Category Archives: Real Estate

Basic Contract Law – Contracts 101

Back to Basics – Contracts 101.

(Originally published in the Mid Atlantic Mariners Club Newsletter, 2010).

The first rule of contract: capture the intent of the parties.

In every profession, not just the law, we are faced with making, interpreting and abiding by contacts.  Sometimes these contracts are long and impossible to understand (mortgage refinancings, consumer warranties) sometimes they are so fleeting that one hardly notices (“I’ll pick up lunch”).  In law school, we learn that a contract consists of an enforceable promise.  It’s a promise that one can take to court, and the court can make the other comply or award damages for their failure to do so.  All contracts, though, include a major element of hope and trust and if that trust is broken, bad things happen, and the threat of a court’s intervention may not be enough to save the deal.

When a client comes to me about a contract, it is usually one of three things — reviewing a contract that someone else has prepared; papering an understanding where the framework is already in place; or protecting a client from the risks of a particular kind of deal.  The most frequent contracts for me are boat and ship purchase contracts — these often involve a significant outlay of funds before the product is near completion, and therefore require both trust and legal protections.  With all projects, I generally start with the same three questions.  What are you trying to accomplish?  What has already been agreed to?  How much do you know and trust the other party?

 When it comes to reviewing a contract that someone else has prepared for my clients’ signature, I focus on two things.  First, does it capture the items that my client thinks are being agreed to?  Many times I am given a form contract such as a boat brokerage agreement, and the parts of the deal that are most important to my client (the time of delivery and the promises that the boat will be fully commissioned to spec) are nowhere to be found.  Usually this can be handled with an addendum that sets out the specifics (Boat to be delivered to Maryland on date certain at the seller’s risk and expense), but sometimes the brokerage contracts simply will not do the trick.  Lawyers often joke about the boat brokerage and real estate contracts — they do a great job protecting the brokers or agents, but beyond that, its usually a lot of words that don’t say too much.

 My favorite project is when a client comes to me and says … “I agreed to _____ with ______ – can you write a contract for that?”  I like this kind of project (not just for the irony of the fact that there may already be an oral contract) because it usually allows me to work from the ground up, as opposed to slogging through pages of 8 point font prepared by someone else.  I get to start with “what exactly has been agreed to?”  Typically a clients’ answer to that question feels like the tip of the iceberg … “we agreed that I would sell his product for a 10% commission.”  This leaves open all sorts of lawyer-fun — how much do you have to sell; can you sell competitor’s products, too; can they hire other brokers or salespeople; where will suit take place; what happens upon termination?  And what happens if there is no agreement on all of the side issues?  I love that question.

 The Second Rule of Contract: be reasonable.

Assuming that there is enough of a contract to be a contract (generally that it is known what is being agreed to, including when it is to be done and how much it is going to cost) everything else may be an open term.  In some areas of the law, like partnerships, employment and state insurance contracts, there is a whole body of statutes that fills in the blanks.  In those areas people may “agree” to many things that they never even thought of.  If there are not default terms, then the agreement reverts to the rules of reasonableness.  These rules are essentially human instincts — most people will agree most of the time about certain things even if they have never considered them before.  If the contract is to buy a certain thing (say a house), then it is only for that particular thing, not something else.  If it is for something that is largely interchangeable (like a Blackberry), then it may not mean a specific thing, just a thing like it.  You can usually do well in contracts by staying polite and acting reasonably, but sometimes that is mighty hard.

 The rest of contracts is just simple interpretation — if the words on the paper say to do X, and X isn’t illegal or completely unreasonable, then that is what you do.  Words are notoriously tricky things, though, so one must write with care and make sure that everyone abides by at least the most important terms over time.  There are a few contracts (marine insurance, for example) where certain words and phrases have such a history behind them that their meaning is known with some certainty.  But for most contracts, even ones that have been used many times, no court has ever interpreted the key language, and everyone is operating on   hope that the words mean what they think they mean.  This is the real difficulty with “form” contracts — people trust it because its The Form, but who knows whether it captures the agreement that was really intended.

 What can you take away from all of this?  First and foremost, be sure that the contracts you enter into actually capture what is being agreed to — this can be trickier than you think.  Second, sometimes the simplest contracts are the best ones — agree to the key items, and otherwise act reasonably.  Third, there are times when a very thorough papering is necessary — like when a major asset like a house or a business is on the line.  In those cases, have clear goals and good representation that is looking out for your specific interests.

Dividing Real Estate in Maryland – Partition Actions

Dividing Real Estate in Maryland

What do you do if you own a piece of real property with someone else, but you can’t stand them anymore?  Or you need to sell the property, but they want to keep it?  In law, this implicates the doctrine known as “partition.”  In a partition action, one owner of a property files suit against another and asks that the property be divided up or sold and the money split.  It is similar to what happens in a divorce, but the owners aren’t married.  Typical examples: two brothers are made joint owners in their Grandparents will.  One brother uses the property, the other would like to sell it and use the money to work on his own house.  Also typical two people are in love and buy a house together; their love cools and one moves out.  The person that moves out wants to get her money out of the house; the one that stayed is happy with the status quo.  What to do?  File a partition action and ask the court to either divide up the land (perfect if there are two similar lots) or order the land to be sold and money split (necessary if there is one house on the property and it cannot be split in half).

The right to a partition is set out in the Real Property Article of the Maryland Code.  It says:

“Decree of partition (a) A circuit court may decree a partition of any property, either legal or equitable, on the bill or petition of any joint tenant, tenant in common, parcener, or concurrent owner, whether claiming by descent or purchase. If it appears that the property cannot be divided without loss or injury to the parties interested, the court may decree its sale and divide the money resulting from the sale among the parties according to their respective rights. The right to a partition or sale includes the right to a partition or sale of any separate lot or tract of property, and the bill or petition need not pray for a partition of all the lots or tracts.” § 14-107

As the language indicates, if the property cannot be divided without losing value to its owners, then the court should order that it be sold and the proceeds divided.  That is what is known as a sale in lieu of partition.  Such sales are controlled by a section of the Maryland Rules of Civil Procedure that state: “When the relief sought is a sale in lieu of partition, the court shall order a sale only if it determines that the property cannot be divided without loss or injury to the parties interested.”  MD R PROP ACT Rule 12-401.

This is the correct result — if the property can just be split, as with two similar lots that are not improved with buildings — they should be split and the parties can keep or sell them as they see fit.  If the property cannot be split, however, it needs to be sold.

For the owners of the property, however, there are very strong reasons not to actually go through the sale as it would be ordered by the Court.  Under the Rules, the normal procedure is to appoint three commissioners who can establish a value and oversee the sale.  “When the court orders a partition, unless all the parties expressly waive the appointment of commissioners, the court shall appoint not less than three nor more than five disinterested persons to serve as commissioners for the purpose of valuing and dividing the property.”

MD R PROP ACT Rule 12-401.  These commissioners, in turn, can be paid out of the proceeds of the sale.  “Payment of the compensation, fees, and costs of the commissioners may be included in the costs of the action and allocated among the parties as the court may direct.”  MD R PROP ACT Rule 12-401.  If needed, the sale would then proceed to judicial sale –an auction on the courthouse steps.  This means that, if the owners cannot agree to sell it on the open market, it will likely go for a steep discount and then be subject to significant fees to pay the attorneys, commissioners, trustee, and related court costs.

 

The bottom line: if you own property and the other side won’t sell, or if someone has sued you to partition a property you own — you will need pragmatic, effective counsel that realizes that all fees and costs will ultimately come out of the value of the clients’ property.

J. Dirk Schwenk is a Maryland Real Estate, Waterfront Property, Civil Litigation and Maritime Lawyer from Annapolis, Maryland.  He provides civil litigation services in real estate issues, contract disputes, environmental and zoning issues, adverse possession and boundary disputes.  He graduated cum laude (with honors) from the University of Maryland School of Law in 1997 and has been in private practice in Maryland ever since.

Boundary Disputes and Land Surveys

Maryland’s highest court issued a decision last week in Webb v. Nowak, a case about boundary disputes.  The case arose because the Nowak’s cut down and sold timber on a parcel of land that the Webb’s believed they owned – this led to accusations of trespass and claims of adverse possession.  Both parties obtained surveys to determine where the boundary line was supposed to be.  The original 1928 deed set the mutual property line at an “existing fence” and then ran from the fence “340 feet more or less” to a road.  The Nowak’s surveyor concluded that there were remnants of a fence and other evidence of its location when he surveyed almost 80 years later in 2007.  His testimony included pictures of a fence post, the borings of a tree that had grown around a fence post and a description of a swale that he concluded indicated the edge of a formerly tilled field.  He therefore concluded that the 340 foot measurement was a mistake, and the distance should only be about 200 feet.  The Webb’s surveyor relied on a point 340 feet from the road, but did not note any evidence of a fence at that location.

For a starting point, the Court of Appeals concluded that there was a question of fact concerning the correct location of the boundary.  A “determination of which of two surveys reflected the true boundaries of disputed land as intended by the original surveyor is a question of fact.”  Webb v. Nowak, 83 SEPTTERM 2012, 2013 WL 4417573 (Md. Aug. 20, 2013).

The determination of the boundary line in this case … must involve comparing the Wolf deed to conditions in the field—e.g., the location and condition of the Existing Fence, the location of the Private road and County road, the location of other monuments, the topography of the land, and even the location of surveyors’ pins.”

Webb v. Nowak, 83 SEPTTERM 2012, 2013 WL 4417573 (Md. Aug. 20, 2013).  The Court went on to conclude that the 340 foot measurement was a mistake, because the fence was a monument and “monuments control over courses and distances where they continue to exist, or their locations can be determined with reasonable certainty.”  Webb v. Nowak, 83 SEPTTERM 2012, 2013 WL 4417573 (Md. Aug. 20, 2013).

The takeaway for a current landowner?  First, if there is a dispute about the correct boundary in a deed, the testimony of a surveyor will be of paramount importance.  This brings me to land surveys — In Maryland, land surveyors are licensed by the State and the state regulates what must be included in certain types of surveys.

What most people receive when they buy a house — a location drawing — is the lowest form of survey and it cannot be given to someone unless they acknowledge in writing that “A LOCATION DRAWING IS NOT A BOUNDARY SURVEY AND CANNOT BE RELIED UPON BY ANYONE TO SHOW WHERE THE PROPERTY’S BOUNDARIES ARE.” COMAR 09.13.06.06.  The purpose of a location drawing is only to “provide some assurances that improvements are located on the property.  This assurance is for the use of a lend or an insurer only.”  Id.  So a homeowner that purchases a property is not supposed to rely on the location drawing for assurances that the boundaries are correct.

An accurate and reliable survey that is likely to be accepted in Court needs to be at least a Boundary Survey.  A boundary survey will establish and mark the “physical position and extent of the boundaries of the property” and requires that monuments (surveyors stakes) be set and a plat produced.  COMAR 09.13.06.03.  Conducting the survey is what will place the surveyor in a position to testify as an expert to the location of the lines.  And in the case of Webb v. Nowak, it is what put the surveyor in a position to testify that a line described in a deed as 340 feet was really only 200 feet – and that testimony made all the difference.

For more on types of surveys, see Types of Land Surveys

J. Dirk Schwenk graduated from the University of Maryland School of Law in 1997, cum laude, and practices in real estate, waterfront land riparian rights and marine issues in Annapolis, Maryland.

Types of Land Surveys

I regularly receive calls from landowners that have a conflict (or potential conflict) with a neighbor over the boundaries between their properties.  For waterfront property, this may involve the location of a pier.  For the homes in planned and platted communities, this may involve the location of a paper road or community land.  For everyone it might involve a question of where exactly is the shared line between two properties.  These locations may be obscured by installed fences or sheds, by a history of maintenance in one area or lost to history.  It is very common that the potential client, and perhaps their opposing neighbor, do not know where the location is that is called for in the deed or plat.

 

Usually one of my first questions is whether the property has been properly surveyed.  If so, this will narrow the field of dispute a great deal.  Oftentimes the property owner does not have a survey or if they do only has the Location Drawing that they received at purchase or perhaps just the neighborhood plat.  The plat is an important legal document which is relevant (and may establish) the legal boundaries, but it is not the same as being able to locate actual boundaries in the field.  In Maryland, there are several kinds of surveys identified in the regulations, each of which serves a different purpose.  Any qualified surveyor should be able to perform them – a very good surveyor will also be able to testify as needed.  Oftentimes there will be multiple categories on a single plat, but it is good to know what you are looking at, and what you should be able to expect from your surveyor.  Here are some thoughts on each type of survey.

 

1. Location Drawings.  A location drawing is the depiction of the property you receive when you purchase a house.  Although it looks like a survey, it hardly qualifies.  To start with, although you may not remember, if you received one you had to sign a piece of paper that says: A LOCATION DRAWING IS NOT A BOUNDARY SURVEY AND CANNOT BE RELIED ON BY ANYONE TO SHOW WHERE THE PROPERTY’S BOUNDARIES ARE.  The purpose of a boundary survey is to “locate, describe and represent the positions of buildings or other visible improvements affecting the subject property.”  For a location drawing, the surveyor is offering the insurance company and mortgage company an assurance that any improvements to the property are within the boundaries — but that is it.  There are no true assurances to the owner of the size or location of the property, whether there are easements across it, or any of the other items that are likely to cause disputes.

 

2. Boundary Surveys.  A boundary survey “is a means of marking boundaries for sufficient definition and identification to uniquely locate each lot, parcel or tract” and to “establish, reestablish or describe … the physical position and extent of the boundaries of real property.”  If you have a dispute with a neighbor about where the property line is, this is the type of survey that you need.  The surveyor should mark the corners of the property with survey stakes and provide a plat of the area.  To create it, the surveyor will do field work including locating any existing boundaries and markers and review the chain of title to determine what is called for in the deeds.  The surveyor is to accept and review private and public records, and note conflicting boundary line locations.  Field work is to include measurement of locations to an accuracy of 20 millimeters and take account of visible encroachments and visible indications of rights including those asserted by adverse possession or prescription.

 

3. As built, Constructed or Record Surveys: This is the type of survey that is done where there is a question about whether something that has been constructed (say a fence, building or pier) is in the correct location in relation to the boundaries.   They are required to have sufficient accuracy to “permit the determination of whether the position of visible constructed improvements encroach upon adjoining properties” in rights of way or in easements.  In the case of a pier, this will mean that a determination must be made, typically by asking the County zoning officials, of where the riparian line is to be drawn.

 

4. Field Run Topographic Survey: this is the correct survey if the contours of the property are needed, including the location of the mean high water line for waterfront properties.

 

5. Field Run Planimetric Survey: This is similar to a location drawing, except that it is done as a full survey in order to “locate, describe, map or all of these, the horizontal positions of the physical features and characteristics of the earth and other features.”

 

6. Metes and Bounds Description: Instead of a depiction of the property on a plat, this is “a written legal description of the subject tract of land that provides information necessary to propertly locate the property on the ground and distinctly set it apart from all other properties.”

 

7. Right of Way/Easement Surveys: An easement or right of way is a legal right of one person to access property owned by another.  It might be a narrow walking path to reach a beach or other feature, or it might be a complete right of use (such as a community park) that prevents the deeded owner from developing the property in any way.  An easement survey “is a means of obtaining, reporting, or displaying … the necessary data to establish or reestablish the location of sufficient property lines of the affected tract of land to assure the accurate location of the strip or parcel of land being described for the use and benefit of others.  Markers need not be set, but the survey is otherwise required to meet the same standards as a boundary survey.

 

8. Special Purpose Surveys: This is essentially a catch-all category that covers anything aside from the first seven types noted above, but it is not to be used to lower the required standards described in the regulations.

Dirk Schwenk is a graduate, cum laude, from the University of Maryland School of Law.  He practices in real estate, waterfront and riparian law and Maryland boating issues. Baylaw, LLC is located in Annapolis, Maryland.