title company does not receive from a lender a release or a written objection to the issuance of a certificate of release, the title company “may” record a certificate of release.  The lender has ninety days after receipt of this notice to issue a release or object in writing to the issuance of a certificate of release.

I note that this Act self-repeals on January 1, 2004, which seems to limit its effectiveness.  What may also curtail its use is the fact that the title insurance company has no obligation to issue a certificate.  As noted above, the operative word in this legislation is “may” and not “shall.”  In a time of limited resources, will a title company want to undertake the additional task of sending out and monitoring notices and certificates?  On the other hand, perhaps some title companies WILL undertake this chore--but at a price.  Will an additional charge for “Certificate of Release Notification and Preparation” soon be appearing on title company invoices alongside the fee for the ubiquitous 8.1 environmental endorsement?

Finally, in March 2001 I wrote a column about new statutory standards for residential plats of surveys.  (See http://www.dpr.state.il.us     I noted the pitfalls of the so-called mortgage inspection plat, which do not meet the accuracy standards of plats of survey.

A title examiner recently forwarded to me one of the most egregious examples of a mortgage inspection plat that I have ever seen.  This plat (for which the seller paid $225) noted that the building on the property was located “plus or minus” on the west lot line!  Admittedly, this absurd notation is consistent with the requirements of the mortgage inspection plat standards, which state that “if evidence exists of the possibility that the improvements on the subject property or adjoining property are on or very near the apparent deed lines, the surveyor is obligated to note his/her findings. . . .”  These standards, however, contain the additional caveat: the surveyor is also obligated to “recommend that a boundary survey or land title survey be performed.”  Was such a survey prepared?  If so, why wasn’t it delivered at closing?

A mortgage inspection plat is not a survey, and so it seems clear that these plats are useless for title insurance purposes.  It is important for sellers’ attorneys to realize that a mortgage inspection plat does not satisfy the usual contractual requirement between buyer and seller that the seller deliver a current survey to buyer at closing.  Furthermore, title companies may not accept these plats for the purpose of giving extended coverage over the general exceptions.  If a seller’s attorney hands over a mortgage inspection plat to a buyer at closing, the loss of $225 may be the least of his or her concerns.

Dick Bales

Chicago Title

Wheaton, Illinois