Acquiring land via a tax foreclosure doesn’t give a company ownership of a billboard. That’s the lesson of Outfront vs CYA Properties. Here are the facts:
- In 1971 OUTFRONT leased vacant land in Wayne County, Michigan to install a billboard. The lease was renewed several times, most recently in 2009. The lease specified that the billboard was OUTFRONT’s property The lease was unrecorded.
- On April 2015 the Wayne County Treasurer foreclosed on the property for unpaid property taxes and subsequently sold the property to CYA Properties, LLC (“CYA”).
- CYA notified OUTFRONT that on the basis of a bill of sale it had purchased not only the real property but the billboard on the property.
- OUTFRONT filed an action to recover and remove the billboard. CYA counterclaimed that the billboard constituted a real property improvement which it owned via the bill of sale and that it had no notice of OUTFRONT’s interest in the billboard because the lease was unrecorded.
- A trial court found in favor or OUTFRONT arguing that: “Outfront’s leases, from its original lease in 1971, through the final lease, entered into in 2009, all stated that the billboard was Outfront’s property. The applicable law and Outfront’s leases unambiguously establish that the billboard was the personal property of Outfront.”
- The Court also dismissed CYA’s claims that it did not have actual or constructive notice of OUTFRONT’s interest in the billboard because the lease was unrecorded: “It is difficult to imagine what could be more open and manifest than a muli-ton, multi-story steel structure with Outfront’s name on it in addition to a permit number that clearly tied the billboard to Outfront. At most, CYA has established that it was possible for the billboard to have been included with the real property. However, CYA knew there was a billboard structure on the property prominently displaying Outfront’s name. Therefore, CYA was on notice to inquire as to any outstanding interests that might exist affecting the parcel.”
Insider’s take: This litigation might been avoided if the lease were recorded. Recording puts land purchases on notice of your billboard lease and requires them to investigate the lease terms. But even if a lease is not recorded a purchaser of land will be bound by a billboard lease if the purchaser has knowledge of it. A great reason to have nameplates on all your billboards. It establishes that the billboard is yours and not the landowner’s.
For a discussion of a similar case see Rothfelder on Notice to a Sign Property Buyer.