An Irrevocable License Not Properly Recorded Will Not Survive Transfer Of Property Absent Actual Notice Of The License

CATEGORY: Public Education Matters
CLIENT TYPE: Public Education
DATE: Feb 28, 2020

In 1950, the owner of the property in Los Angeles (the “first property”) agreed to provide eight parking spaces to the owner of a neighboring lot (the “second property”) who intended to build a warehouse on the site. The parties executed the agreement and filed an affidavit documenting the agreement with the city. The affidavit was part of the permitting process.  Neither property owner recorded the agreement.

In 1994, a limited liability corporation, 3000 E. 11th St., LLC, operated by Steven Soroudi, purchased the first property. Soroudi inspected the property, title, and deed before the purchase. There was no indication that anyone other than the previous owner’s employees parked on the property, and neither the title report nor the deed mentioned the affidavit or listed it as an encumbrance on the property.

In 2007, Ruben Gamerberg purchased the second property. He, too, was unaware of the parking affidavit. However, in 2013, Gamerberg began consulting with the city about expanding the warehouse and a city official informed him that there was a parking affidavit for the property.

In October 2013, Gamerberg sent Soroudi a certified letter with the parking affidavit and requested access to the parking spaces. Soroudi consulted his attorney and made a claim on his title insurance, but did not respond to the letter. Gamerberg then notified the city that he informed Soroudi of the affidavit, and the city approved Gamerberg’s expansion plans.

In March 2015, Gamerberg, nearing completion of the expansion, contacted Soroudi to confirm the location and availability of the parking spaces. Soroudi informed Gamerberg that he referred the matter to his attorney, but did not provide access to the parking spaces. In December 2015, Gamerberg filed a complaint against Soroudi and his corporation seeking an irrevocable license to access the parking spaces under the 1950 affidavit.

At trial, Gamerberg, Soroudi, and a city official testified. At the conclusion of the trial, the court ruled that the parties’ predecessors’ affidavit created an irrevocable license to the parking spaces even though both Gamerberg and Soroudi took title to their respective properties with no knowledge of the affidavit. Soroudi and his corporation then appealed the trial court’s decision.

On appeal, the Court of Appeal reviewed the standards for the grant of an irrevocable license, and whether the court should grant such license in this case, where the parties had no notice of the license. 

The Court distinguished covenants that run with the land, such as easements, from licenses, which are personal rights, confer no interest in land, and which may be revoked. The Court then distinguished revocable licenses from irrevocable licenses, in which the licensee relies on the licensor’s representations or on the terms of the license and thereafter makes substantial expenditures of money or labor in the execution of the license. In such cases, the Court concluded that the license should continue for so long as it is appropriate. The Court noted the courts sparingly use their power to declare irrevocable licenses and only do so where the licensee expends the substantial, considerable, or great amounts, based on the licensor’s representations or on the terms of the license.

The Court then analyzed whether an irrevocable license is binding on a subsequent purchaser who takes the property without notice of the license. The Court considered case law on the subject before concluding that an irrevocable license must be recorded in the property records in order to bind subsequent purchasers who lack actual notice of the license. Here, the Court concluded that the failure of the original signatories to record the license and to expressly state that such license would bind subsequent assignees meant that the unrecorded license did not survive the subsequent transfer of the property.

Accordingly, the Court of Appeal reversed the trial court decision and invalidated the unrecorded license.

Gamerberg v. 3000 E. 11th St., LLC (2020) 44 Cal.App.5th 424.