Found At: www.statewidetitle.com
Issue
24
Published:
7/1/1997
NCGS 136-68 et seq were revised in 1995 and the statutory amendment included a sunset provision due to expire June 30, 1997. Legislation introduced in the 1997 session of the General Assembly by Senator Eric Reeves (Senate Bill 456) and Representative John Brown (House Bill 501) would have further amended the statutes and either extended or removed the sunset. It appears that both bills are dead in committee and that there will be no action to extend or remove the sunset from the cartway statute. We were unable to contact either representative prior to the press deadline for this issue of the newsletter for their comments regarding the status of these bills. As a result, the cartway revision will expire and the old version of the cartway statute will go into effect July 1, 1997, unless successful action is taken in the legislature to revive these bills prior to adjournment. If the cartway revisions do in fact expire no nonappropriation amendments will be considered by the short session in 1998 unless deemed noncontroversial and therefore no action to amend the cartway will occur until 1999.
While the 1995 amendments substantially improve the old statute making the bringing of a cartway proceeding easier and narrowing the issues, the amendment left several questions unanswered and in need of clarification. Under the 1995 amendments, a property owner of a parcel of land seven (7) acres or greater used as a homestead would be entitled to a cartway if there was no record access. Since the amendment did not define the term homestead, questions have arisen as to whether this required the homestead to be the owners principal residence or if it was a second home or vacation home, would the owner still be entitled to bring a proceeding? Another question arises under similar situation where a large tract owner brings a proceeding under the homestead provision, obtains a cartway, pays the subservient land owner compensation for the cartway and then wishes to subdivide the tract of land. The statute gives no guidance as to whether the land owner is required to compensate the subservient land owner for each additional cartway or if he is entitled to assign his rights in the cartway to all of his grantees. Additionally, no guidance is given as to whether all subsequent grantees tracts must be at least seven (7) acres or more or may be smaller. Subsequently yet another question arises... if the owner of a seven (7) acre tract of land obtains a cartway, may he then subdivide the seven (7) acre tract and provide access to the grantees over the cartway?
The cartway amendment provides that a cartway may be awarded if the landowner is preparing his property for one of the approved purposes. It would be helpful if a future amendment of the statute gave some guidance as to how long a period of time the land owner can "prepare" the property before the subservient landowner would be able to file a motion in the cause to terminate the cartway. Additionally, clarification will be helpful as to whether a landowner acquires a cartway in preparation of the property for one of the approved purposes would have the right to assign the cartway to a grantee of the tract prior to completion of the improvements. Presumably one would be able to do so, however, a great deal of uncertainty would be eliminated if any future amendment of the cartway statute included provisions addressing the alienability of the cartway rights granted under the order. Any practitioners drafting orders in cartway proceedings would be well advised to address the alienability issues in the order granting the cartway.
Any comments or observations concerning other areas of concern or uncertainty in the existing revision or any suggestions concerning future revisions would be welcomed. If there is sufficient interest in this issue, we will address it again in a future article updating the status of the statutory amendment.
The following are some issues affecting real estate that we feel would be of interest to you.
House Ways and Means Committee Chairman Bill Archer (R-TX) has recommended tax legislation to reduce capital gains for home sales, along with recommending a reduction in 1099-S reporting. Chairman Archer is also proposing that no 1099-S information reporting would be required for sale of property by individuals when the sale price is under $250,000.00, and by those who file jointly when the amount is under $500,000.00, if the seller certifies a principal residence is involved. Tax legislation is expected to be considered in the Senate this summer.
After simplification provisions by the Administration threatened many Section 1031 "like-kind" real estate exchanges through possible tax policy legislative changes taking shape on Capitol Hill, members of the House Ways and Means Committee, and others, agreed that no changes should be made in the existing "like-kind" law.
Leaving present law as is will continue to mean "like-kind" transactions can be used without the burden of unnecessary capital gains taxes on exchanges. Modifications proposed by the Administration would have limited the practice of exchanges of farms, ranches and small business real estate, along with commercial, residential, and other types of property.
We will continue our efforts to keep you updated on matters coming before Congress.
Whatley v. Whatley, North Carolina Court of Appeals, No. COA96-641,(May 6, 1997) is a recent decision that appears to break new ground in the area of disputes concerning the right of owners in common to bring partition proceedings. The facts of the case are somewhat unusual and produced a very interesting opinion for real property practitioners. The petitioner filed an action for partition by sale of a building and the two tracts of land upon which it is located. The parties stipulated, by consent order, that one tract was owned by petitioner and respondents as tenants in common with a 2/9 undivided interest and 7/9 undivided interest respectively. They further stipulated that the other tract was owned solely by the respondents and the building located on both tracts was owned solely by the petitioner. The trial court found that the respective interests of the parties were ‘not alienable in piecemeal fashion’ that if divided all of the parties would receive a share with a value materially less than if sold, that a division would materially impair the rights of all the parties as co-tenants and ordered a partition sale. The trial court’s consideration of evidence included an affidavit of Don R. Castleman, a professor of law at Wake Forest University School of Law which stated in part ‘In my opinion, the agreement and order must be viewed as having treated the two tracts and the building as a single parcel, owned in undivided interests as tenants in common. Otherwise, the petitioner would own a building, part of which is situated on someone else’s land and her title, because of uncertainty as to the nature of her tenancy on the surface on the underlying land, would be unmarketable. Likewise, the respondents would own a tract of land upon which sits a building owned by another, whose ownership is confirmed by the court, and thus the title to their land, because of the uncertainty as to their right to the possession and use thereof, would be unmarketable. Thus, neither party would have freely marketable title and this would restrict the free alienability of both properties and would be contrary to public policy in North Carolina’. Among the findings of fact the trial court found that ‘[a]s to those portions of Tract[s] One and Four on which the building lies, a vertical tenancy in common exists which renders the building unmarketable’. The trial court then concluded that the parties were tenants in common to both tracts and the building, that the cloud on title created by the encroachment rendered both tracts and the building unmarketable leaving partition sale as the only proper remedy. The court of Appeals then affirmed after a discussion of the facts.
It is interesting to note that the Court of Appeals never used the term "encroachment" in its opinion nor did it give any guidance as to how to value the ‘vertical tenancy in common ’ in order to determine the respective shares of the proceeds of the sale and the opinion does not indicate if this was addressed at the trial level. A tenant in common has the same right to erect a building on the common property as sole fee owners would have on their property as long as it does not impair the other common interests and the tenant in common would have the right to remove it if removal would not cause damage or would be entitled to betterment upon partition (see P. Hetrick & J. McLaughlin, Webster's Real Estate Law in North Carolina § 118, at 134 (3rd ed.1988)).
On the other hand mandatory injunctive relief is available for the removal of an encroachment of a building of only one square foot. "[S]ince the encroachment and continuing trespass have been established, and since defendant is not a quasi-public entity, plaintiff is entitled as a matter of law to the relief prayed for, namely removal of the encroachment. "Williams v. South & South Rentals, Inc., 346 S.E.2d 665, 82 N.C.App. 378, (1986). In Whatley it seems that the petitioner is as much a stranger to the title of the parcel owned solely by the respondents as the defendant in Williams and that the respondents would have been entitled to the same relief. It would seem to be a logical inference that when a stranger to a title erects a building encroaching on the adjoining owner each property, therefore, becomes inalienable in the same way as in Whatley. Therefore, in light of this holding, Professor Castleman’s comments on public policy would seem to apply equally to an encroachment case. It could then be argued logically that a ‘vertical tenant in common’ is created when strangers to the title are involved if it is created when the encroaching building owner is a tenant in common and his co-tenants own the encroached upon tract
Admittedly the consent order before the trial court may have contained unusual stipulations that gave rise to this decision but, if so, the opinion did not set them forth or discuss them. The appellate court did not cite any cases in support of what appears to be a very innovative legal theory and if our Supreme Court affirms or adopts this ruling it could well be that