Daily Development for Monday, March 4, 2002

 

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

 

EASEMENTS; ABANDONMENT:   Once a property owners begins to enjoy the benefit of an easement, it can not abandon the easement just to avoid a shared responsibility to pay the cost or maintaining it.

 

Lake Lookover Property Owner's Association v. Olsen, A-0868-00T3, 2002 WL 220898 (N.J. Super. App. Div. 2002); February 14, 2002:

 

A developer created a lake by damming a water course.  The lake, its beaches, and other facilities were conveyed to a property owners association.  The property surrounding the lake was subdivided into over 100 home sites.  Over time, through deeds, all of the home sites "received, in one form or another, the benefits of an easement entitling the owners to use" the lake.

 

About sixty years later, the New Jersey Department of Environmental Protection (DEP), claimed that the dam was unsafe and sued to have the developer and the association remedy the condition.  It alleged that the developer had primary responsibility and that the association was also responsible because it had made unauthorized modifications to, and controlled, the dam.

 

In that litigation, which preceded the instant matter, it was held "that the holders of the easement [the surrounding property owners] were primarily responsible for repair and maintenance of the dam."  During the three years following that decision, a series of orders were issued concerning physical repairs to the dam and the water level of the lake. After considerable negotiations, a court-approved agreement was reached between DEP, the developer, and the association wherein the developer deeded the lake and beach property to the association, a fine was paid, and a repair timetable was established.  More importantly, the settlement agreement provided, in essence, "that the cost of the project would be 'borne on a pro rata basis' by all of the ... property owners who had 'lake rights.'" It also provided that the association would bill each benefitted property owner on a periodic basis, and that if any property owner failed to make timely payment, the court would enforce the that property owner's payment obligation.  Specifically, the court-approved agreement referred to the need for "a fair and reasonable sharing of financial obligation[s] among its property owners ... ."

 

The earlier court established a process by which individual property owners waived their appearances, and consented to the pro-rata payment arrangements.  Equally important, each of the property owners had been kept aware of the progress of the DEP enforcement action through meetings and letters.  Before the settlement was approved by the Court, the association advised all property owners of the substance of the agreement and the obligation of each property owner to pay a pro rata share of the assessment.  It was an the end of this entire process that the earlier court approved the settlement.

 

In the instant, subsequent action, about thirty-five percent of the property owners challenged the authority of the association to levy assessments. They also asserted that they could abandon their easement rights and "thus be exonerated from any obligation to contribute to the repair or maintenance of the dam."

 

To this, the new lower court responded that "it would not revisit the issues resolved" by the earlier proceedings and by the earlier order.  It found that the complaining property owners had full notice of the matter and never asked the prior court to reconsider the matter nor had they appealed the order.  The lower court "found it inequitable for the defendants now, some two years later, to challenge the actions which the Association had taken in reliance on that order."   As to the whether the property owners could abandon the easement and avoid making contributions to repair the dam, the Court pointed to a governing principle of New Jersey case law::

 

"With the benefit [of an easement] ought to come the burden, absent agreement to the contrary ... .  The argument that, notwithstanding that principle, one can avoid its impact by surrendering the easement right, has a deceptive simplicity. Some reflection, however, makes clear that the concept is not sound."

 

Here, the property owners had enjoyed the benefit of the lake easement for almost eighty years.  Without doubt, the dam suffered wear and tear over those years and, "not surprisingly, after some eighty years it requires substantial rehabilitation."  According to the Court, allowing the property owners to abandon their obligation when they enjoyed use of the easement for such a long period of time "would make little sense."  It would subvert equitable concept "that the burden should follow the benefit.  Under such a rule, the ones who enjoyed the benefit would share none of the burden."

 

The Court pointed out that it was not dealing with an "abandonment" that had taken place at about the time the easement itself was created.  In fact, until the time that the matter with the DEP was settled, no property owner had purported to surrender its easement rights.  Only after the association spent four year "struggling" with the issue, did some of the property owners suggest that they could surrender their easements.

 

The property owners sought to rely on comment b. to section 4.13 of the Restatement (Third) of Property: Servitudes to support their position. That comment essentially reads that the holder of an easement is free to abandon the servitude and that the duties that arise generally cease upon such an abandonment.

 

Here, however, the Court pointed out that the property owners were ignoring additional language that states that, "[o]nce the easement owners had started making use of the easement, there is a duty to make such repairs or do such maintenance as may be necessary to avoid reasonable interference with the servient estate... ."  In sum, "[t]o permit those in a position such as [the complaining property owners] to avoid their maintenance obligation by some purported abandonment or surrender of the easement rights which they or their predecessors had enjoyed for so many year would quite obviously represent a default in the obligations of those easement holders to their fellow easement holders. ...

We do not believe the Restatement supports that position or, if it does, we decline to adopt it."

 

The Appellate Division agreed with the lower court that there was no reason to overturn any of the good faith actions taken by the association and that the easements holders were bound to contribute to the association on a pro rata basis.

 

Comment 1:   The case is as interesting for the original ruling, here accepted by default, that all easement holders were obligated to participate in the costs of maintaining the dam, even if they were not and never had been members of the property owners association, which was given the right to levy and collect assessments.

 

Comment 2: Given the prior ruling, the instant ruling is difficult to avoid as to its gist.  It may go to far to say that a party cannot abandon an easement.  But abandonment should not result in release of the benefitted property from a burden established as a consequence of prior existence of the easement.

 

Comment 3: The case suggests that the lake was an integral part of the property value and ownership rights of all the easement beneficiaries, who now were simply trying to dodge the costs.  Nevertheless, this is a relatively rare holding that a homes association can act as a surrogate for the interest of all those involved in holding a lake easement, even those who have no voice in the operation of the association.  Taxation without representation?  Or will the court conclude that parties who pay have the right to participate in the asssociation's maintenance decision.  The editor expects the latter.

 

 

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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