Long term leasehold interests are subject to both statutory and equitable partition in a case seeking to divide property of unmarried cohabitants.

Wynkoop v. Stratthaus. 2016 VT 5 (filed January 15, 2016)

DOOLEY, J. The parties to this appeal are co-lessees in a thirty-year ground lease for a ten-acre parcel of land The parties constructed improvements on the land and shared the parcel as unmarried cohabitants Upon termination of their relationship, plaintiff sought partition the property under 12 V.S.A. § 5161 and compensation for ouster under 12 V.S.A. § 4765. Defendant appeals the trial court's property division and compensation to plaintiff. We reverse in part and affirm in part.

On appeal, defendant claims the leasehold is not real property subject to partition under 12 V.S.A. § 5161; and that the court erred in calculating the parties' contributions to the project; We affirm the trial court's judgment with respect to the applicability of the partition statute to the leasehold. We reverse and remand for the court to correct errors in its calculation of the parties' respective contributions and to value the property and determine the partition remedy.

All, or virtually all, decisions that have considered the question before us have held that partition is available for leasehold interests. Based on our own analysis, as well as the precedents from other jurisdictions, we hold that plaintiff could seek partition under 12 V.S.A. § 5161.

There is, however, an alternative remedy applicable to the situation in which plaintiff is left. Partition is both an action at law, pursuant to the statute, and a remedy in equity that came to us as part of the English legal system a court could partition a leasehold interest under the court's equitable powers, In applying partition then, we have relied on equitable partition and not the action at law known as statutory partition. While there may be multiple reasons for proceeding this way in particular cases, the overall rationale applicable to property division for unmarried partners in marriage-like relationships is that we must consider all relevant circumstances to ensure that complete justice is done.

Thus, even if § 5161 did not apply because the parties have a leasehold interest and not ownership in fee, we would hold that partition in equity is the proper remedy.

Equitable partition can follow its own flexible procedures, and the court is not bound by those in the statute, including the use of commissioners. We conclude that appointment of commissioners is particularly inappropriate and unnecessary in a case like this because they add cost to the process, the value of the property is relatively small, and the role of the commissioners is very limited. Thus, we conclude that in this case the trial court should value the property and not refer valuation to commissioners. Once the court has valued the property, it should determine and order the partition remedy, either by assigning the property to plaintiff with a pay-off to defendant or sale of the property with distribution of the proceeds according to the percentage shares of the parties. If a sale is ordered, the court may appoint commissioners to sell the property.

In summary, we hold that he superior court has jurisdiction over this case based on the common leasehold interest of the parties. This case is appropriately an equitable partition case to be adjudicated under the equitable principles and procedures of a normal civil case.  The superior court should proceed to fashion a remedy without use of commissioners except, if necessary, for purposes of sale of the property.

EATON, J., concurring. I agree with the majority's conclusion that equitable partition, in addition to statutory partition, is part of the law of Vermont and that in reaching an equitable division of the parties' property, the court could employ equitable partition under the facts of this case. In my view, 12 V.S.A. § 5161 does not apply in this instance, making equitable partition available and appropriate.

Because the majority relies upon equitable partition, the historical overview of statutory partition is largely unnecessary to the result. I am also not convinced that statutory partition is available in this case, and to the extent the majority holds that statutory partition provided any authority for the court to partition the leasehold interest, I disagree

Partition, whether employed under the statutory framework, or as a part of the court's equitable powers, is cumbersome, potentially expensive, and time-consuming. Using it with every division of a leasehold interest that comes before the court in a divorce or civil proceeding among unmarried cohabitants, would be unwise and unworkable. In long-term lease situations, however, or those where valuation of the leasehold is particularly difficult, it should be one of the tools available to the trial court, in its discretion, in discharging its obligation to divide the parties' property in an equitable manner.

I concur with the outcome reached by the majority, and agree with its analysis of the issues, except as to the applicability of 12 V.S.A. § 5161

Landlord tenant. Termination of long-term ground lease for waste. Trial court cannot balance the equities and award damages in lieu of writ of possession.

Mongeon Bay Properties, LLC v. Mallets Bay Homeowner's Association, 2016 VT 64  (filed June 10, 2016)

ROBINSON, J. This case calls upon us to determine whether, and under what circumstances, a court may decline on equitable grounds to enforce a provision in a long-term ground lease giving the lessor the right to terminate the lease and reenter the premises in the event of a default. Plaintiff MBP sued defendant Association seeking to void a multi-year ground lease for property abutting Lake Champlain on account of alleged breaches of the covenants in that agreement.  After a bench trial, the trial court concluded that the Association had violated its obligations under the lease by failing to reasonably maintain the embankments abutting Lake Champlain to protect them from erosion. However, the court declined to enforce the forfeiture clause in the lease against the Association, and awarded MBP damages to enable it to undertake the necessary restoration and bank protection. MBP appeals the trial court's award of damages in lieu of forfeiture. We reverse the court’s refusals to declare termination of the lease and to issue a writ of possession to MBP, and remand for reconsideration of MBP's remedy.

The trial court explained that the primary interest of the lessor under a long-term ground lease is return of the land itself at the end of the lease in substantially the same condition as when the lease was initiated, absent "normal wear and tear" that would reasonably be expected over the forty-year lease term. The trial court concluded that the Association's failure to adequately address lakeside erosion, causing substantial injury to the leased property, amounted to "waste."  Despite its ruling in MBP's favor the court concluded "lease forfeiture here would be especially inequitable, and a sanction entirely out of proportion to the lease violations." Concluding that an award of damages for remediation would afford adequate relief, the court awarded MBP a judgment for $135,000—the expected cost of remediation and restoration of the bank.

MBP contends that the trial court lacked the authority to conduct the kind of equitable balancing that it undertook in this case and that the trial court should have enforced the terms of the lease. The ground lease provided, "in the event that an Event of Default shall have occurred, [and] upon issuance of a writ of possession, the rights of the Lessee . . . shall immediately cease and become void." It further stated, "[i]f any Event of Default shall have occurred and be continuing, whether or not the term of this lease shall have been terminated pursuant to the Lease, the Lessor may enter upon and repossess the Land or any part thereof pursuant to Vermont law."

Although the law disfavors forfeiture clauses, this Court has never declined to enforce a contractual forfeiture provision when the landlord timely invoked the forfeiture right. This is a case of first impression insofar as the Association urges us to rely on our general policy disfavoring forfeitures to authorize the trial court to invoke general equitable considerations in declining to enforce a contractual agreement providing for forfeiture in the event of default, even though the lessor timely invoked the clause and elected termination.  We decline to do so for several reasons.

 First, our precedent does not support setting aside clearly applicable, contracted-for remedies. Second, the Restatement provides that termination by the landlord is an available remedy for waste as long as landlord gives tenant opportunity to restore leased property to its former condition before terminating lease. See Restatement (Second) of Property: Landlord & Tenant § 12.2(2).  Finally, our statutes contemplate the ejectment of tenants on the basis of a breach of a stipulation contained in a lease. 12 V.S.A. § 485.

For these reasons, we conclude on the basis of the trial court's findings that MBP was entitled to terminate the ground lease as a matter of law, and is entitled to a writ of possession.

Reversed and remanded for determination of a remedy in light of the above.

SCOVT NOTE. For the case after remand see Mongeon Bay Properties v. Mallets Bay, 2017 VT 27(Reversed for failure to exercise discretion. Trial court had discretion to stay writ of possession for at least a short period notwithstanding termination of lease and Court’s earlier mandate directing change of possession.)