Category: Real Estate

Dean Alterman presents ABA seminar on landlord’s liens in commercial leases

Abandoned store with merchandise

It’s been reported that Millennials don’t want to inherit the furnishings that their Baby Boomer parents have accumulated.  Commercial landlords often have a statutory or contractual lien right in their tenants’ furnishings to secure the tenants’ obligation to pay rent.  They want that security interest – but sometimes, like Millennials, they don’t want the stuff itself, even when the tenant stops paying rent.  On February 23, Dean Alterman gave a presentation to the Leasing Group of the American Bar Association’s Real Property, Trusts and Estates section on how to recognize the competing interests of landlord, tenant, the landlord’s lender, the tenant’s lender, and the tenant’s vendors when drafting a commercial lease.

Indian Ridge I v. Lenahan: The Oregon court of appeals expands lis pendens rights

Image courtesy of Shutterstock.com. Used under license.

Oregon law authorizes a party to litigation who is claiming an interest in someone else’s real estate to record a notice of pending litigation – a lis pendens – in the real estate records.  The lis pendens gives notice to prospective purchasers and lenders that the lawsuit may affect the title to the property.  The particular statute, ORS 93.740, begins with “In all suits in which the title to or any interest in or lien upon real property is involved, affected or brought in question, any party thereto” may record a notice of the pendency of the action, which puts purchasers and lenders on notice “of the rights and equities in the premises of the party filing the notice.”

Until this September, most Oregon real estate lawyers understood that the litigant who records the notice must be asserting some interest in the real property, such as ownership, a lien, a leasehold, or an option.  A plaintiff who was not claiming any direct interest in someone else’s property couldn’t record a lis pendens against the defendant’s property.

In September the Oregon court of appeals changed our common understanding with its opinion in Indian Ridge I v. Lenahan, 314 Or App 715 (2021).  The court held that a landowner who was challenging a neighbor’s land division through a writ of review could record a lis pendens to put the writ of review into the real estate records, even though the plaintiff was not himself asserting any right in the neighbor’s property – and even though the defendant was the county, not the property owner.

Here’s what happened.  In 2014, the owner of the “Hayes property” applied to partition the 150-acre tract into a 146-acre parcel and two 2-acre homesites.  Lenahan owned nearby property and also held an easement over the Hayes property to convey water from the Wallowa River to Lenahan’s property for irrigation.  Lenahan challenged the partition because he believed that developing the homesites might affect his water rights.  Wallowa County approved the partition.  Lenahan filed a petition for review with the Land Use Board of Appeals, properly naming Wallowa County as the respondent.  LUBA denied Lenahan’s petition for review for lack of jurisdiction and transferred it to the Circuit Court, to be handled as a writ of review under ORS 34.010.

The court of appeals describes what happened next:

While the writ of review proceeding was underway, the Hayes property went into foreclosure. Anticipating that the property could be sold at auction, respondent filed a notice of lis pendens in Wallowa County on April 28, 2017. The notice identified the writ of review proceeding by case number, listed the parties to the proceeding as Lenahan (as petitioner) and Wallowa County (as respondent), identified the Hayes property as the real property affected, and described the object of the action as “Appeal of Wallowa County’s decision (Order 2015-017) to approve a tentative plat (LP#14-13) to create two two-acre parcels pursuant to Ballot Measure 49 Final Order H129386.”

The new owner of the Hayes property, Indian Ridge, petitioned to have the lis pendens declared invalid.  The circuit court granted Indian Ridge’ petition because Lenahan was not, in the trial court’s words, making any “claims against any interest or lien” in the property under the writ of review.

Lenahan appealed.  The court of appeals reversed the circuit court and held that ORS 93.740 entitled Lenahan to record a lis pendens.

The court of appeals identified the question as whether the writ of review was a suit “in which the title to or any interest in or lien upon real property [was] involved, affected, or brought in question.”   Lenahan contended that the writ of review would affect an interest in the property, and that as Lenahan was the plaintiff, Lenahan could record the lis pendens.

Indian Ridge argued that Lenahan could not record a lis pendens against the Hayes property (now Indian Ridge’s property) because Lenahan did not claim any interest in the Hayes property.  The suit would affect only whether the Hayes property was one parcel or three parcels, but would not grant Lenahan any rights in the Hayes property.

The court of appeals explained that although ORS 93.740 allows parties to litigation involving interests in real property to record a notice to establish their priorities in the real property, “it does not follow that the only purpose of lis pendens is to establish claim priority.”  The court included in the statute’s purposes that of giving prospective purchasers notice of matters affecting the property, such as the dispute between Lenahan and Indian Ridge over the partition application.

To again quote the court:  “[The lis pendens statute] is not written so narrowly that only someone making a claim against the property may file a notice of lis pendens.  Rather, it expressly permits the filing of a notice when any property interest is involved, affected, or brought in question.”

However, the court’s opinion barely mentions three unusual facts about this case.  First, people who claim an interest in real property name the property owner as a defendant, but the property owner, Indian Ridge, was not a party to the underlying case because Lenahan had sued the county to overturn a county decision; he had not sued the landowner.  Second, no matter how the case ended, Indian Ridge would still own the Hayes property free of any claim of Lenahan.  All the case would do is determine whether the property was one legal parcel or three legal parcels.  Third is that the statute says that the lis pendens is notice to prospective purchasers “of the rights and equities in the premises of the party filing the notice,” but Lenahan, who filed the notice, id not claim any right or equity in the Indian Ridge property.  (No one argued against his easement right for the river water.)

We are left with a dissatisfying result.  The court of appeals held that the public benefits when litigants can use ORS 93.740 to tell the world that about challenges to partitions and land use actions, and yet it’s hard to read the words of the statute and conclude that the legislature intended to give people who aren’t claiming an interest in real estate and who aren’t suing the property owner to record a lis pendens against the property.

If the government builds on your property, don’t wait 30 years to sue

In its September 1 opinion in Walton v. Neskowin Regional Sanitary Authority, 314 Or App 124, the court of appeals reinforced a basic point of Oregon condemnation law: when the government physically invades your property, the six-year statute of limitations on your takings claim begins to run.  The court’s opinion is, however, remarkable for what it does not discuss.

With one exception, the facts are straightforward.  In 1993 or 1994, the Neskowin Regional Sanitary Authority installed an underground sewer line through the property of James Jefferson Walton, father of the three plaintiffs.  The property had a house with a septic tank.  In 2001, James Walton deeded the property to the three plaintiffs, his children.

In 2014, Neskowin told the Waltons that the septic tank had failed, and that they must connect their house to the sewer.  The Waltons told Neskowin that their father had given Neskowin permission to build the line through his property in exchange for being allowed to hook up without charge.  Neskowin denied that it had made any such agreement with James Walton.

In 2017, the Waltons sued Neskowin and asked for compensation for inverse condemnation that resulted (they said) from Neskowin building the line through their father’s property.  They also alleged that Neskowin and their father had made the agreement for a free sewer connection.

Neskowin’s primary defense was that the claim was time-barred: the statute of limitations for their claim was six years, and the Waltons had brought their claim more than six years after Neskowin had built the sewer line.  The trial court agreed with Neskowin and granted summary judgment to Neskowin.

The Waltons appealed.  Their principal argument was that the 6-year statute of limitations for an inverse condemnation claim began to run when Neskowin first refused their demand to be compensated, not when Neskowin built the sewer line.  The court of appeals rejected their argument and in a short opinion affirmed the trial court.

That’s what’s in the opinion, and it’s not particularly remarkable.  If the government starts to dig on your land, your claim accrues and the statute of limitations begins to run.  Sue promptly.  However, the opinion leaves out the answers to two questions.

The first question comes from the law of easements.  If James Walton had given permission to Neskowin to build the sewer line through his property in exchange for a free hookup, then Neskowin’s use was not adverse.  The statute of limitations for a trespass would not start to run until Neskowin’s use became adverse to the Walton family – that is, until Walton or his children asked to connect to the sewer line or told Neskowin to move the line off of their property.  The Walton children did allege that their father had given Neskowin permission to build the line, which if correct would have kept the statute of limitations on their claim from starting to run until Neskowin had denied their request for a free sewer connection.  The court’s opinion doesn’t mention that important point.

The second question is why the trial court decided the case on a motion for summary judgment.  A trial court can’t grant summary judgment if there is a disputed material fact.  Whether James Walton had given Neskowin permission to build the line was a disputed material fact: the opinion itself discloses that the Waltons alleged that their father had given Neskowin permission to build the sewer line, and Neskowin alleged that he hadn’t.  The court of appeals recognized that the fact was disputed; in a footnote it wrote “Rather, it is plaintiffs’ assertion, albeit contested by defendant, that the previous property owner – plaintiffs’ father – had allowed defendant to install the sewer line ‘by permission *** for a no-charge hookup.”  How, then, could the trial court have granted summary judgment to Neskowin?

The answer may lie in a document in the trial court file, stated to be a letter dated May 25, 2000 from one of the plaintiffs, Jeff Walton, to Neskowin.  Walton wrote: “Current circumstances: A NRSA sewer line now exists without permission or easement approximately 100’ on Walton property.”  Whether or not James Walton had given Neskowin permission in 1993 to build the line through his property, seven years later his son Jeff Walton told Neskowin that Neskowin had built the line without James Walton’s permission — enough to start the clock ticking on the six-year statute of limitations.

Recent Posts

Categories

Archives