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UPDATE FROM THE LEGISLATIVE LIAISON COMMITTEE |
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The Legislative Liaison Committee of the Real Property Planning and Zoning Section, Chaired by Theresa B. Shea, will be considering several issues in advance of the upcoming legislative session, which will begin in mid-January, 2007. 1. Successors and assigns clauses. The Court of Appeals addressed the applicability of catch-all “successors and assigns” provisions in Park Station v. Bosse, 378 Md. 122 (2003). That case dealt with the attempted enforcement of a right of first refusal on property that was donated and not sold. The blanket “successor and assigns” term found in the agreement at issue was held to apply to day-to-day use and governance provisions, such as use restrictions, but not to the right of first refusal term, which concerned future vesting. As a result, the right of first refusal was considered “personal” to the holder and held to not violate the Rule Against Perpetuities. The Court was not asked to (and did not) consider the effect of Section 1-103 of the Real Property Article, which provides that “[u]nless otherwise expressly provided, any obligation imposed on or right granted to any person automatically is binding on or inures to the benefit of his assigns, successors, heirs, legatees, and personal representatives.” On the surface, Section 1-103 appears to be a “gap-filler” provision, intended to apply to private agreements. But ABA Real Property Chair Kevin Shepherd discovered that legislative history supports the idea that Section 1-103 was intended only to apply to the statutory provisions of the Real Property Article and not to private agreements. The Committee will consider legislation to clarify that Section-103 applies only to provisions in the Real Property Article. 2. The Rule Against Perpetuities. Yes, it hasn’t gone away. And there is no question that our Appellate Courts have struggled to find meaningful ways to apply RAP, sometimes leading to conflicting results in factually similar circumstances. (Compare Dorado (317 Md. 148) [RAP violated by contract contingent on obtaining sewer allocations from County where moratorium was imposed] with Brown (120 Md. App.653) [Rap not violated by contract contingent on perc. tests and permit approvals] with the recent Cattail Associates case (CSA. No. 849, Sept. Term, 2005, filed 9/15/06) [contract contingent on completion of subdivision would have violated RAP, but for the perpetuities saving clause]. Our Section tried the legislative route back in 1989 and 1990, with a bill to essentially kill RAP as to bona fide, arms-length transactions. But legislative eyes glazed over and the bills failed. Since then, the Estates and Trusts Section was able to encourage the Legislature to enact Section 11-102(e), an exception to RAP that enables “Dynastic Trusts.” Clearly, the very purpose behind RAP (to prevent the remote vesting of title that gives rise to real property dynasties) has been cut down in large part by 11-102(e). The Committee will be utilizing the brain power of Ed Levin, who drafted the original legislation, the work of the Uniform Law Commissioners and Starbucks. 3. Time is of the essence. Whatever happened to the good old days when the term “time is of the essence” meant what it says? Carving out exceptions to this ancient and well-loved contract provision simply delays the ultimate vesting of titles, which as we know violates the Rule Against Perpetuities. (Okay, that was a joke). But in an unreported Court of Appeals decision (reported to the Section courtesy of David Fishman) Haylett v. Catoctin Homes, Inc. (CSA. No. 1002, Sept. Term 2004) the Court allowed a vendee specific performance of a contract that had laid fallow for nearly two and a half years following the required closing date, notwithstanding time being of the essence. The Court cited a variety of “old” law that seemed to indicate that the “time is of the essence” clause would have to further expressly provide that the contract would be void if the contingency or term was not satisfied within the prescribed time period. This approach has never been adopted in any reported opinion in Maryland. The Committee will consider whether clarifying legislation would be beneficial. 4. The Revised Uniform Power of Attorney Act. The Estates and Trusts Section will be working to have the Uniform law enacted in Maryland. Our Committee will coordinate with that Section to make certain that the Uniform law “works” in the context of our real estate recording and conveyance laws and, in particular, will not conflict with our time-honored 4-107. For more on this topic see Overview of the Uniform Power of Attorney Act in this issue. 5.
Elimination of all Ground Rents. Joking, again, but for
those interested, SB 489 of the 2005 session would have
prevented creation of new 99 year ground rents. It failed, but
many legislators have expressed their desire to completely
eliminate ground rents, somehow, someway. This cannot happen of
course, but the possibility of placing limitations on collection
of “irredeemable” ground rents – so as to convert them to
redeemable (similar to the limitations placed on defeasible
estates via Title 6 of the Real Property Article) seems
reasonable and inevitable. |