Idaho Land Law

A Blog Discussing Current Issues of Land Use, Real Estate, and Construction Law in the State of Idaho.

Filtering by Category: Idaho Supreme Court

Oh no… The Idaho Supreme Court may have killed Airbnb in most neighborhoods

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@depositphotos_11884489_

With the growing popularity of short-term rental sites such as Airbnb and VRBO it was inevitable that we would see a court case on whether or not a homeowners’ association (“HOA”) could prohibit the short-term rental of real property.  I knew this would eventually be decided due to the numerous calls we receive from HOA boards and members concerning rental units.  Whether these HOA rental concerns are fair or unfair is a question for another article, but regardless it is safe to say that HOA boards and members have real concerns about renters.

For years, the question in Idaho has been whether or not an HOA could prohibit the rental of real property?  We now know, at least for short-term rentals, the answer is… Yes.

In Virgil Adams v. Kimberly One Townhouse Owner’s Association, Inc., the Idaho Supreme Court upheld an Ada County District Court’s decision that an HOA could prohibit the rental of property for periods of less than six months.  The Kimberly One case concerns a property owner, Virgil Adams, who had been renting his subdivision unit to short-term renters as a vacation property.  The Kimberly One HOA had objections to such use and in response amended its conditions, covenants and restrictions (“CCRs”) to prohibit short-term rentals.  Mr. Adams filed suit alleging that such amendment was an unreasonable restriction on the use of his property and that the amendment was not in keeping with the original CCRs.

The Idaho Supreme Court examined the District Court’s ruling and held that because the original CCRs clearly provided for their amendment, that the HOA had the right to amend the CCRs and prohibit short-term rentals.  The Court found this despite the fact that the original CCRs allowed for leasing or renting a subdivision property. The Court basically examined this issue as a freedom to contract argument and held Mr. Adams to a sort of caveat emptor standard in regards to what could possibly be restricted in HOA subdivisions.

So what are the practical implications of this case?  The obvious implication is that an HOA can restrict short-term rentals. This of course could have a dramatic impact on property owners earning income and paying debt service by using Airbnb or other online sites such as VRBO.  The other thing we have learned is that in the future a court may uphold a complete restriction on rentals in HOA controlled subdivisions.  We do not know if the Court would uphold such a restriction but given this holding, individuals looking to purchase investment rental property should know this is a distinct possibility.   

One final thought on this case.  The Court did say that, “There is doubtless a point when a party has changed his or her position in reliance upon the covenants in effect to a degree that enforcement of an amendment would be precluded.”  We do not know where this “point” lies but a potential purchaser of investment rental property could request a written statement from the current HOA board approving the property as a rental.  This document could later be offered as evidence of reliance on the CCRs and potentially used to defeat an amendment restricting rentals.  Just a thought and there are probably other methods to document this reliance in hopes that a Court would negate an amendment restricting long-term rentals.  

New Eminent Domain Case from the Supreme Court of Idaho

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@depositphotos-londondeposit

The Idaho Supreme Court unanimously affirmed the Kootenai County district court’s compensation award to HJ Grathol (“Grathol”), vacated and remanded the district court’s denial of attorney fees to the Idaho Transportation Department (“ITD”), and affirmed the district court’s award of costs to ITD. The Court also unanimously awarded attorney fees and costs to ITD on appeal. 

A link to the full decision can be found here: Idaho Trans. Dep’t v. HJ Grathol, Docket No. 41068 (February 11, 2015) http://www.isc.idaho.gov/opinions/40168.pdf

This eminent domain case arose when ITD acted to condemn 16.314 acres of Grathol’s 56.8 acres in order to improve U.S. Highway 95. After a bench trial, the district court held that just compensation would be based on the 56.8-acre parcel’s value and that the property remaining suffered no severance damages. Grathol argued on appeal that the district court should have based just compensation on a 30-acre parcel. Grathol also argued that the district court ignored Grathol’s severance damage evidence and improperly excluded testimony about damages from a proposed frontage road. Grathol also appealed the district court’s award of costs to ITD, arguing that ITD was not entitled to costs. ITD cross-appealed, arguing that the district court should have awarded ITD reasonable attorney fees under Ada County Highway District v. Acarrequi, 105 Idaho 873, 673 P.2d 1067 (1983). 

Contrary to Grathol’s assertions that the district court ignored the law and evidence, the Idaho Supreme Court found substantial and competent evidence supporting the district court’s findings that Grathol’s parcel was valued at 56.8 acres and that the remainder suffered zero severance damages. The Court also found the district court did not err by excluding testimony about impacts from an alleged frontage road because this Court held in a prior decision that ITD had no intent to condemn land for that road. 

As to attorney fees, the Court vacated the district court’s denial of attorney fees based on Idaho Code section 12-117 because that statute is not the exclusive source of fees for state agencies. The Court reasserted that it held in Acarrequi that courts can award attorney fees to a condemnor in extreme and unlikely cases. The Court then adopted a three-part test to determine when a case is extreme and unlikely. The Court remanded for the district court to analyze attorney fees within the new “extreme and unlikely case” parameters. 

As to attorney fees on appeal, the Court found that this was in fact an “extreme and unlikely case” and awarded ITD its reasonable attorney fees to be paid by Grathol. The Court found Grathol’s arguments on appeal were unreasonable and frivolous because Grathol asked this Court to re-weigh the evidence and second guess the district court without any legal or factual basis to support its arguments.

One of the lessons from this case is that appealing decisions in condemnation cases is not without risk that the Court may award attorney’s fees to the condemnor.  Our suggestion would be to carefully balance this risk before proceeding with an appeal.

Idaho Supreme Court Awards Attorneys Fees in Easement Case

Another Idaho easement case…  

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@Depositphotos_4987607

Unfortunately, easements are the equivalent of a full-time employment act for land use attorneys.  You can just count on a dispute arising over an improperly located or undefined easement. The following case gives us some guidance on not only easements but also on why a court will award attorney’s fees in a frivolously filed case.    

On January 23, 2015, the Supreme Court of Idaho issued its decision in The Jim & Maryann Plane Family Trust v. Skinner, Docket No. 41448.

In an appeal from Bear Lake County, the Idaho Supreme Court affirmed the district court’s decision denying the Jim and Maryann Plane Family Trust’s motion to void a portion of an earlier stipulated judgment regarding a ten-foot wide driveway easement. The parties’ predecessors in the case stipulated to an entry of a judgment creating a five-foot driveway easement over land currently belonging to Jason and Janae Skinner with the other five-foot of the driveway easement being located on land that might (according the parties’ predecessors) be State highway right-of-way.  Already you can see the potential problem for future landowners.

The Plane Family Trust argued the stipulated judgment was void for lack of jurisdiction and illegal because the State was not a party to the stipulated judgment. The Trust asked the district court to delete portions of the stipulated judgment referring to the location of the driveway on the State highway right-of-way. This would have had the effect of doubling the width of the Trust’s easement across the Skinners’ property. 

The Supreme Court determined that Rule 60(b)(4) did not authorize the district court to modify a judgment in such a fashion and that the judgment was not void or illegal. The Supreme Court also ruled the district court had not abused its discretion when it awarded attorney fees to the Skinners for their defense of a frivolous action. The Supreme Court found the appeal to be frivolous, and imposed sanctions against the Trust and its attorneys, ordering them to pay the attorney fees and costs incurred by the Skinners in the defense of the appeal.

It should be noted that the Trust failed to mention the State had granted the Trust a license to use the State highway right-of-way for purposes of ingress and egress to the Trust’s property.  While this is not discussed in-depth in the decision, I cannot help but think this played a critical role in the award of attorneys fees.

The case is a good read and can be found in its entirety at:

http://www.isc.idaho.gov/opinions/41448.pdf

New Mechanic's Lien Decision from the Idaho Supreme Court

The Idaho Supreme Court recently issued another mechanic's lien decision in  a case styled ACI Northwest Inc. v. Monument Heights, LLC – Docket No. 41269 [January 21, 2015].  A link to the full decision is here:  http://www.isc.idaho.gov/opinions/41269.pdf

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@Depositphotos-nenovbrothers.jpg

In a case arising out of Kootenai County, where ACI Northwest Inc. (ACI) sought judicial foreclosure of its two mechanic’s liens on property encumbered by two deeds of trust. The district court determined that ACI’s liens were lost and unenforceable against the property because ACI failed to name or join the trustees in its action within the six-month statute of limitations in Idaho Code section 45-510. Thus, the district court granted summary judgment to Monument Heights LLC, Dan Jacobson, Sage Holdings LLC, Steven Lazar, the Mitchell A. Martin and Karen C. Martin Family Trust dated August 9, 2005, Devon Chapman, HLT Real Estate LLC, Anthony St. Louis, Andrea Stevens, and Lilly Properties Inc. ACI appealed to the Idaho Supreme Court. 

The Idaho Supreme Court reaffirmed its holding in ParkWest Homes, LLC v. Barnson (ParkWest II), 154 Idaho 678, 302 P.3d 18 (2013), that an action to enforce a mechanic’s lien on property encumbered by a deed of trust must name the trustee, who hold legal title to the property, within the statutory time limitation in Idaho Code section 45-510. Failure to name the trustee within the prescribed time limitation results in the mechanic’s lien being lost against legal title, the trustee’s interest in the property. This Court determined that the district court properly applied ParkWest II and therefore affirmed the district court’s decision.

The lesson for those with potential mechanic's lien claims is to make sure you name or join the trustee to your cause of action within the six-month deadline.  Failure to do so will result in a loss of mechanic's lien rights.


What do you mean I cannot sue the subcontractor?

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@depositphotos-jazavac

Construction law cases… you have to love them.  Generally, we find a teaching moment or two in almost all the construction law decisions we review at the Idaho Land Law blog.  The Idaho Supreme Court’s decision in DeGroot v. Standley is no exception.  DeGroot is your standard general contractor, subcontractor, and supplier type construction defect case.  Parties pointing fingers at each other and the owner left with a little less than they bargained for when they started the project.   

In this case, Charles DeGroot and DeGroot Farms, LLC (collectively “DeGroot”) appealed the district court's grant of summary judgment in favor of Standley Trenching, Inc.  (“Standley”), concerning the construction and installation of a manure handling system at the DeGroot dairy. Beltman Construction, Inc. (“Beltman”) was the general contractor for the project and subcontracted with Standley for the installation of the manure handling equipment.

At some point after the construction of the DeGroot dairy, DeGroot began experiencing issues with the manure handling equipment and sued both Standley and Beltman. Beltman brought a third party complaint against Standley, Beltman stipulated to a judgment and assigned its 3rd party rights against Standley to DeGroot. The district court dismissed Beltman, granted Standley summary judgment on its counterclaim against DeGroot, granted Standley summary judgment on DeGroot’s claims, and granted Standley summary judgment on Beltman’s assigned third-party complaint.   

The case is an interesting read.  From our perspective, the most interesting portion of the case is the Supreme Court’s treatment of the whether or not DeGroot was a third-party beneficiary of the contract between the Beltman (the general contractor) and Standley (the subcontractor).  The Supreme Court held that DeGroot was not a third-party beneficiary to the subcontract between Beltman and Standley despite hearing evidence that Standley met with DeGroot prior to submitting its bid, listed DeGroot as the customer on its invoices, named the project “DeGroot”, and sent warranty information directly to DeGroot.

In reaching its decision, the Supreme Court looked at I.C. § 29-102 and stated that in order to establish a claim as a third-party beneficiary, “the contract itself must express an intent to benefit the third party.”   The Court went on to state, “Idaho case law is clear that the party claiming to be a third-party beneficiary must show that the contract expressly indicates that it was made for his or her direct benefit.”

What does this mean for owners and general contractors?

Given this holding, the logical question is should owners require general contractors to include third-party beneficiary language (in favor of the owner) in their contracts with subcontractors and suppliers?  Should general contractors require the same of subcontractors in the subcontractors' contracts with suppliers?  I think the answer to both these questions is yes. 

An owner will want to know that it can sue a subcontractor or supplier to a project under the theory that the owner is a third-party beneficiary to the general contractor’s contract.  From the general contractor’s perspective, it too will want the ability to sue a material supplier to a subcontractor, as a third-party beneficiary, should a material supplier fail to meet its contractual obligations to the subcontractor.  


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