Legal case studies this issue: Realty agency and seller’s representative held liable for fake wire transfer instructions, new landlord has no standing to sue for past rent, condo owner failed to prove Fair Housing Act violations, PINs not exempt from FOIA disclosures of vacation rental adjustments, immunity for sidewalk snow removal limited, and property owner cannot evade creditors by transferring encumbered property.
Research and analysis by Lisa Harms Hartzler,
Sorling Northrup Attorneys
Realty agency and seller’s representative held liable for fake wire transfer instructions
In Bain v. Platinum Realty, LLC (Case No. 16‑2326‑JWL, June 25, 2018), a federal district court in Kansas reviewed a jury’s decision to hold the seller’s representative and her agency 85% liable for the loss of the purchase price in a real estate transaction. An unknown criminal had inserted himself into the transaction through emails and, by using fake email accounts with names similar to the accounts used by parties in the transaction, caused the seller’s agent to email incorrect wire instructions to the plaintiff. As a result, the buyer wired over $196,000 to an account controlled by the criminal. The buyer sued the seller’s agent for negligent misrepresentation.
A person can be found liable for negligent misrepresentation if that person, in the course of his or her business, supplies false information for the guidance of another person in a business transaction and that person reasonably relied on that false information if: (1) the supplier of false information failed to exercise reasonable care or competence in obtaining or communicating it; (2) the information is intended to benefit the person who relied on it; and (3) damages were suffered in a transaction that the supplier of information intended to influence.
In this case the defendants argued that these elements had not been proven. The court found evidence was adequate for the jury’s conclusion otherwise. The agent testified that she had failed to confirm the correctness of the wire transfer instructions, despite oddities in the instructions, such as an incomplete out-of-the-area bank address. The court concluded that the agent did not act with reasonable care in obtaining the instructions and confirmed the judgment in favor of the buyer.
New landlord has no standing to sue for past rent
In 1002 E. 87th Street LLC v. Midway Broadcasting Corporation, 2018 IL App (1st) 171691, the plaintiff bought property that was leased to the defendant by the prior owner for use as a radio station. The lease provided that rent was due without deduction or offset to the landlord and its assigns and that all liabilities and obligations of the original landlord would be binding on the new owner. After the plaintiff purchased the property, the defendant tenant sent in its January rent, which was returned. The plaintiff claimed it was owed nearly $73,000 in additional rent that was due to the previous owner but unpaid. The tenant claimed the rent was not due because the prior owner had failed to maintain the property.
When the plaintiff sued to evict the tenant for failure to pay the past due rent, the tenant claimed the new owner did not have standing to sue. The appellate court agreed. “If a landlord conveys property by warranty deed without reserving any rights, he or she also conveys the leases for the property, as well as the right to receive unaccrued rent.” However, a “rent arrear is a chose in action and not an incident of the land to pass as such to a grantee by a grant of the land.” A new landlord has the right to sue a tenant for failure to pay rent that becomes due, but only the original landlord retains any right to recover rent that was due but unpaid before selling the property. Nothing in the lease agreement could change that rule of law. The case was dismissed because the plaintiff had no legal right it could enforce and, therefore, had no standing to sue.
Condo owner failed to prove Fair Housing Act violations
In Geraci v. Union Square Condominium Association, 891 F.3d 274 (7th Cir. 2018), a condominium owner suffered an incident involving several dogs in an elevator. After the incident, she claimed she was diagnosed with PTSD rising to the level of a handicap. She requested an accommodation (unspecified in the case report) that her association board denied. She then sued the association under the Fair Housing Act and later added that the association retaliated against her when they published two litigation updates and held an open forum to discuss and update the association’s co-owners about the status of the lawsuit. She claimed those actions caused her emotional distress and embarrassment.
At trial, the association presented testimony from another psychiatrist that the plaintiff had three different mental conditions, but not PTSD. The jury returned a verdict in favor of the association. On appeal, the federal court first determined that the plaintiff had no claim for retaliation. As soon as she filed a lawsuit, her PTSD diagnosis became public knowledge. The association disclosed only factual information from the public record and was not prohibited from discussing legal costs and details with co-owners. Its actions could not be interpreted as coercive, intimidating or threatening conduct, which was required to show retaliation under the Fair Housing Act.
Further, every defendant has a right to defend himself. The plaintiff bore the burden of proving she had a handicap for which she was illegally denied an accommodation and the association had the right to disprove that assertion by presenting testimony that the plaintiff did not actually have the handicap she claimed. Judgment for the association was affirmed.
PINs not exempt from FOIA disclosures of vacation rental adjustments
In Illinois Attorney General Opinion No. 18‑009, dated July 16, 2018, the City of Chicago’s Department of Business Affairs and Consumer Protection was found to have violated the State’s Freedom of Information Act (FOIA) by redacting property index numbers (PINs) in response to a request for information about properties that had received “adjustments” under the city’s vacation rental ordinance. Under that ordinance, if a dwelling unit did not otherwise comply with the vacation rental registration and licensing requirements, the property owner could seek an adjustment from the commissioner. Applications for an adjustment required the PIN for the proposed vacation rental.
The Attorney General concluded that the FOIA exemption for “private information” was not available in this situation because a PIN identifies a specific parcel of property, not a particular individual, like a Social Security Number. PINS are also available to the public on governmental websites and statutorily subject to public inspection under the Property Tax Code. Further, the exemption for disclosure of personal information that would cause an unwarranted invasion of personal privacy was also not available for the foregoing reasons. In addition, even if PINs were highly personal information, “there is a significant public interest in the disclosure of information that identifies properties that have been granted adjustments to that the public may assess whether the adjustment process in question is conducted fairly and equitably and because of the potential impact of adjustments on property values of surrounding properties.”
Immunity for sidewalk snow removal limited to municipal sidewalks
In Hussey v. Chase Manor Condominium Association, 2018 IL App (1st ) 170437, a woman slipped on ice and broke her ankle using a parking lot path between parked cars that owners used to reach the rear entrance to the condominium building. Snow in the parking lot had been pushed up against the building, had melted across the path and then had frozen again. When the woman sued the condo association and the property management company that had hired a snow removal service for negligence, the defendants asserted immunity under the Illinois Snow and Ice Removal Act. That Act grants immunity from liability for removal of snow or ice from a “sidewalk.”
The court stated it was required to construe the Act strictly because it was in derogation of the common law. Prior to the passage of the statute in 1919, the common law imposed liability on one who attempted to remove snow or ice from a public sidewalk and did so in a negligent manner. In a lengthy discussion of what “sidewalk” meant in the statute, the court disagreed with other appellate court decisions that had expanded the definition to pathways on private property abutting a residence or paths “akin” to sidewalks. It strictly construed the Act and limited application of the Act’s immunity to sidewalks within the municipal right-of-way, the part of the public street reserved for pedestrian use and that abuts private residential property. It was not available to any path on private property and, therefore, was not available to the defendants in this case.
Property owner cannot evade creditors by transferring encumbered property
In Pluciennik v. Vanderberg, 2018 IL App (3d) 160726, plaintiffs sought to invalidate certain transfers of commercial property owned by companies owned and managed by the defendant The defendant’s companies had borrowed money from the plaintiffs, among others, for various construction projects and became unable to repay their debts. When the subject property was transferred to companies held in trust for the benefit of the defendant’s minor daughters, plaintiffs filed suit, alleging a violation of the Illinois Uniform Fraudulent Transfer Act. The Act provides relief to creditors against the fraudulent transfer of assets by debtors. It prevents debtors from defrauding their creditors by moving assets out of reach “with actual intent to hinder, delay or defraud any creditor of the debtor.”
Under the Act, an asset is property of a debtor, but an asset does not include property to the extent it is encumbered by a valid lien. The defendant claimed the Act was not available to avoid the sales because the properties were encumbered by mortgage loans greater than the value of the properties and, therefore, were not “assets” of the debtor as defined in the Act. The defendant submitted several affidavits stating that the real estate was worth less than the loans they secured. However, the court held that none of that evidence established the fair market value of the property. Consequently, it was unknown whether the properties were fully encumbered and might possess some value in excess of the value of the liens. The court sent the case back to the trial court for further proceedings to determine the fair market value of the transferred properties.