black-big.pngKerry Randall a mortgage banker for Peoples Bank dialed me in to a new bill that is working its way through Olympia’s legislative python.

HB 1349, which is sponsored by WA House Rep. Jeff Morris of the 40th District, seeks to provide a legislative default for private road maintenance agreements when one does not already exist.

The rationale which Rep. Morris gave for his sponsorship of this bill in his testimony to the House Judiciary Committee (which you can find presented after the legislative assistants testimony beginning at 37:20 here) was this.

In order for banks to lend money real property which are adjacent to private roads, they often will require that a road maintenance agreement be in place. The reason for this is that if access to real property is denigrated over time, the value of the real property itself will be too.

So, if you had a dilligent developer that went through this step – you are in luck. But, in that this is an extra cost for a benefit generally unknown by the general public as to its importance, it may have been conveniently forgotten.

The hope then is that this bill, which Rep. Morris indicates is modeled after Oregon’s code, will eliminate bank’s fear that the property will be difficult to resell when this agreement is not in place.

Now, I will say upfront that I have not taken a fine look at the language of this bill. (Which is to say, I haven’t read it and let it sit long enough to think through all the angles.) However, I do believe that something of this nature is very valuable.

The reason is to remove what in economics is called a free-rider problem. An example of this is the negligible costs associated with filling an empty seat in a bus, plane, or movie-theatre. When that seat is not sold, the benefit to the free-rider is great and the immediate cost to the company – or in this case the other homeowners – is small.

Except, now that Jimmy doesn’t have to pay his fair share, Sally might think that she should play the same game. The result is an almost complete fall down where nobody is willing to ‘buck-up’.

Now in the case of a private road this can become even more pronounced if one of the neighbors is seeking to get a road maintenance agreement signed off by his or her current neighbors.

This is because these neighbors will suspect an imminent departure – hence they will no longer be living proximate to the land owner seeking the agreement. The result is that they may even have the audacity to ask for the receipt of some sort of compensation for their signature.

Why? Because in the case of a private road, there is some sort of ownership, even if not spelled out in writing. And what pray-tell is that likely going to be?

I will certainly allow myself to be corrected, but I suspect that 90% or more of the time the private road is owned jointly by everyone who has private property that either abuts its center-line or its edge.

And folks, what this means is that each and every owner of the private roadway through the magic of the legal fiction called ‘joint ownership’ owns each and every square inch of that private roadway to an equal degree.

The result – even though it does not make sense when numbers exceed say 3 or 4 people – is that there are no rules in place. Result: CHAOS!.

People may, and often do seek to use the private roadway in all different sorts of ways. Believe me, I have had experience with this and it is not at all pretty!

So, where do things now stand with HB 1349? It has been modified and approved narrowly in the House. So, it now must go through the vetting gauntlet of the Senate Judiciary Committee before it passes to Rules – if at all. 

Interestingly, at the House Judiciary Committee, Rep. Morris testified alone and was not asked any follow up questions. I should think that the Real Estate and Title Insurance communities should take a more active approach. Which leads me to wonder if they are informed of this bill. 

This is certainly a bill, which if properly thought through will assist their efforts to keep real property alienable (i.e. able to be sold). So, I will be curious to see if there is a bigger testimonial turn-out at the Senate Judiciary hearing. What do you think?black-small.png