Property Law Developments—Joseph William Singer

The New York Court of Appeals affirmed the usual rule that an owner may have a “vested right” to engage in activity on land if the owner invests substantially in reliance on existing law even if the use has not commenced before the zoning law is changed to prohibit the previously lawful use. In this case, Glacial Aggregates LLC v. Town of Yorkshire, 924 N.E. 2d 127 (N.Y. 2010), the owner had invested $500,000 in mitigation measures to secure a mining permit and had received the permit; when the town amended its zoning law to classify mining as a use needing a special permit and then refused to issue the permit, the Court of Appeals had little trouble in finding the $500,000 investment, when coupled with the permit grant, to be sufficient to give the owner a vested right to engage in the mining activity. The case is interesting because no mining had yet occurred and all expenditures were undertaken to get the permit itself; in the usual case, a vested right is not found until the owner begins investing in creating the use–for example by beginning to build a structure. Here the initial expenditures were both necessary and expected and of such a magnitude that the new prohibitory law could not be imposed retroactively.

A trial judge in Massachusetts has ruled in Citibank (South Dakota) v. DeCristoforo, (Mass. Super. Ct. 2011), 39 Mass. Lawyers Weekly 1 (Jan. 19, 2011), that a South Dakota based credit card company’s interest rates above 18 percent charged to a defaulting credit card borrower in Massachusetts were unconscionable. The judge applied Massachusetts common law to protect the borrower from interest rates deemed to be onerous even though the bank that issued the credit card was located in another state whose law would have allowed the interest rate. The contract presumably contained a choice-of-law clause for South Dakota law and if such a clause were in the contract, the judge overrode it in deciding to apply Massachusetts law to protect a Massachusetts domiciliary. The case is of interest because it may be used as precedent in subprime mortgage case involving borrowing from out-of-state banks.

A court in Massachusetts has held that no compensation is due when a city takes a private sewer system. North Adams Apartments, L.P. v. City of North Adams, 2011 Mass. App. LEXIS 41 (App. Ct. 2011). The court held that the transfer of title from the private owner to the city caused the owner no pecuniary loss; indeed, it benefited the owner by transferring maintenance obligations from the owner to the city. The court also noted that developers frequently created sewer hook-ups and then voluntarily (and without compensation) sought to transfer title to the municipality. Although one might think that loss of control of the sewer connections would constitute a property loss, the court’s factual finding was that there was no reduction in fair market value of the property and no economic value to the land owner in retaining ownership of the sewer connections.

The Pennsylvania Supreme Court ruled, in In re Opening Private Road ex rel. O’Reilly, 5 A.3d 246 (Pa. 2010), that a statute authorizing an owner to construct a road across neighboring property to get to a public road effected an unconstitutional taking of property. Read minority opinion. The court distinguished the common law doctrine of easement by necessity that grants owners rights of way by necessity over remaining land of a common grantor, finding that doctrine to be constitutional. The court further ruled that such a taking was for a private purpose unless the predominant beneficiary of the taking would be the public.