• $40,000 in maintenance
• $90,000 in attorney fees
• 27 days in jail

That is what an Allen County land owner has put into the pond that is located primarily on his homestead in Allen County. Greg Tucker is a business owner, and thought he was buying an upscale property with a nice accessory, a large pond for his kids to play and fish in.

What he bought was a headache. See, the developer promised the next-door neighbor the right of access to the pond. However, no easement was ever created for the neighbor. Now the neighbor is an attorney, and you would think that an attorney would be held to be a sophisticated enough buyer to realize that permanent rights in the property of another cannot be created without a written easement, but the trial court said the now absent developer committed fraud and gave the attorney right of access to Tucker’s pond.

Then things got messy, as the attorney complained when Tucker made modifications to the pond site and messed with the water level. The trial court told Tucker to knock it off and when he was slow to act, sent Tucker to jail for contempt on 2 occassions:

The Hogans, who say developer Steve Jahn sold them legal access to the pond with their property, complained about the lower water level. And the fight was on.

Since then, the two couples have fought about a mound Tucker built across the pond so he wouldn’t have to hear the traffic on nearby I-69 or look at the Hogans’ house. When Heath ordered the mound removed last November, Tucker spent 18 days in jail in February for not removing the dirt fast enough. This month, Tucker was in jail for nine days after Heath ruled he hadn’t drained the pond enough to allow the Hogans to deepen the end near their home.

Outside of divorce, there is no better fight than a neighbor dispute. From a dollars and cents point of view, this type of dispute makes no sense, but I’d wager the parties will be at if for years to come.

Story from Fort Wayne News Sentinel, Kevin Leininger reporting.

However, in January 2005 the buyers were served with notice of foreclosure on their properties. According to court documents, [Douglas Wayne] Polley did not disclose that he had taken promissory notes on the properties and told the buyers they did not need title insurance.

“This action induced the victims to refrain from having title checked on the property and allowed Polley the time necessary to obtain additional mortgages on the property,” according to charging information signed by deputy prosecutor Rhett M. Stuard.

The scheme came to light when Landmark Savings Bank foreclosed on the loans Polley had taken out on the properties, said Pat Baldwin, Hendricks County prosecutor.

Link (Indy Star).

My question is, is this really a crime, or just bad business decisions. You buy property, you get title search/insurance. If you don’t, you’re a fool. What ever happened to caveat_emptor? Maybe I’m off on this one, but there is a trend in the criminal law to criminalize taking advantage of people’s foolishness.  Of course, the prosecutor in this case was probably motivated by the fact that the developer declared bankruptcy after the buyers filed a civil lawsuit.

The reality is that every financial transaction has some level of risk. Being aware of the risks and taking precautions against them is how you avoid unreasonable losses. If you voluntarily decide to enter into a risky transaction, does that make the other party a criminal? If so, then Indiana needs to outlaw casinos taking money from drunk gamblers.

Also in real estate, check out Kevin Leininger’s column in today’s Forte Wayne News-Sentinel “The Tale of Two Barns.” In it, he discusses the dramatically different response 2 property owns got from the Allen County planning commission, despite the fact that they are about 1 mile apart, in similar areas of the county. 1 was zoned residential, one agricultural, though, and the county wants 1 of the barns (in the residential area) torn down. the result is some good discussion about local zoning control:

To be fair, the area surrounding the Tills’ property is not quite as heavily developed as the land near the Rices’ property to the south – although the transformation is beginning there as well. But, in the real world, the projects are not so easily distinguished. Perhaps the law should reflect that.

Sooner or later, the courts will sort out the feud between the county and the Rices, who claim they followed guidelines and are simply being targeted by would-be neighbors who don’t like the looks of their garage. While I was chatting with Rice, a man near the West Autumn neighborhood pool started yelling at him – not all of it printable.

The flap over the Rices’ barn is more proof that local development guidelines need to be tightened. If there was a problem with their project, it should have been caught long before it was – which would have saved the Rices a lot of money and the neighbors a lot of angst.

All but certain to be signed into law by Gov. Mitch Daniels, the Indiana House measure would require a city or county to pay 150 percent of fair market value to the owner of an occupied residence and 125 percent for agricultural land. Weinzapfel noted the bill’s effect is to force a government agency to look at individual parcels rather than an entire area when the goal for use of condemned land is economic development and increasing assessed valuation.

The government entity also would be responsible for relocation costs and some legal expenses. Weinzapfel said Evansville’s project could fall under a provision of the new law inserted to accommodate a plan to redevelop a South Bend brownfield where Studebaker automobiles were manufactured. It allows a government entity to consider land of multiple parcels as a block when it comprises at least 10 acres and when the entity acquires clear title to 90 percent of the parcels.

“Every wetland consultant, everybody who does land development, everybody I do business with will be watching them closely,” Highland attorney Michael Muenich — who represents developers — said of the Supreme Court cases.

Don Ewoldt, who manages Indiana’s first wetland mitigation bank — 230 acres of restored wetlands in Lake Station, where developers can compensate for filled-in wetlands in other areas — is concerned about the decision’s potential implications.

“It could be hard on the environment,” he said. “A lot of wetlands could be filled in.”

Link.

In 2001, the Court determined that the so-called migratory bird rule, used to give the Corps of Engineers jurisdiction over “isolated” wetlands was an over extension of jurisdiction under the Clean Water Act (the so called SWANK case). NPR did a piece a while ago (I cannot locate it now) about the impact of that decision, and the fact is, no one is really monitoring the pace at which wetlands are being filled in in most places. The Post-Tribune article notes how much Indiana has changed through the draining of wetlands:

Wetlands covered more than 100,000 acres of Northwest Indiana before European settlers moved in, dug ditches to drain them and started farming and building on the land.

Real Estate Brokers:

Real Estate brokers scored a big win in the Indiana Legislature this year with the passage of HEA 1339. This provision mandates certain services that must be part of a listing contract. On the face, it would appear to protect sellers, assuring that they get a certain minimum level of services from their broker, but in truth, what the new law does is prevent the advancement into Indiana of low-cost brokerages, like internet brokers.

It is a strange provision as it forces the seller to accept services from the broker, even if the seller would rather not have those services and would gladly forgo them, in exchange for a lower listing fee. It deprives sellers of contract options, and as the Indiana Law Blog recently noted:

The Antitrust Division of the Justice Department, along with consumer groups and many new real estate brokers, opposes the law. Gov. Mitch Daniels did not act in the best interests of consumers and homeowners when he signed this legislation. . . .

NPR’s Morning Edition had a story last Friday, March 3rd, about how “the Internet is putting pressure on the fees that [real estate] agents have become accustomed to.” It speculated whether real estate agents would soon go the way of travel agents. And stock brokers.

In other words, no discount real estate brokers in Indiana.

Advance Indiana has more:

Advance Indiana wonders just what impact this new law will have on Indianapolis-based Homeyeah.com. Their fees are 40%-90% less than the traditional real estate brokers’ fees. As it describes its services, “Our proprietary business model and technology allows buyers and sellers to take more control of their transaction without sacrificing necessary information and licensed professional guidance at critical points during the transaction process.”

Juanita Rael said she is still surprised that disputes over things such as children’s play equipment in covenants can end up being decided in a courtroom.

“I feel like they’re saying kids aren’t welcome here,” she said. “We didn’t know this could happen.”

The landlord must provide a tenant with written notice of the damages within forty_five days of the termination of the rental agreement and delivery of possession. The tenant must provide the landlord with a mailing address in which to deliver this notice. If the landlord fails to comply the tenant is entitled to return of the entire security deposit and reasonable attorney fees. . .The failure to comply with the notice of damages requirement constitutes an agreement by the landlord that no damages are due.

Admittedly, “reproduction cost minus depreciation” is recognized as a method for determining the “just value” or market value of real property, . . . [h]owever, as the State Board admits, its method of “reproduction cost minus depreciation” is designed to secure “true tax value,” which is unrelated to market value. Because this court holds that the “just value” of real property is its market value, the State Board’s method of calculating “true tax value” cannot withstand constitutional attack. [A] method of cost valuation which does not move towards the goal of securing a just valuation of all property cannot withstand constitutional attack.

Town of St.John v. State Bd. of Tax Comm’rs, 665 N.E.2d 965 (Ind.Tax 1996) (citations ommitted). Over the course of the rest of the 1990’s, the Indiana Supreme Court more or less agreed with judge Fisher, and Indiana was forced into a “market value” system for valuation, implemented as of 2003.

Today we have  a report from the Indiana Fiscal Policy Institute on the impact of the new system, which was supposed to bring fairness to the property tax system.  The net results: unfairness and chaos.  From the Star  today: 

Despite a massive overhaul of the state’s property tax system, wide disparities remain in 85 percent of Indiana’s counties between what a home is assessed at and what it actually sold for. . . . The disparities mean the owner of a home that would sell for $100,000 might find his home assessed at $80,000, while the owner of another home with the same sale price might find her home assessed at $120,000 — even in the same county or township, said Steven Johnson, a former state senator who is president of the institute.

The study focuses blame for the continued disparities squarely on the township assessors, advocating for the elimination of the township assessor positions, leaving the assessment function to appointed “professionals” at the county government level.  That is likely to be a very controversial proposal as it would gore a host of oxen.

The Washington Post is reporting:

Government antitrust regulators are investigating the National Association of Realtors for a possible lawsuit alleging that the group’s policies illegally discriminate against online competitors.

The government’s investigation, which has been going on for about 18 months, centers on a policy the National Association of Realtors is trying to adopt that would allow its 1.2 million members to control whether their real estate listings can be displayed on the Web sites of other agents. Now, other agents can display listings on their Web sites from regional multiple listing services and urge users of the sites to contact them, rather than the listing agent.

The Realtors’ group argues that agents work hard to get listings and so should be entitled to choose whether a home can also be displayed on a competitor’s Web site.

So seldom does a news item present an opportunity to discuss the concept of a “fee simple defeasible,” that I cannot let the opportunity pass. Marcia Oddi is already on this story at the Indiana Law Blog (on its penultimate day!), and the news story details the struggles of New Albany, Indiana to expand the local hospital. To expand the hospital, they have to take and tear down several low-income level house. The plan was approved, so long as the city found a place to build replacement low-income houses. So they decided to take a local city park and put the houses there.

The trouble is, in giving the land to the city in 1935, the grantor put a condition in the deed that would cause the property to revert to the grantor (or his heirs) if the property was not used as a park. Generally, this type of “condition subsequent” is valid and enforceable, and would give the grantor a right of re-entry (or reverter, depending on how the condition is worded). However, in 1993, Indiana passed a law (now, IC 32-17-10-2) that causes such conditions to expire 30 years after transfer. The statute says that the limitation applies “despite whether the possibility of reverter or right of entry was created before, on, or after July 1, 1993.”

The trouble here is the concept of an ex post facto law, a law that retrospectively changes the legal consequences of a fact or commission of an act, and the Contracts Clause. Article I, Section 10 of the United States constitution forbids the states from enacting ex post facto laws or impairing existing contract rights. Article I, Section 24 of the Indiana Constitution says “No ex post facto law, or law impairing the obligation of contracts, shall ever be passed.” A deed is a subspecies of a contract, so the law passed in 1993, might not pass constitutional muster. However, the prohibition as to impairment of contract obligations does not necessarily extend to state’s power to pass laws in matters affecting the health, safety or general welfare of the public, the basic police powers. Basically, the court will have to balance the state’s interests under the statute against the interests involved in the constitutional provisions.

I see the purpose of the statute. Having valuable tracks of real estate locked in particular uses because 70 year old deed condition, inserted by a long since dead person is inconvenient, to say the least. But I also see some injustice here: The original grantor probably thought he/she was creating a permanent city park, having no idea that the legislature would invalidate the limit on his/her gift some 58 years later. If he/she knew the city could come along and rip up the park, maybe the gift would never had been made.

The Pal-Item’s recently created feature where Jess Price answers readers’ questions about the functions of the government is producing good results. Today, Jess answers a question that I know has created a great many neighborly disputes:

Stand on your property and visualize a line going from your property line or the right-of-way line straight up as high as anything attached to the ground would go. Everything on your side of that line is your property and you have sole control of it within the law of course. And while you may maintain something on the other side of the line, the property or right-of-way owner on that side has the right to control it.

Thus, although the trunk of a tree is well on your side of the property line, some limbs, perhaps nearly half of them, may be beyond the line and whomever owns or has that right-of-way can cut them as they wish.

Link.

Good information, and accurate to boot.

Indiana’s move to market value as the basis for property taxation has changed the county assessor’s job significantly. In the near future, property values for tax purposes will be required to keep up with trends in the local real estate market. One Indiana’s County has struck a deal in anticipation of that requirement:

The information-sharing agreement has been in the works for several weeks. In February, the commissioners approved a contract with Plexis, an Indianapolis company, to create a computer program that gives Realtors direct access to property tax files.

Those files are and have been public records available to anyone. The computer program simply makes getting access more convenient for Realtors, who will be able to get the information from their computers.

In return, the County Assessor’s office and assessors in Portage, Penn and Clay townships will get access to the Realtors’ multiple listing service records and be able to use that information to update property valuations on an annual basis.

Link.

The Pal-Item reminds us of the home builder scandal that hit the Cincinnati area 3 years ago and questions why state law makers in Ohio and Kentucky have not acted to prevent housing fraud.

Link.

In that scheme, a large home builder, Erpenbeck Co., borrowed money, constructed homes, sold them off to consumers, then pocketed the cash, leaving the homes still subject to the construction loans. From what I can tell, the home owners got financing through the builder through Peoples Bank of Northern Kentucky. Peoples had their mortgage interests in the homes insured, but the home buyers did not, leaving the home buyers to pay off their own financing plus the construction loan if they wanted to keep their homes.

In the end, the holders of the construction loans decided to take the loss rather than foreclose on the home owners, and the builders and bankers went to prison. Richmond’s connection was through Peoples’ banker John Finnan, who graduated from Richmond High School, and worked at a local bank before moving on. He got 63 months in federal prison out of the scam.

It looks to me like the existing laws worked pretty good: No one lost their home over it and the schemers went to prison, so I do not understand the Pal-Item’s call for legislation. They point to a measure that failed in Ohio:

Ohio Rep. Michelle Schneider, a Madeira Republican, introduced a bill last year that would have required title agents to explain to home buyers the difference between lenders title insurance, which protects banks making loans, and homeowners title insurance, which protects the buyer.

I spend a lot of time in my real estate class trying to explain the difference between the mortgagee and the mortgagor, and I doubt that this measure would have much of an impact on public understanding. In most home closings, the buyers are like deer in the headlights, ready to sign anything at that point, to get them through the experience. The disclosure in the proposed Ohio law would just result in another piece of paper in the transaction to be signed but seldom read. The home buyers rely on those involved in the transaction, the title agents, bankers and real estate agents, not to screw them. Generally, it works out, and outside from a little fee gouging around the edges, the buyers get what they bargained for.