Billboard Insider has published numerous articles, including in its Guide to Leases, Easements, and Real Estate, advising that the prudent billboard operator should record his ground lease, or at least of memorandum of the lease. By officially recording in the county real property records, the operator insures the world has actual notice of the lease, so that subsequent purchasers of the encumbered real estate are precluded from claiming ignorance in dealing with the billboard or land. Nevertheless, many leases remain unrecorded, thereby often necessitating the intervention of a lawyer to argue the concept of “constructive notice” to curb the overreaching of unscrupulous subsequent purchasers.
The recent case of SignAd vs BJZ is a good example of constructive notice. By way of background, SignAd, a Texas independent billboard operator, entered a pre-paid 30-year lease with the landowner, Kopycinski. The lease, which was not recorded, contained a right of first refusal, under which SignAd could match any acceptable offer for the purchase of the property. After SignAd’s double face steel monopole bulletin was constructed, the landowner received an offer, and without first giving SignAd the right to review and refuse it, he sold the property. The purchaser, BJZ, claimed it was not bound by the right of first refusal, as it was a “bona fide purchaser” and the lease was not recorded. SignAd sued to enforce the right of first refusal and invalidate the sale to BJZ.
In an opinion decided on January 27, 2022, the Texas Court of Appeals for the Houston Fourteen District initially explained “notice can be actual or constructive.” It went on to clarify that “actual notice depends on personal knowledge, whereas constructive notice is notice that the law imputes to a party without such knowledge in certain situations. When the situation is the purchase of real property, the purchaser may be charged with constructive notice of the claims on an occupant or possessor if those claims could have been reasonably discovered upon a proper inquiry. The duty to inquire into such claims arises only when the occupation or possession is visible, open, exclusive, and unequivocal.”
As the Appellate Court noted, constructive notice is especially appropriate for a billboard, which is designed to “achieve optimum visibility to the traveling public.” In particular, the Court felt it important that “SignAd produced evidence that its billboard is nearly sixty-feet tall, and that it hosts two back-to-back display faces measuring fourteen feet by forty-eight feet, and that it towers above the natural landscape and all nearby structures.” Thus, the Court concluded that “even though SignAd had not publicly recorded a copy of its lease or a memorandum of its interest in the Kopycinskis’ property at the time of the purchase, there was still sufficient evidence from which a reasonable factfinder could determine that the BJZ Parties had a duty to inquire into SignAd’s interest, and that they had constructive notice of it.”
Through good lawyering, billboard operators may be successful in establishing constructive notice and binding subsequent purchasers of land with unrecorded leases. However, some caution up front in recording the lease or a memorandum of it might save some of those attorneys fees.
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