Download Property Law Case Study: Mack's Gas Station and Quill's Land Easement and more Exams Property Law in PDF only on Docsity! EXAM#_______________ Page 10 of 11 STANLEY/LAW 715A/PROPERTY/FALL 2011 PART II -- ESSAY QUESTION 1 (80 points total -- Suggested time: 60 minutes) Mack owns a gas station in County. The gas station was established in 1955 and has operated as such since that time although it has been remodeled and upgraded several times. In 1967, a real estate developer purchased a 75-acre parcel of land which bordered and somewhat surrounded the gas station and the County zoned the area for single-family residences. Although the gas station was now situated on land zoned for only residential use, the County granted Mack’s predecessor in interest a prior nonconforming use permit to continue to operate the gas station. On January 1, 2005, Mack, who was reaching retirement age, leased the gas station property to Lessee under a 30-year term lease. The lease required Lessee to pay annual rent of $24,000 plus 5% of net profits as that term was defined in the lease. All taxes, insurance, and repairs on the property were the responsibility of Lessee. The lease also provided that the property should be used only as a gas station and in a manner consistent with the County’s prior nonconforming use permit. Lessee paid Mack the $24,000 annual lease payment when due on January 1 of each year as well as 5% of the net profits, and continued to operate the gas station on the property. In 2011, after a routine inspection by the County’s environmental protection agency, it was discovered that the underground storage tanks (“USTs”) on the gas station property were leaking gas. This posed a serious environmental danger to the groundwater used by surrounding residential community. The leak in the UST was small and would not have been noticed by a landowner; the investigators were unable to determine when or how the leak in the UST was caused. Nevertheless, on July 1, 2011, the County ordered that the gas station be closed until the soil was remediated and the UST was replaced. This work would take about 90 days and cost $150,000. Lessee had to get a loan to complete the remediation, which delayed the work for about two months during which time the gas station remained closed. As part of the work on the property, Lessee decided to add on to the structure to include a convenience store which he hopes will bring in additional revenue to repay the loan. The remediation work and new construction of the convenience store was completed in late November 2011. At that time, Lessee sent a letter to Mack demanding reimbursement for the cost of the environmental remediation and related damages (e.g., loss of profits due to the business closure), arguing that he never agreed to be responsible for such a major repair. A County ordinance provides that any gas station not open for business for 60 consecutive days would be deemed abandoned. Consequently, the County withdrew the prior nonconforming use permit for the gas station on December 1, 2011. When Lessee learned he could no longer operate the gas station, he vacated the property and sent a notice to Mack that he was terminating the lease as of December 31, 2011. You represent Mack, and he has asked you to answer the following questions and provide a detailed explanation for your answers, applying common law rules and noting if any modern law trends would produce a different result: 1. Is Mack liable to Lessee for the cost of the environmental remediation and related damages? 2. May Mack hold Lessee to the lease or does Lessee have a right to terminate? End of Question 1; Question 2 is on the other side of this page
