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Real Estate Law:  The Irrevocable License

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Real estate attorneys in Los Angeles often deal with real estate disputes between neighbors over rights to property.  Boundary disputes often involve claims of quiet title (who owns this property?) or some type of prescriptive or equitable easement (who has a right to use this property?).  Sometimes these disputes arise because one or both of the neighbors was mistaken about who owned a portion of the land. Some lawsuits arise when the neighbors have acquiesced to the neighbor using their property but want that arrangement to end.

One concept in real estate law that is not as well-known is a license.

What Is A License in Real Estate Law?

An owner grants a license when he or she allows someone else to use his or her land.

A license may be created by express permission (oral or written) or by acquiescence where the landowner permits another to use the land with full knowledge but without objecting.

Generally a license is revocable.  That is to say the landowner granting the license may rescind his permission to use his land and take back control and use.

When Is A License Irrevocable?

However, a court may declare the license to be irrevocable “for so long a time as the nature of it calls for” if the licensee “has expended money, or its equivalent in labor” while reasonably relying on the existence of the license.  But those expenditures must be “substantial”, “considerable” or “great”.

Nearly every case where a license has been declared irrevocable has involved the licensee’s permanent alteration of the land and the ensuing upkeep, either by building, altering or upgrading a roadway; constructing a ditch, canal or levee to transport water; erecting a wall; or raising a living quarter.

Courts Should Use Their Power Sparingly

The requirement for significant expenditures is intended to make sure that court’s use their power to create irrevocable licenses sparingly.  Courts are rightly reluctant to exercise “what is, in effect, the right of eminent domain by permitting the licensee to occupy property owned by another.”  Such licenses are functionally indistinguishable from easements.

Example:  Shoen v. Zacarias

The California Court of Appeal dealt with an irrevocable license issue in the case of Shoen v. Zacarias, which was published on April 4, 2019.

The Shoen case is a textbook example of what can happen when neighbors fight…and fight…and fight.  The parties first began litigation in 2012. Since then they have gone through two trials, two appeals and 7 years of litigation.  And the case is not over yet.

The Parties Were Neighbors

Shoen and Zacarias are neighbors whose backyards consist primarily of steep upward hillsides.  Up on the hill is a flat patch of ground—with some of the patch being on Shoen’s property and some on Zacarias.

The prior owner of the Zacarias property installed steps leading all of the way up to the flat patch.  The prior owner of the Shoen property installed steps leading about two-thirds of the way up to the patch.

Zacarias Mistakenly Believes The Flat Patch Belongs To Her

Zacarias mistakenly believed that she owned the entire flat patch.  So she brought in contractors to grade the patch, removed bamboo and overgrown brush, installed ornamental gravel, planted a loaw hed, built a wooden fence around the perimeter, set up a cloth cabana with a chaise lounge, tables and chairs, installed an electrical underground conduit from her house to the patch, and installed sprinklers which she later replaced with a drip system for the hedges.  These improvements were made in 22,3, 2004 and 2005.

A Survey Shows Zacarias Does Not Own The Entire Patch

In 2005 the prior owner of Shoen’s land did a survey and discovered that a portion of the flat patch belonged to him.  He shared this survey with Zacarias. But he also told her that he would let her keep her furniture there as long as he owned the property.

Shoen Buys The Shoen Property

In 2006 The Shoen Family Trust bought the property from the prior owner.  Both Shoen and her father admitted knowing that the disputed property was their land but in an effort to be a ‘good neighbor’, they did not tell Zacarias to stop using the disputed area.

Shoen herself acquired the property from the trust in late 2011.  Shoen then asked Zacarias to vacate the disputed area. Zacarias ignored the letters.

In between 2006 and 2011 Zacarias spent time and money to maintain the area, including trimming the trees, clearing the brush, replacing plants which had died, watering the hedges, using the cabana’s lighting or electricity, and re-upholstering the cabana and furniture.

Shoen Sued Zacarias in 2012

In June 2012 Shoen sued Zacarias for damages, injunctive and declaratory relief on theories of (1) trespass, (2) nuisance, (3) ejectment, and (4) negligence.  Zacarias answered and counter-sued for (1) prescriptive easement, (2) equitable easement, (3) nuisance based on Shoen’s placement of two video cameras that overlooked the disputed area and portions of Zacarias’ property.

The First Trial Court Grants An Equitable Easement

The first lawsuit went to trial solely on the issue of equitable easement.  The trial court granted the equitable easement but the Appellate Court reversed, concluding that Zacarias had not proven that the hardship she experience in moving her portable patio furniture was ‘greatly disproportionate’ to the hardship on Shoen in losing use of her own property.

The Second Trial Finds An Irrevocable License and Nuisance

A second trial found that Zacarias was entitled to an exclusive irrevocable license to the entire disputed area and that this license would last forever, even after Zacarias sold the property.  The trial court ruled that the equities favored Zacarias because the disputed area was accessible from the Zacarias property and did not appear to provide any benefit to the Shoen property. The court also made it permanent due to the physical layout of the parcels and the parties’ bad relationship.

The Appellate Court Struck Down The Exclusive Irrevocable License

The Appellate court struck down the trial court’s finding.  The court found that there was insufficient evidence of substantial expenditures in reliance on the implied license.  The court found that the estimate of expenditures was improperly calculated and that the initial improvements were made when Zacarias labored under the mistaken belief that the whole patch belonged to her, not in reliance on the license granted in 2011.

More importantly the court found that the expenditures were not substantial.  The cost, for example, of movable furniture could not be counted. The modest costs of upkeep were also not substantial enough to warrant taking away Shoen’s land.

The court noted that the duration of any license should be fixed “for so long a time as the nature of it calls for.”  This means it should remain irrevocable “for a period sufficient to enable the licensee to capitalize on his or her investment.”

The trial court used the wrong legal standard, according to the Appellate court.  Rather than look to when Zacarias would obtain the return on investment of her upkeep occurring after she obtained a license, the court engaged in a wholly separate inquiry into who would make better use of the disputed area by balancing the greater value and utility of the disputed area to Zacarias (due to her ready access to the area) against the lesser value and utility of the area to Shoen (due to her less-than-ready access to the area).  “Not only is this the wrong test, but it is precisely the type of ‘free-floating inquiry into which party will make better use of the encroached-upon land, which values it more, and which will derive a greater benefit from its use’ that the court had condemned as inappropriate in the first Shoen appellate ruling.

The proper analysis would have noted that Zacarias made all of her improvements before any license was granted.  The only investment to be recovered was the annual investment in upkeep. The court found that this does not warrant a perpetual license.

Practice Pointers:  In a recent trial over a claim of prescriptive easement over a neighbor’s property there was plenty of case law which condemned a trial court’s efforts to transfer property from one owner to another absent a very compelling case.  But all of those appellate cases had come about because a trial court had ruled in the neighbor’s favor in the first place. A similar dynamic is at work here. Two trial courts had to be reversed in order to preserve Shoen’s right to her own property.  Both trial courts essentially found that Zacarias had essentially ‘earned’ the right to take the neighbor’s property or that Zacarias would get more use out of the neighbor’s property than the neighbor would. It is disappointing to see judges deprive a party of their property so easily—in this case some gardening and removable furniture.  Also keep in mind the incredible litigation burden that Shoen has had to bear in order to protect her property rights. This litigation started in 2012 and has involved, so far, two trials and two appeals.

 

Laine Wagenseller is a Los Angeles-based real estate litigation trial attorney.  He is the founder of Wagenseller Law Firm in downtown Los Angeles which specializes in lawsuits involving properties and partnerships.  The lawyers at Wagenseller Law Firm have handled many neighbor disputes involving ownership issues, easements and licenses. For more information please call the firm at (213) 286-0371.

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