Relating to Real Estate

IN THIS ISSUE:

THERE IS NO STATUTE OF LIMITATIONS FOR A FORECLOSURE SALE

BAD NEIGHBORS MAKE STRONG FENCES

HOUSE BUILT OVER THE PROPERTY LINE IS A TRESPASS

CONSTRUCTION LENDER HAS NO OBLIGATION TO SUBCONTRACTORS

GUARANTOR REMAINS LIABLE AFTER LEASE IS REJECTED BY LANDLORD

SPEAKING OF REAL ESTATE

There Is No Statute of Limitations for a Foreclosure Sale

Wanda and Nathaniel Daughtry borrowed $918,900 from Liberty Mortgage Corporation to refinance their home in Prince George’s County in 2007. In 2012, they defaulted on their loan. In December 2018, trustees for the lender commenced foreclosure proceedings, noting that the loan was 6½ years in default. The Daughtrys filed a motion to dismiss or stay the foreclosure, contending that the action was barred by the statute of limitations. The Circuit Court for Prince George’s County denied the motion, and the Daughtrys appealed to the Court of Special Appeals (CSA). The CSA affirmed Daughtry v. Nadel, 248 Md. App. 594 (2020).

The Court of Appeals held in Cunningham v. Davidoff, 188 Md. 437 (1947), that there was no statute of limitations on foreclosure sales, and the CSA held that that this remains the law today.

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Contact Ed Levin | 410-576-1900

Bad Neighbors Make Strong Fences

It seems that Robert Frost’s adage “Good fences make good neighbors” needs to be updated, at least for neighbors who own adjoining panhandle lots with narrow strips that extend to a public road.

In Chicago Title Ins. Co. v. Jen, 249 Md. App. 246 (2021), Allynnore Jen and Charles Shuler lived next to Dennis and Teresa Bull in Parkton, Baltimore County. Each of their lots contained a 15-foot strip of land that runs 155 feet to a public road. There was a driveway right of way on these strips that served both properties, but the paved portion of the driveway was located mostly on the Bulls’ strip. The Bulls told the Jen-Shulers that they could not drive on the Bulls’ paved portion of the driveway, and the Bulls constructed obstacles to prevent the Jen-Shulers from doing so. The Jen-Shulers did what distressed homeowners often do when they have disagreements with their neighbors: they requested that the issuer of their owner’s policy of title insurance (here, Chicago Title Insurance Company) pay their legal expenses in their dispute with the Bulls.

The Jen-Shulers claimed coverage from Chicago Title under the section of the Policy insuring against a “[l]ack of a right of access to and from the land.” According to the CSA, no Maryland case had previously decided this issue, but seven of the eight jurisdictions that had concluded that necessary access is satisfied if a property adjoins a public roadway. Therefore, the CSA ruled in favor of Chicago Title on this point.

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Contact Ed Levin | 410-576-1900

House Built over the Property Line Is a Trespass

Wilson v. Donald, Sept. Term 2019, No. 287 (Md. Ct. Spec. App. Dec. 14, 2020), describes a situation of unfortunate events and court decisions.

The Court of Special Appeals (CSA) affirmed the circuit court’s finding that a newly constructed house was partly over the boundary line of the neighbor, and that the invasion constituted a trespass. The circuit court had required that the encroaching portion of the improvements be removed, and the CSA agreed with that. The circuit court had awarded $50,000 in punitive damages and $1,000 in compensatory damages, but the CSA vacated those awards and remanded the case to the trial court for further consideration. Compensatory damages must be equal to the loss of the value of the property, and there was no indication in the file what basis the circuit court had used to determine its award of compensatory damages. And punitive judgments must be based in part on compensatory damages, so the CSA held that that portion of the award needed to be reconsidered by the circuit court as well.

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Contact Ed Levin | 410-576-1900

Construction Lender Has No Obligation to Subcontractors

In Bel Air Carpet, Inc. v. Korey Homes Bldg. Grp., LLC, 249 Md. App. 109 (2021), Bel Air Carpet, Inc. (Bel Air Carpet), a subcontractor on a series of new homes built by Korey Home Building Group, LLC (Korey Homes), was not paid for a portion of its work when Korey Homes went out of business. In an effort to get paid, Bel Air Carpet filed an action in the Circuit Court for Harford County to recover damages against Korey Homes and others, including the construction lender, Hamilton Bank. Bel Air Carpet claimed that Hamilton Bank was negligent because it did not follow normal industry standards in administering its construction loans to Korey Homes. Bel Air Carpet alleged that the bank did not require that Korey Homes obtain mechanics’ lien releases from its subcontractors, that Korey Homes complete its work, or that the subcontractors be paid before the bank disbursed construction advances to Korey Homes.

The trial court granted Hamilton Bank’s motion to dismiss the negligence count against the bank because Bel Air Carpet failed to allege any contractual relationship or intimate nexus between it and Hamilton Bank to establish a duty of care.

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Contact Ed Levin | 410-576-1900

Guarantor Remains Liable After Lease Is Rejected by Landlord

Although most lease rejections in bankruptcy arise in the context of bankruptcies of tenants, when a landlord files for bankruptcy, the landlord can elect to assume or reject a lease. If the lease is rejected, the Bankruptcy Code protects the tenant from losing the premises by giving the tenant an election to remain on the premises and continue to pay rent throughout the remaining term and any renewal term. 11 U.S.C. §365 (h). However, the Code does not address the liability of a guarantor of a lease that has been rejected by a landlord where the tenant elects to remain in possession.

In Eplet, LLC et al v. DTE Pontiac North, LLC, et al, 984 F.3d 493 (6th Cir. 2021), the U.S. Court of Appeals for the Sixth Circuit held that a guarantor of the lease remains liable under its guaranty where the tenant elects to remain in possession following rejection of its lease by its landlord. Under the facts of Eplet, the parent of the tenant guaranteed the tenant’s performance of an agreement that required the tenant to maintain the premises in good condition and free of environmental defects. After the lease term ended and the tenant vacated, the landlord sued the guarantor for damages as a result of the tenant’s breach of the maintenance agreement.

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Lawrence Coppel wrote this summary. Larry is former Senior Counsel at Gordon Feinblatt and can be reached at lawrencecoppel@gmail.com.

Speaking of Real Estate

Presentations

Edward J. Levin was a panelist on the Strafford live webinar on “Navigating UCC Issues in Real Estate Finance Opinions” on March 24, 2021.

Edward J. Levin presented “Recent Maryland Cases Regarding Real Estate” at the Maryland State Bar Association’s Real Property Section’s Commercial Real Estate Discussion Group Lunch on April 13, 2021.