NO WALKS ALONG THE BEACH
Easements for lake access could be problematic

A dispute between two neighbors living near Lake Huron may change the way that REALTORS® market property on or near the Great Lakes. For years, many REALTORS® have extolled the virtues of miles of beaches to stroll when selling or purchasing lake access properties.

In this case, the Goeckels owned property in Alcona County which was bordered by Lake Huron. The Goeckels’ property was east of US-23. Joan Glass owned property west of US-23. Ms. Glass was able to reach Lake Huron through a 15-foot easement across the Goeckels’ property which was “for ingress and egress to Lake Huron.”

Unfortunately, things went awry in paradise. In August 2000, Ms. Glass trimmed several tree branches in the easement that were impeding her use of the easement. This, apparently, irritated the Goeckels. The dispute continued in the spring of 2001 when the Goeckels objected to Ms. Glass pruning any trees or bushes in the easement. According to Ms. Glass, the Goeckels blocked Ms. Glass’ entrance to the easement by parking Mr. Goeckels’ car at the entrance. In addition, Ms. Glass claimed that the Goeckels either threatened or actually interfered with her right to walk across the beach area of the Goeckels’ property between the ordinary high-water mark and Lake Huron. Finally, Ms. Glass sued, requesting that the trial court issue an injunction to prevent the Goeckels from interfering either with her rights to use the easement, or to walk along the shoreline between the waters of Lake Huron and the ordinary high-water mark. For what it is worth, the ordinary high-water mark for Lake Huron is at 579.8 feet above sea level.

The Michigan Court of Appeals reviewed the history of Michigan law regarding the rights of the public to walk on the beaches of the Great Lakes. For many years, the law of Michigan was out of step with the law of the country with regard to the rights of the public to walk across beaches bordering on private property. It was the law of Michigan that the strip of land located between the meander line and the water’s edge was, in fact, submerged land under the law. (“Meander lines” were established by surveyors to determine the acreage of lakefront property. The meander line for the Great Lakes was established by government survey in 1851.)

As the water along the Great Lakes receded from the beach, the newly exposed land was still treated as if it were submerged under the water. That being the case, the land belonged to the government, and anybody could walk upon it. Applying this old analysis to the present case, Ms. Glass could walk along the beach bordering the Goeckels’ Lake Huron property between the high-water mark to where the water met the beach.

In the Goeckels decision, after discussing the history of the law, the Michigan Court of Appeals went on to determine that the old law of Michigan had been overruled by the Michigan Supreme Court in 1930. While most of us did not know it, in 1930 the Michigan Supreme Court determined that the meander lines established by the original surveyors were not boundaries, but were simply a device of surveyors. The Michigan Supreme Court determined that the boundary was where nature had placed it—at the edge of the water of the Great Lakes.

This interpretation of the state law by the Michigan Court of Appeals meant that Ms. Glass could not walk across the beach in front of the Goeckels’ property without the Goeckels’ consent. Instead, she was confined to the 15-foot easement which she received when she purchased her property on the west side of US-23. More broadly, this decision means that people who own property on the Great Lakes can now exclude people from walking across their beach. In other words, if you do not own beachfront property on the Great Lakes, you had better be in a park, or otherwise on public land, when you walk on the beach, or have the permission of the property owners to walk across their beach. REALTORS® need to keep this in mind when they are dealing with property on or near the Great Lakes.

Earnest money: take it or leave it

We receive many calls at the MAR Legal Hotline relating to the handling of earnest money deposits. Many of those calls raise the issue of whether the provisions in purchase agreements throughout the state regarding the handling of earnest money deposits are actually enforceable by the courts. A recent decision by the Michigan Court of Appeals indicates that the courts will literally apply the provisions which REALTORS® insert in purchase agreements for the handling of earnest money deposits.

In this case, the buyer and seller entered into an agreement July 23, 2001, under which the buyer agreed to pay $440,000 for 5.6 acres of vacant land owned by the seller in Oakland County. On the day that the contract was signed, the buyer tendered an earnest money deposit in the amount of $20,000 to the buyer’s agent.

Under the terms of the purchase agreement, the buyer was provided with a 30-day due diligence period commencing July 23, 2001. While the parties disagreed on the issue of whether a closing date had ever been set to complete this transaction, the parties did agree that on August 23, 2001, the buyer had requested a seven-day extension of the due diligence period in the purchase agreement.

The buyer contended that the seller granted him the seven-day extension. The seller testified that he denied the request for a seven-day extension, and required that the closing occur on or before August 25, 2001.

The seller’s attorney, in a letter to the buyer dated August 23, 2001, specifically provided that the seller would not grant the buyer’s request for a seven-day extension. The attorney’s letter went on to declare that the purchase agreement was null and void, and instructed the buyer’s agent, who was copied on the letter, to return the $20,000 earnest money deposit to the buyer.

The buyer’s agent testified that he delivered a $20,000 check to the buyer, and the buyer admitted at trial that he had deposited the $20,000 check into a bank account.
The buyer sued the seller, alleging a breach of the purchase agreement after the seller sold the property to another buyer. The seller claimed that the buyer had waived his right to seek additional damages when the buyer accepted a refund of the earnest money deposit. The purchase agreement in this case had specifically provided:

DEFAULT BY PURCHASER OR SELLER: In the event of legally inexcusable failure to perform by the Seller, the Purchaser may, at his/her option, elect to enforce the terms hereof, or demand and seek a refund of his entire deposit in full termination of this agreement. Broker shall hold deposit until the dispute is resolved by: written mutual consent, arbitration or court of law.

The trial court did not have any problem in dismissing the buyer’s breach of contract action against the seller. It seemed clear to the trial court from the above quoted provision of the purchase agreement that the purchaser had waived any additional claims for damages against the seller when he accepted and deposited the $20,000 earnest money.

Fortunately for the seller, the Michigan Court of Appeals agreed with the trial court. The Court of Appeals determined that the paragraph quoted above called for an election of remedies by the buyer in the event of a breach of contract.

The buyer could either receive his earnest money back, or could leave it with the buyer’s agent and resolve the disputed breach by negotiation, arbitration or litigation.
The buyer cited several Michigan cases in which a buyer had received a refund of an earnest money deposit, and yet was able to proceed with a lawsuit against the seller for breach of contract damages.

The Michigan Court of Appeals found that none of those cases involved a clear and unambiguous provision like the one involved in this case.

When REALTORS® are representing buyers, and a seller breaches a purchase agreement, the buyer’s agent should make certain that the buyer fully understands what may happen to his rights against the seller if he demands and receives a refund of his earnest money deposit. If the purchase agreement has a provision like the one in this case, then the buyer will get his money back, and nothing else.