Western Real Estate Business

OCT 2017

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

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42 • October 2017 • Western Real Estate Business www.REBusinessOnline.com CRE AND THE CALIFORNIA COURTS Three of the Golden State's top commercial attorneys tackle the premier legal issues facing California's developers, land owners and potential investors. THE SWISS CHEESE PROPERTY CONUNDRUM: CORRECTING CA'S FLAWED METES AND BOUNDS DESCRIPTIONS By Mark D. Epstein, Partner, Real Estate Litigation and the Title Insurance Practices, Wendel, Rosen, Black & Dean LLP in Oakland, Calif. Most real estate parcels in Califor- nia's urban and sub- urban areas were carved out of large tracts of what was once agricultural or ranch land in the 19th and early 20th centuries. Today, many urban infill development proj- ects combine contiguous parcels that were created decades ago into newly unified, high-density housing, retail, mixed-use and other contemporary developments. Modern developers of- ten commission what may be the first professional land surveys and title re- ports ever created for the parcels to be developed, which sometimes reveal that the original metes and bounds descriptions used to define the par- cels' boundaries contain ambiguities or indecipherable language. A "metes and bounds" description is a sur- veyed description of a parcel that uses measured distances, angles and direc- tions, resulting in a "legal descrip- tion" of the land, as distinguished from a simple street address or parcel number. Original metes and bounds descriptions may sometimes rely on physical monuments or markers that no longer exist (e.g., trees, fences, and pathways) or have measurement er- rors and other irregularities that call into question the placement of the boundary lines. When these types of flaws are dis- covered, they cannot be swept under the rug. Unless corrected in the public record, they can mean that a particular parcel is landlocked — i.e., that it has no legal rights of ingress and egress from a public street — or that the par- cel's boundary lines don't all connect, and therefore do not fully enclose the parcel. Other times, the original metes and bounds description fails to describe the entire parcel so that it is beset with missing pieces, or "holes." The descriptions of the parcel in ques- tion and adjacent parcels may also inadvertently leave spaces between them to create tiny and unusable "or- phaned" parcels, called strips, gores or gaps. These types of legal description flaws are most common in parcels that were created before California's adop- tion of the Subdivision Map Act. They will usually place a hold on pending purchase and sale transactions or de- velopment projects because the sub- ject parcel(s) cannot be title insured and the local jurisdiction will not ap- prove the project until the discrepan- cies are corrected. While this can be a time-consuming and costly endeav- or, the good news is there are legal and equitable cures for these types of problems. These cures are useful when these discrepancies cannot be voluntarily resolved between neigh- boring landowners through corrective deeds, easement grants or lot line ad- justments. How This Phenomenon Plays Out In a recent case, a property inves- tor purchased 11 separate contiguous parcels that had been created from a large 1860s ranch through several piecemeal sales by the original owner. The subdivided parcels, which had been used for various industrial and commercial purposes during the 20th century, were to be merged and repur- posed by a developer for a mixed-use retail and residential project. Upon a closer review, the title insurance com- pany identified a 3,000-square-foot unowned sliver of land in the midst of the development parcels that the orig- inal owner never conveyed away, cre- ating a gap in the middle of the prop- erty. When this gap was discovered, the project ground to a halt. The ques- tion was who owned that small strip of property? The public record went cold. The original owner had simply neglected to convey away this small strip of land before he disappeared from the public records in the 1880s. It was unknown where and when he died, or if he had heirs. The investor filed suit to quiet title to the orphaned strip against anyone else who might claim to own it. Ulti- mately, the court agreed that the resid- ual strip was the result of the original owner's mistaken oversight and qui- eted title under the Doctrine of Ad- verse Possession because the investor had exclusively occupied and used the strip as his own land for more than 11 years, while the county had never assessed property taxes against it. The court quieted title to the strip in favor of the investor, granting him author- ity to merge the metes and bounds description of the strip with one of the adjacent parcels to create a new enlarged parcel. Resolving property "Swiss Cheese holes" can add to a project timetable, but sometimes it is the only way to move a project forward and create in- surable (and thus marketable) title. Epstein California loans will be made pursuant to Finance Lenders License #603H310 / BRE Broker #01982999. To fund your vision, visit WalkerDunlop.com POW ERING YOUR PROSPERIT Y MICHAEL ROCKS ALLEN & RO CKS , INC . Avid Outdoorsman Walker & Dunlop borrower since 2012 Resolving property "Swiss Cheese holes" can add to a project timetable, but sometimes it is the only way to move a project forward.

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