Real Property Flashcards
(6 cards)
- Whether the expansion project is a nonconforming use?
The issue is whether the man’s expansion of his store by 1,100 square feed to add a small dining area is a nonconforming use.
The local zoning board, granted authority by the state, has the ability to pass ordinances that rezone their districts. A nonconforming use is one that does not coincide which the zoning board’s ordinance. However, when passing a zoning ordinance, the zoning board has the ability to grandfather in nonconforming uses, thereby allowing the owner of the nonconforming use to possess and use the building without being subject to violating the zoning ordinance; additionally, the owner is able to sell the property with the nonconforming use. However, constructing on a property in violation of the zoning ordinance after the ordinance is passed is an impermissible nonconforming use if the owner previously had a nonconforming use and expanded the property and made substantial additions thereto.
Application
Here, the man built the expansion after the zoning ordinance was passed with a prior nonconforming use, but ithe expansion created an impermissible nonconforming use. The man purchased the convenience store in 2015, and at that time only sold gasoline and snack-type grocery items. The local zoning board passed their ordinance in 2017, and the man’s store’s zone changed from light commercial to residential. The man’s convenience store was not a residential use, and thus was considered a light commercial use before the zoning ordinance was passed. Thus, when the man decided to expand the store by 1,100 square feet, he was in violation of the ordinance because he expanded the property substantially (going from gasoline and snacks to additional services and products).
Thus, the expansion project is a nonconforming use.
- Assuming the expansion project does not violate zoning classifications, whether the bank is obligated to disburse the further funds?
The issue is whether the man defaulted on the loan when there was a mechanic’s lien filed against the property.
Default occurs when an individual fails to meet the obligations under the security agreement or contract, and payment comes due and/or performance is no longer required. Default is subject to the agreement between the parties. Good faith judgment may be inserted into the agreement and will be subject to what the parties believed would be considered good faith when entering into the agreement.
Application
Here, the man did not default on the security agreement with the bank when a mechanic’s lien was filed because the agreement required the bank’s good faith judgment that there was satisfactory progress. Satisfactory progress has occurred even though there was a mechanic’s lien.
Thus, the bank is obligated to disburse funds because not paying after a mechanic’s lien was filed, even though there was substantial progress, is considered bad faith.
- Whether the mechanic’s lien has priority, in whole or part, over the bank’s mortgage?
The issue is whether the mechanic’s lien as priority over the bank’s mortgage.
A security agreement creates a security interest in collateral. A security interest is created in collateral when there is attachment and filing, possession, or control. A security interest attaches when the secured party gives value/collateral, the debtor receives the rights to the collateral, and there is an agreement signed by the debtor that authenticates and sufficiently describes the collateral. With respect to priority of security interests, generally, first in time is first in right; thus, the first party to file or perfect their security interest is the party with the superior right. A lien is a subordinate priority interest when it is subsequent in time.
Fixtures are articles that are so connected with the real property that they essentially become part of the property. Generally, the person having the security interest in the real property will have the right to the fixture as well. However, if a contractor wishes to separate the fixture from the real property, they must properly file the fixture with the local county clerk’s office where the property is located. Failure to do so will subject the fixture to be taken with the property, and the individual filing the lien due to the fixture will be a secondary right holder.
Application
Here, a security interest was properly attached and possessed when the man received disbursement to the property from the bank. Similarly, the man received the fixture, but it was recieved after the bank perfected their security interest. As between two perfected security interests, first to file or perfect generally wins. In order to gain a priority interest, the mechanic would have needed to file with the county clerk, identifying the land involved and the security interest in the fixture. Because there is no indication the mechanic met the requirements for a fixture filing, the bank will have priority over the mechanic.
Thus, the mechanic’s lien does not have priority over the bank’s mortgage.
