Post by Henry Smith
Most of the time when we think building encroachments, we’re talking about an inch here or there. But what happens when someone builds an expensive house on the wrong lot? That could never happen, could it?
Oh yes, it can and it does. In one recent example, Mark and Brenda Voss mistakenly had their vacation home (pictured above) built at a construction value of $680,000 on the lot next to the one they actually own. Mr. Voss owns a real estate company (!), but the mistake and the ultimately responsibility appear to be the builder’s. Bargaining is inevitably going to be tough in what amounts to the ultimate bilateral monopoly situation. (Merrill and I have a case in our casebook in which the frustrated mistaken improver demolishes the house – and winds up having to pay for it!)
What to do in a situation like this? As anyone who has taken first-year property knows, buildings are “fixtures” and become part of the real estate they sit on. One answer would be “tough luck” – be more careful next time. That does not seem terribly satisfying, and the law has come up with a variety of ways – under the heading of restitution and unjust enrichment – to allow the mistaken improver here to recover something. Usually the remedy – the lot owner buying the house, the builder buying the lot, etc. – is at the election of the lot owner, as the put-upon party.
One puzzle: does the possibility of some such remedy mean that the mistaken builder really owns the house? What if the lot owner sells the real estate including the house before a court has had a chance to rule on the restitution claim? This is one of many examples where significant personal relations potentially impact the state of (in rem) title. Absent a deal, what the improver needs is a lien, and had better hurry up and get to court.