Real Cases in Real Estate By Andrea Lee Negroni, Esq. - July 19th Update

Real Cases in Real Estate By Andrea Lee Negroni, Esq. - July 19th Update


By Andrea Lee Negroni, Esq.

BuckleySandler LLP

Real Cases in Real Estate is a weekly update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

Followers of Real Cases in Real Estate will learn and be entertained by lawsuits involving nuisance, trespass, zoning violations, deed restrictions, title insurance, public utilities, mechanics liens, construction defects, adverse possession, foreclosure and eviction, divorce and marital property rights, tenants' rights, and more. Real Cases in Real Estate uncovers the unpredictable, amusing, and sometimes outrageous disputes between next-door neighbors, contractors and homeowners, condo boards and residents, real estate brokers and homebuyers, and zoning administrators and developers.

Each fully cited case summary highlights the essential law of the case and explains the principal legal theories and concepts relevant to the outcome. Plain language treatment makes Real Cases in Real Estate accessible to lawyers and laymen alike.

Whether you follow real estate law professionally or as a hobby, you'll find something new and useful every week in Real Cases in Real Estate.


Updates for week of July 19, 2010

When Arson Damages Neighbor's Home, Liability Requires the Criminal Act be Foreseeable

In this Texas case, the court considered whether a homeowner owed a duty to the owner of the house next door, when both homes were damaged in a fire. The case also explains the meaning of negligent entrustment and rules that this principle is not applicable to real estate in Texas.

Mary Scurlock sued Carol Pennell after a fire destroyed Pennell's vacation house and damaged Scurlock's house. Pennell had not been at her vacation house for 10 months before the fire and testified that she left the house locked up with the utilities off. The fire at Pennell's house was apparently started by an arsonist. Scurlock's lawsuit was based on Pennell's negligence. Liability for negligent activity requires that the injury result from the activity complained about. In this case, however, the arsonist's activity was an intervening cause of Scurlock's property damage, which ultimately relieved Pennell from liability. However, if the intervening criminal act created a foreseeable risk of injury, then Pennell's liability would not have been excused.

In this case, Scurlock did not demonstrate that Pennell should have foreseen the risk of fire by arson. The factors that make danger foreseeable include other criminal conduct on or near the property, how frequent the other criminal conduct occurred, how similar the other criminal conduct was to the conduct complained about, and whether the property owner knew about those other criminal incidents. Briefly put, the court looked for "similarity, recency, frequency and publicity" of prior criminal acts in considering whether the injury caused by arson was foreseeable. The only other nearby criminal activity mentioned in the trial was a burglary nearly 30 years earlier. This crime (burglary) was not similar to the arson, or recent, or evidence of frequent criminal activity in the area. Therefore, the court found that Pennell could not have foreseen the risk that arson would injure her neighbor. As the decision states, "Property owners owe a legal duty to those whom a third-party criminal act may harm only if the risk of criminal conduct is so great that it is both unreasonable an foreseeable."

Scurlock also based her claims against Pennell on negligent entrustment, defined in Black's Law Dictionary as "the act of leaving a dangerous article (such as a gun or a car) with a person who the lender knows, or should know, is likely to use it in an unreasonably risky manner." In Texas, however, negligent entrustment applies only to chattels, not to real estate. subscribers can view the enhanced version of Scurlock v. Pennell, 177 S.W.3d 222 (Tex. App. 1st Dist. 2005).

Non-subscribers can use lexisOne's Free Case Law search to view the free, un-enhanced version of Scurlock v. Pennell, 177 S.W.3d 222 (Tex. App. 1st Dist. 2005). 


New York Landlord Has No Legal Duty to Mitigate Damages Following Broken Lease

A New York court considered a landlord's obligations to his tenant after the landlord rented a house that was not complete when the tenant moved in. The decision in Hamblin v. Bachman (unpublished) reaffirms the long-standing rule in New York that a residential landlord is not required to mitigate damages when his tenant breaks the lease. In simpler terms, the landlord doesn't have to re-rent the house but may sue his tenant for the full unpaid rent under the broken lease. The case also explains what it means for a lease contract to be surrendered by operation of law.

Steven Campo rented a house knowing that work was needed, but oddly, he signed a lease requiring him, as tenant, to ensure the property conformed with town codes. Although he was aware of the unfinished condition of the house when he rented it, Campo did not reference any kind of punch list for items he expected the landlord to repair. In a separate note to the landlord, he requested the repairs. Campo was dissatisfied with the landlord's delay in making the requested repairs and reported mold and moisture to the health department.

The health department did not determine that the mold violated the health code, but did report a violation based on damaged asbestos insulation and ordered the landlord to abate the violation in 21 days. The health department also suggested no one enter the basement or garage because of the asbestos.

Campo stopped paying rent and moved out. The landlord made some repairs and re-rented the house. The issue decided in this case is how much rent Campo owed the landlord. The New York rule is that landlords have no duty to mitigate damages from a broken lease, so a tenant is liable for the rent until the end of the lease term if the house isn't re-rented. However, when the landlord re-rents the house, the lease is surrendered by operation of law. "A surrender by operation of law is inferred from the conduct of the parties." That is, both landlord and tenant acted in a way that was completely inconsistent with their desire to continue the lease. The tenant's conduct, in moving out, was inconsistent with his desire to continue to rent the house, and the landlord's conduct, by re-renting the house to someone else, was inconsistent with his desire to continue the lease with Campo.

Ironically, the education and accomplishments of the tenants worked against them in this lawsuit. Noting that one tenant had a master's degree and the other owned a business, the court decided their bargaining power was equal to the landlord's, so they should have worked harder to negotiate the lease. There is even a suggestion in this decision that if the same lease had been made by a tenant with less knowledge and education, it might have been unconscionable.

The legal principle favoring the tenants in this case is the common law warranty of habitability, which means that a landlord's commitment to rent a residence legally implies that the property will not be harmful to his tenant. The Court relied on a treatise on New York Landlord-Tenant law for guidance on the proportion of rent that should be abated based on the severity of this breach of warranty of habitability. The Court abated Campo's contractual rent 60% for the health risk posed by asbestos and 20% for the mold. subscribers can view the enhanced version of Hamblin v. Bachman, 23 Misc. 3d 1116(A), 885 N.Y.S.2d 711 (N.Y. City Ct. 2009).

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