Easements and Land Contracts

In Wells Venture Corp. v GTR Glacier Club, LLC, the Michigan Court of Appeals discussed when and whether an easement granted by the purchaser of a land contract remained valid when the land contract was subsequently forfeited and the seller regained title.

Wells Venture owned two contiguous parcels of property:  one consisting of undeveloped land and the other a golf course.  It sold the undeveloped land outright in 2002, then sold the golf course on a land contract in 2005.  In 2007, a detention pond and drainage system were installed on the golf course parcel, and the golf course buyer purportedly granted an easement to the owner of the undeveloped parcel.  The land contract was subsequently forfeited in 2010 and Wells Venture regained title to the golf course.  In 2011, Wells Venture filed suit seeking removal of the pond and drainage system, alleging among other theories trespass and quiet title.

The trial court granted summary disposition to the owner of the undeveloped parcel, finding that the injury to Wells’ title occurred in 2007 and the statute of limitations for trespass passed three years later, before the lawsuit was filed.

The court of appeals reversed.  The court of appeals noted that, upon sale of the golf course on land contract, Wells Venture retained only legal title as security for payment of a personal debt:  the land contract.  A land contract seller’s interest is personal property, not real property.  It did not ripen back into real property until the land contract was forfeited in 2010.  Thus, the earliest that trespass on Wells Venture’s interest could have occurred was when the land contract was forfeited.  Thus, the trespass action was timely.

The court also noted that there are only four ways to grant or obtain an easement:  by express grant, by reservation or exception, by covenant or agreement, or by adverse possession.  To the extent that the owner of the undeveloped land claimed that Wells Venture agreed to the easement by tacit consent, this claim was invalid as a matter of law.  Because there was an issue of fact as to whether an express grant of easement was made which the trial court never reached, the court remanded the matter.

In a footnote, the court also noted that Wells Venture argued that, upon forfeiture of the land contract, any easement granted by the land contract buyer would have been terminated as a matter of law.

This case points out the hazards of negotiating an easement when a land contract is involved.  The person seeking the benefit of an easement needs to obtain a grant from both the land contract seller and the land contract vendor.

© Steve Sowell 2017