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					John Demeter Property Bassett Fall 2003

I. Introduction
A. Cannot use property to harm others (State v. Shack) - Overreaching state policy allowed trespassers onto property to help migrant farm workers B. Cannot Discriminate in Housing 1. Federal Level 42 USC § 1982 - Cannot discriminate in real estate based upon race EXCEPT IF: - Fewer than 4 units - Non-advertised offering and no use of a realtor - Boarding house 2. CA State Level CA Govt. Code § 12950 - There is NO defense for discriminatory practices in Real Estate. - Provides much more protection than Federal Government does. (Jones v. Mayer) - Realtor refused to help blacks buy a home. Violated 42 USC § 1982.

II. Acquisition of Personal Property
1. Findings NOTE: Possession is 9/10 of the law. Possession is important. a. Abandoned Property - Finder of abandoned personal property has the possessory right in it - Sometimes there is no known or rightful owner (Goddard) - Meteor crashing onto farm ruled to be property of landowner, not finder (Armory v. Delamirie) - Chimney sweep who found ring is the owner (Eads) - The one who raised the ship, not found it is entitled to its contents (Columbus v. Atlantic) - Finder of a sunken ship is not owner because rightful owner never abandoned title to the sunken ship b. Mislaid Property - Usually mislaid property, the ownership right goes to the owner of the land, not the finder. (McAvoy v. Medina) - Purse left in barbershop was properly classified as mislaid, not lost. (Schley v. Couch) - $1000 buried in the dirt under the garage is mislaid, not lost. c. Lost Property - Usually lost property goes to the finder. (Bridges v. Hawkesworth) - Found money on floor of store. Finder’s property if nobody claims it. (Sharman) - Pool cleaners find diamond ring in pool. Right to ownership is the owner of the pool, not the cleaner. Probably because finder was employee of owner. (Hannah) - Finder of brooch in a curtain given ownership of the brooch because of his deed. The good guy should win. d. Treasure Trove - Another word for Pirate Treasure is BOOTY! - Hardly used or recognized anymore. It means what its name says. It’s a treasure trove. e. Statutory schemes to deal with lost/mislaid property i) CC §§ 2080-2080.5 - How to deal with found property, police, etc. - At common law, cannot benefit from found property if - Find it during a crime - Employees who has a duty to report (i.e. hotel maids) - Find it enclosed in a safe deposit area - But in CA, only exception is public agency employees cannot benefit from found property 2. Bailments Bailor - turns over the property Bailee - custodian of the property A. Voluntary bailments - Agreement (express or implied) between bailor and bailee - Bailee has higher degree of care - Voluntary bailee for hire has highest degree of care, held to strict liability for


John Demeter Property Bassett Fall 2003
Property (Allen v. Hyatt Regency) - Owner of parking garage held liable for theft of auto from garage B. Involuntary bailments - Finder becomes a bailee and must deliver property to police under CC §§ 2080-2080.5 - Finder must reasonably protect the item found - Finder must act in a commercially reasonable manner (Cowen v. Pressprich) - OK when unordered bond given back to wrong messenger. Acted commercially reasonably. 3. Bona Fide Purchases - Very important in Real Property sales - Banks will only lend to a bona fide purchaser. 4. Unauthorized or Adverse Possession - If landlord does not evict someone and allows them to squat past Statute of Limitations (25 years), it becomes the property of the squatter. - In CA, to gain title by adverse possession, possessor must take possession and pay all taxes and assessments during the time of possession. 5. Improving Another’s Property by Mistake - Also known as Accession a. Common Law - If encroachment is innocent, court will work out inequities between the owners - If encroachment is knowing, court will give encroached upon party what it wants b. CA Law - CC § 871 Innocent Improvers Act Court asks: - Was there encroachment? - Was it innocent? If YES, court will work out inequities between parties If NO, court uses common law approach and gives victim what he wants. (Raab v. Caspar) - Failure to survey land for actual boundary lines was bad faith and resulted in forfeiture of building. Harsh rule for knowing evildoers.

III. Donative Transfers
1. Inter vivos Gift - A gift between two living persons a. Donor must have intent to make the gift b. Gift must be delivered - Once delivered, donor cannot get back the property - Two ways to prove delivery: i) Actual Delivery ii) Constructive Delivery (i.e. deed for a home, key to safe deposit box) (In re Cohen) - Gift of 500 shares by note in birthday card held constructive delivery of inter vivos gift - Present inter vivos gifts of a future interest are allowed (Gabriel Pascal) - Gift of future earnings from My Fair Lady was a valid gift - Gifts of a future interest with a present interest are allowed. Sometimes called splitting title (Gruen v. Gruen) - Father gave son the title of the painting, but kept an interest in it during his lifetime. Valid inter vivos gift. Good for estate planning. 2. Testamentary Promise (Gift made in contemplation of Death) - A gift made and intended to take place after death - It is a conditional gift, on condition of dying of the donor - Promise is revocable up until time of death - Promise does not live past lifetime of donee - Involves only personal property - Must be in contemplation of imminent death - Death must be the one anticipated by the donor a. Donor must have intent to make the gift b. Gift must be delivered - Two ways to prove delivery:


John Demeter Property Bassett Fall 2003
i) Actual Delivery ii) Constructive Delivery (Foster v. Reiss) - Old thinking court did not like these gifts and said there must be actual delivery. Now overruled for the most part. (Scherer v. Hyland) - Leaving longtime boyfriend settlement check before suicide and leaving a note with the check was enough for constructive delivery. Suicide can be unavoidable and not against public policy. NOTE: Engagement rings must be given back if the engagement breaks off (Lindh v. Surman) - No fault rule. No matter whose fault, the engagement ring must be given back to the man. NOTE: If you make out a check and die, not a valid delivery. Bank is obligated to honor the check until they know of your death, then they freeze your account. NOTE: Between a will and a gift in contemplation of death, whichever was created nearest to death governs the property at issue.

IV. Landlord-Tenant Law
A. Introduction - Leases are viewed as K’s not conveyances, as they once were 1. Commercial lease - Bargained at arm’s length between parties of equal bargaining power - If you want it in the lease, put it in. Courts will hardly ever read into a commercial lease. - Obligation is on the tenant to inspect / make sure things are OK with the property 2. Residential lease - Has become the model for consumer protection legislation - Obligations shift to the landlord - Contains an implied warranty of habitability, essentially a consumer K between LL & T with reciprocal obligations B. Structure of the Lease 1. Premises of the lease - Description of the property - Names of the landlord & tenant - Term of the lease - $ Rent - When rent is due 2. Rights and obligations of the parties - Covenants and individual K’s between the LL & T - Could be no pets, no waterbeds, etc. - Usually contains a final covenant, that if any of the covenants are breached by T, LL can evict. C. Who is a Tenant CC § 1940 1. Tenants are all who hire dwelling units - Includes sub tenants - Does not include - Transient occupancies - Hotel guests (maid service, telephone, food, less than 7 days stay) - Students in dorms 2. Dwelling unit - Home, residence, sleeping place D. Types of Tenancy 1. Periodic Tenancy Month-to-month leases are periodic tenancies a. Notice is required by either party to terminate a periodic tenancy CC § 1946 - Month to month leases require 30 day advance notice - Can be more or less, but must be at least 7 days 2. Tenancy for a Term Standard commercial tenancy e.g. 10 year lease


John Demeter Property Bassett Fall 2003
a. Since both parties know when it will end, there is no need for notice at end of lease b. If tenant stays on beyond the lease, they are a holdover, not a trespasser. - Become a tenant at sufferance (see below) c. Lease options can be negotiated between the parties - To protect yourself, put safeguards on the extensions - If options is vague, court will construe as a 1 year option - Must show intent of option for court to enforce 3. Tenants at Sufferance a. Common Law, tenant was held to an entirely new lease. - Highly punitive, e.g. held for another 10 year term b. In CA, if the holdover offers to pay rent, and landlord accepts, then a new lease is formed In residential leases - If tenant pays and landlord accepts, month to month lease 4. Tenant at Will a. Tenancy can be ended by either landlord or tenant at any time, for any reason. - Often times the slum tenant is at will E. Implied Warranty of Habitability 1. Implied Warranty of Habitability a. Landlord’s responsibilities i) CC § 1941 - Lessor is required to put the building into habitable condition and maintain it in habitable condition - Buildings must be habitable at the time of move-in - Building must be keep in tenantable condition ii) CC § 1941.1 What is fit for human occupancy - A dwelling is untenanable if it lacks waterproofing, running water & gas and electricity - Must be free from rubbish, filth - Common areas must be in good repair iii) CC § 1941.3 Landlord’s duty of security - Must put locks and deadbolts on doors and windows of the dwelling iv) CC § 1942.1 Tenant cannot Waive rights of tenantable conditions v) CC § 1942.3 - If inspector has issued written report of violation and Landlord has not fixed the problem in 60 days, it is assumed the Landlord is in violation of the warranty of habitability (Brown v. Southwall Realty) - D stopped paying rent b/c said lease was void because apartment was not up to code. LL knew of defects prior to leasing to D. Implied conditions into the lease. Allowed not to pay rent. Gives the tenant a self-help remedy. (Green v. Superior Court) - Clarified Brown. Absolute self help is not allowed. Up to the trial court to determine best remedy for both LL & T. (Javins v. First National Realty) - Landlord has obligation to maintain and upkeep code standards. b. Tenant’s responsibilities i) CC § 1929 Tenant is responsible for damage caused by the Tenant ii) CC § 1941.2 Tenant’s obligations - Keep dwelling clean and sanitary, throw out trash - Use utilities properly - Do not destroy or deface the property - Only use the dwelling for its intended use iii) CC § 1942 Repair and Deduct Allows a tenant to repair and deduct the expense from the rent Repair and deduct cannot exceed 1 months rent Cannot do this more than 2 times per calendar year Tenant is allowed to proceed if: 1) After a reasonable time (30 days, maybe less depending on the condition) 2) After written or oral notice to Landlord 3) Of dilapidations rendering untenantable which Landlord ought to repair 4) And Landlord neglects to repair 2. Warranty of suitability - Not binding in California


John Demeter Property Bassett Fall 2003
- Makes commercial leases like residential leases. - In CA, obligation to pay rent and obligation to maintain premises are independent obligations. (Richard Barton v. Tsan) - Tenant was justified in withholding rent for broken elevator that was essential to his business. In CA, commercial tenant must still pay rent. F. Security Deposits 1. Landlord must pay interest on security deposit of the tenants in SF (Not the rest of CA) a. Can be used in case of default, repairs and cleaning, or future debts b. Guideline - Unfurnished 2 months, Furnished, 3 months c. Held in debtor-creditor relationship - if landlord goes bankrupt, security deposit is a priority claim d. Landlord must give itemized account of deductions 3 weeks after move out (Cook v. University Plaza) - Students in a dorm are held not to be “tenants” and are not entitled to security deposits back. G. Rent 1. Obligation to pay rent a. At common law, rent was due on the last day of the term b. Now, it is due on the 1st day of the term 2. Rent escalation clauses a. In commercial leases, can have a base rent + a % of gross sales in excess of $X. - Be sure to include clause to inspect books periodically or independent audit H. Rent Control 1. System where a public agency registers all units subject to rent control CC § 1947 - In SF, landlords pay fees - Rent control system costs money - Can become entrenched in bureaucracy 2. Must have a level of discretion for hardships, recapture, etc. - In addition to creating stability, it must create appellate procedure for individual consideration - There must be a fair and reasonable ROI for the landlord - If landlord charges more than allowed, victim can get treble (3x) damages 3. Incentives to repair for landlords - In SF, registration with rent control can be denied if the building is not up to code 4. Pass through - Capital improvement should be costed out and then go to the Rent Control board - Board gives you a schedule to amortize these costs thru tenant payments - A way to add onto rents to recover the costs of improvements 5. Stability of the rental market - Puts restrictions on condo conversion - Some people must be protected - Old people get longer notice of owner move-in - Landlord must have good cause to end the lease - In SF, there are 11 good causes - If fraudulently evicts, victim can get treble (3x) damages - Perpetual leases allow for some increase in rent 6. Vacancy de-control - For new units, initial rent must be set by landlord and registered with Rent Control Board - Set at market value at the time the unit comes onto the market - Also works when the tenant vacates or is terminated for cause 7. Collateral incentives for the landlord to stay in the rental business - The system must make people want to be a landlord. 8. Owner Move in - Under the Ellis Act, owners can move in, to make improvements. Also a way to get tenants out of the building - Owner Must: - Take the entire property off the market - Give notice and get permission from the Housing Authority - Give notice to the tenants and give them first priority in right to re-lease - Owner/relative must stay in the property for specified number of months/years


John Demeter Property Bassett Fall 2003
(Telluride v. Lot 34 Venture) - Ordinance that 40% of housing must be low income was equal to rent control (Cwynar v. San Francisco) - Prop. G was held unconstitutional. Allowed an unlawful taking of property. I. Delivery of Premises 1. Residential Leases (CA Rule) a. Landlord must deliver actual possession to the tenant at the start of the lease b. Any holdover tenant is the responsibility of the landlord to get out c. Must be delivered in habitable condition (see above) 2. Commercial Leases (CA Rule a. Without any written agreement to the contrary, the default rule is the landlord must only deliver legal possession. b. Any holdover tenant must be evicted by the current tenant, unless written into the commercial lease c. No implied warranty of habitability. Can be written into lease, but must be express. d. Remedy for holdover tenants is $ damages equaling loss of possession. No loss of business $ damages are awarded because they are too speculative. (Adrian v. Rabinowitz) - 24 day holdover was the problem of the new tenant, not the landlord. It was not put into the commercial lease. 3. Landlord right of re-entry - In emergency - Agreed upon repairs - Abandonment - Court order 4. Personal property of the tenant - Landlord must protect the personal property of a tenant left in the apartment. Cannot keep it, rent it or sell it. J. Discrimination 1. Statutory Provisions a. 12 USC § 3604(c) and 42 USC § 1984 b. CA Gov. Code § 1295 NOTE: See Introduction (Janick v. HUD) - 2 testers sent by HUD found discrimination by the LL, who asked about race, income, age, pets, kids, etc. c. In advertising, use a “reasonable reader” standard to determine if the ad is discriminatory (Housing Rights Center v. Donald Sterling, Inc) - Does the name “Korean House” discriminate? Ordinary reader standard. K. Justified Non-Payment by Tenants 1. Tenants are allowed to refuse to pay rent as a self-help remedy for shitty landlords (See actual partial eviction & constructive eviction) 2. Interference by 3d parties (non-landlord) does not relieve tenant’s responsibility to pay rent 3. If landlord owns adjacent properties: Example: LL owns two lots. Lot 1 is inhabited by old folks home. On lot 2 LL later puts a nightclub. Old folks complain, want LL to enforce noise restrictions. LL does not and Old folks refuse to pay rent. Old folks win. (Brown v. Southwall Realty) - Allowed non-payment by tenant when apartment was not up to code. Self-help remedy. L. Holdover Tenants 1. Give tenant notice of end/termination of the lease 2. If tenant does not leave, landlord must go to court and get a 3 day notice to get into court. Policy: Gets out bum tenants quickly CC § 1945 Renewal of lease by holdover - If a tenant is a holdover and pays rent and the Landlord accepts it, it creates a month to month tenancy NOTE: CC § 1174 - Landlord can get punitive damages of double the rent for a “malicious holdover” (Commonwealth Building v. Hirschfield) - Tenant who was a 10 hour holdover not responsible for double rent as per lease. Unreasonable. Even if lease spells out when tenant must be out, landlord must be reasonable. M. Eviction 1. Types of Eviction If landlord evicts, rightfully or wrongfully, tenant is no longer obligated to pay rent Loss of possession by the tenant relieves the obligation to pay rent (residential only) a. Actual Eviction - Landlord informs the tenant that they have been evicted.


John Demeter Property Bassett Fall 2003
- Partial Actual eviction can occur even with no physical loss of access to property - In residential context, the tenant is entitled to refrain from paying rent - In commercial context, the tenant is entitled to a partial rent abatement for % loss of facility - Can force landlord to enjoin or evict neighboring tenant (if also owned by LL) if they are in breach and nuisance on innocent neighbor. - Actual Partial eviction is a lesser offense than constructive eviction b. Constructive Eviction i) Substantial impairment of covenant of quiet enjoyment ii) Caused by the Landlord iii) Landlord knows of the breach iv) Tenant moves out - A violation of the tenant’s right to quite enjoyment of the property - In CA, no longer necessary to move out for constructive eviction and lawful non-payment of rent - For commercial, tenant can get a partial rent abatement for the % of the land they cannot use - Tenant may be entitled to damages for having to move due to constructive eviction. NOTE: Tenant can lose a constructive eviction defense if he fails to vacate the premises in a reasonable time (Knight v. Hallshammer) - Landlord was redoing building unit by unit. Lots of noise. Tenant can either pay no rent (actual partial eviction) or move out (constructive eviction). c. Retaliatory Eviction CC § 1942.5 Defense of Retaliatory Eviction - Landlord cannot evict or diminish services of a tenant for exercising their rights under the statutes - Case law has put no time limit on retaliatory action - Landlord cannot retaliate for any reason - Even joining a tenant’s union - If found retaliatory eviction, landlord must take back tenant for 6 months. Can remove after that for good cause. - In working with the Ellis Act, Owner move in must be in Good Faith, not in retaliation. (Edwards v. Habib) - Landlord could not evict tenant for reporting code violations to the housing department. 2. Notice requirements for eviction CC § 1946 Notice requirements to terminate a lease - Requirement is at least 30 days notice - If tenancy is greater than 1 year, 60 days notice for landlord, 30 for tenant - Can agree to more or less notice, but never less than 7 days - Both tenant and landlord must give notice - Need notice for termination or any other change in the lease 3. Eviction by Demolition CC § 1940.6 Notice Requirements - Notice must be given to tenants if their building is to be demolished 4. Eviction by Landlord default on mortgage Tenant can get partial rent abatement 5. Eviction by Condemnation a. Tenant cannot get rent abatement because the condemnation was done by the government, not by the landlord - However, tenant is entitled to share in the eminent domain award. - Tenant has cause of action against the government, not the landlord. 6. Eviction of Public Housing Tenants Any eviction of a public housing tenant must be given Due Process of Law in depriving them of their apartment - Notice of good cause - Hearing - Ability to cross examine accusers - Right to counsel - Impartial decision maker and written decision - Right to appeal Bottom line - it is very hard to get rid of public housing tenants N. Landlord’s Remedy for default by Tenant


John Demeter Property Bassett Fall 2003
CC § 1951.2 Landlord must try to mitigate. If they do not, they are only entitled to reasonable damages that could not be avoided. Example: Tenant defaults with 10 months left at $500 a month. If landlord could re-lease at 10 months for $400, he is entitled to $1000 in mitigated damages. If he chooses not to take the $400 a month tenant, He still only gets $1000 (US National Bank v. Homeland) - Original tenant is still liable for damages even if subsequent tenant defaults and leaves landlord holding the weenie. NOTE: This problem can be avoided by including a liquidated damages clause in the lease. O. Civil Penalties for Landlords - Landlords can be penalized in civil proceedings for violations of the codes and statutes For a penalty to be constitutional: - Penalty must be proportionate to the actual damage suffered - Penalty must be proportionate to the defendant landlord’s net worth - Penalty must be proportionate to the gravity of the offense. (San Francisco v. Sainez) - Slumlords were held to $660K penalty for apartments without heat and other city code violations. Had repeated notice to repair and refused. (Hale v. Morgan) - Squatter in trailer park would not leave. So landlord cut the power he was bogarting. Squatter sued. Landlord fined. Landlord can NEVER cut utilities to anyone, even a squatter, for any reason. (Kinney v. Varcori) - Slumlord was fined $36K for conditions of his apartment. Held constitutionally OK penalty. Was proportionate. P. Fixtures on the Property 1. General Rule - Fixtures become part of the real property by accession. (usually if the cannot be removed without damage) 2. Exception a. Trade Fixtures - Trade fixtures are assumed to be the tenant’s personal property - To remove them, building must be returned to some condition as leased, without damage, before the lease ends. 3. Single Ownership - Assume that the fixtures go with the land 4. Double Ownership - Presume that when the tenant specially adapts an apartment, building, etc, the fixtures belong to the tenant & tenant must repair damage of removing the fixtures. Q. Duty of Landlord in terms of Liability 1. Common Law causes of action a. Landlord provided no notice of a known danger to tenants b. Premises is leased for public use (e.g. sidewalks) c. Premises remained under the landlord’s control (e.g. stairwells, hallways) d. Premises negligently repaired by the landlord 2. California Standard CC § 1714 Landlord duty is the foresee ability of harm 3. Duty to protect tenants from 3d parties a. Existence of a special relationship b. Danger brought about by the landlord’s conduct c. Overriding foresee ability d. Voluntary assumption of a duty 4. Courts find exculpation clauses in leases are void as against public policy. (Walls v. Oxford Management) - Woman assaulted in parking lot of apartment complex has no cause of action against landlord (Ann M. v. Pacific Plaza) - Victim raped in store, during business hours. Store employed security, but this act was beyond foreseeability and would cost too much to have security everywhere. (Sharon P. v. Arman Ltd.) - Court said underground parking garages are not inherently dangerous. P could not recover, no duty. (Leslie G. v. Seltzer) - Defective garage door led to assault on P. However, P could not prove causation. With assailant unknown, it could have been a tenant who assaulted. No proximate cause. (Becker v. IRM Corporation) - P hurt by non-tempered glass in shower. Despite report from inspector that all glass was tempered, landlord is liable, like products liability, in the line of commerce. (Peterson v. Superior Court) - Corrected the decision made in Becker, now standard for landlords is negligence, not strict


John Demeter Property Bassett Fall 2003
liability. (Saelzler v. Advanced Group) - Woman beat up in huge apartment complex. Propped door found. But without finding the assailants, no way to tell if they were tenants or 3d parties that beat the shit out of her. No proximate cause. R. Commercial Leases 1. Continued Operations - Unless expressly placed into the lease, the court will not imply a covenant of continued operations (Piggly Wiggly) - Grocery (anchor tenant) has rental agreement of base + % of gross sales. Leave lease & moved down the street 1 month into 3 year lease. Continued to pay base rent, but kept if vacant to keep away competition. Court refused to read implied covenant of continued operations into the lease. 2. Rental Re-adjustments in Long Term leases (Foundation Development v. Loehmann) - LL is dumb enough to rent to tenant for 20/5/5 with NO rent increases. Landlord looks for a way out, and when tenant is just a few days late with a payment, voids the lease. Court said this was (a) trivial breach that did not warrant terminating the lease and (b) accepting the payment waived the right to evict. Landlord is stuck with bad lease. His fault. S. Transfers of Leases 1. Assignments - Transfer of entire lease - New tenant takes over entire time of the lease - Original tenant is now out of the equation 2. Sublets - Does not affect the original landlord/tenant relationship - Sub tenant become a tenant of the original tenant - Two distinct relationships (LL-T) (T-SL) (Jaber v. Miller) - Look to the intent of the parties, not necessarily what they term “assignment” or “sublease” to determine whether it is a sublease or assignment. 3. Consent of the Landlord - The landlord can put a condition in the lease that he must approve all assignments of leases - In residential, landlord can nix an assignment for ANY reason - In commercial, CA rule is without express language to the contrary, landlord must be commercially reasonable in refusing assignments. Can be written around by the parties. (Childs v. WB Theaters) - Subsequent assignments of the lease do not extinguish assignment conditions. Look to the intent of the parties. Landlord keeps veto right of assignment if he originally allowed 1assignment. (21 Merchant Row v. Merchant Row) - Landlord denied assign ability because bank wanted lease as security, and it could reassign without permission. It was not in the lease, so the poor tenant cannot assign. MUST BE IN THE LEASE for commercial (Saks Fifth Avenue Example) - Upscale store wants to assign lease & does so to Mervyns. Landlord refuses because it would ruin integrity of upscale shopping store. This was reasonable. (Carma Developers v. Marathon Development) - Agreement in lease said that landlord could negotiate directly with assignee. Landlord does so here, cutting out assignor of making $ by assigning it. Poorly drafted for tenant.

V. Estates in Land
A. Introduction 1. Right of possession is a property right that can be transferred 2. Conveyance of ownerships is an inheritable interest - Called a Fee Interest - Can be inherited - Perpetual in nature - Historically, had to use the words, “to A and his heirs” 3. Fee is an ownership interest 4. Chattel Real is a present interest in land (lease/possession) - Called a life estate - Grantor retains the inheritable rights B. Fee Simple Absolute 1. Total ownership of the estate. - Only you (and you heirs) have a right to the property/land. 2. Heirs simply succeed the estate


John Demeter Property Bassett Fall 2003
3. Grantees are called “purchasers” - A purchaser is anyone who takes land 4. Used to need words of purchase and words of limitation a. Words of limitation = “and his heirs” (Cole v. Steinlauf) - Back in 1945 deed did not contain the words “and his heirs.” May not be clean title. Court refused to ignore these words. b. Words of purchase = “To A” 5. Cannot be a fee simple absolute if someone else has an interest or it is ambiguous 6. Property will go to heirs automatically if there is no will - At common law, real property could not be included in a will - Now, you can will property out of family, to only one heir, etc 7. Heirs are by blood - Kids, grandkids, aunts, uncles, parents, grandparents, etc. 8. When deciding if a conveyance is a life estate or fee simple, look at the whole document for intent, not for just 1 phrase. (Lewis v. Searles) - Court looked at whole document to decide that it was a fee simple. No language of a reversionary interest. C. Fee Simple Subject to a Condition Subsequent - A fee has been conveyed, but there is a condition or conditions that may cause the grantee to lose the fee (Lewis v. Searles) - A wills farm to B, B keeps farm in fee simple so long as she remains single. If she marries, B, C & D each get 1/3 of real property. B remained single. Restriction on marriage is OK, not against public policy. B has a fee simple subject to a condition subsequent. (Oldfield v. Stoeco Homes) - Court decided that the condition subsequent could be waived by the grantor, thus avoiding a forfeiture, which the court abhors. 1. Defenses to old or onerous conditions - Sometimes these conditions are very old and onerous. - The court looks for the best possible solution to these problems a. Interpret the purpose out of existence (Roberts v. Rhodes) - Land conveyed to school for 2 uses (school or cemetery). Many years later school sells it to Rhodes, Roberts, heir of reverter interest wants land back. Court interprets condition as a covenant. Looked for least onerous solution. b. Conditions have changed / non-foreseeability c. Statute of limitation has run / laches - Statute of limitation begin running on date when condition must be satisfied e.g. Must put up fence by 12/1/04 or else owner can terminate. S/L runs starting 12/1/04. - In CA, the statute of limitations to sue on power of termination is 5 years. d. Impossibility D. Life Estates 1. Grantor conveys a possessory interest in the land for the duration of A’s life, and upon A’s death, the right to possession ends. 2. Grantor can convey away his reversion right (remainder) to another party e.g. To A for his life, then to B and his heirs - Both have an interest in the property - B is the fee owner, but has no right to possession during A’s life 3. Remainders only occur in life estates, not in fees 4. Waste a. Actual Waste - Possessor of land has obligation to keep the property in good order for the eventual (real) owner - It is up to the fee owner to decide when to sue/demand repair of the waste - Statute of limitations does not run until death of life estate (Moore v. Philips) - Fee owners wait until death of life estate owner to sue for waste caused by her. Court said this is OK. Defenses of estoppel or laches no good. b. Meloriating Waste - This is when the life estate makes improvements to the property, but nonetheless has built upon or destroyed part of the property. (Melms v. Pabst Brewery) - Pabst thought it purchased a fee, but it was determined to be a life estate. They destroyed a home on the property and put up a nice new building, greatly improving the value of

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the land. Owners sue. It was waste, but improved value, so it was OK.

VI. Future Interests
A. Introduction 1. Future interest is created in land when the land is conveyed 2. Future interest can be bought, sold, willed and inherited 3. Future interests can be created in the original grantor or in 3d parties a. Future Interests that the grantor retains - Right of termination/reverter (Created by giving a fee simple subject to a condition subsequent) - Reversion interest (Create by giving a life estates) b. Future Interests in 3d parties - Executory Interest (fees) - Remainders (Created by giving a life estates and the reversion interest to a 3d person) 4. Future interests vest at the time of the condition being met - Could be death of the life estate holder, or the meeting of a condition subsequent (Kost v. Foster) - J&C give life estate to A & remainder to his 5 kids. J&C kept possibility of reverter if no kids. Kid Oscar goes bankrupt and sells his 1/7 share to Foster. Foster cannot possess until death of A. If Oscar had died before A, so would Foster’s interest. Interest was vested subject to condition that Oscar outlive A. B. Power of Termination (Possibility of Reverter) 1. Created when A gives to B so long as land is used as a church. - Conveyance and its use are conjoined. Specified for limited uses. If violated, reverts to grantor 2. Power of termination/possibility of reverter is an inheritable interest (Oldfield v. Stoeco Homes) - Deed gave wetlands to Stoeco, provided it fill neighboring city land as well within 1 year. If not, city had right of reverter, land would go back to the city. (Martin v. City of Seattle) - Original grantor held reversionary interest (condition that he or his heirs may build a boathouse on the land). 75 years later heir tries to build it. City tries impossibility or laches defenses. No good. City owes heir fair market value of land because if not it is unconstitutional taking of heir’s land. (Johnson v. Wheat Ridge) - Johnson conveys land to city for park, with condition that all construction must be done in 2 years. Failure to comply allow re-entry by the heirs. Heir tries to terminate the conveyance because of failure to build shitter & no running water. Suit barred by statute of limitations. 3. Subject to Marketable Title Act (see below) C. Remainders - These belong to the grantor. - Can be conveyed to third parties, are inheritable - Upon the ending of a life estate, the remainder of the estate goes to the holder of the remainder 1. Examples - To A for his life, then to B and his heirs. B holds a remainder interest in the estate - To A for his life. D. Executory Interest (Shifting Future Interest) 1. Created when A give fee simple to B, so long as land is used as a church, and if not, then to C and his heirs. 2. The interest is directly tied to the condition 3. Executory Interest will vest upon meeting of a condition subsequent. - Because of this, the holder of the executory interest has no power to enforce his interest until the condition is met 4. Subject to the Rule Against Perpetuities and Marketable Title Act (Lewis v. Searles) - C &D had an executory interest. It only comes into existence if a condition is satisfied in the conveyance from A to B. E. Contingent Remainders 1. A life estate has been created with a remainder to vest in a 3d party, contingent upon something happening. e.g. O gives life estate to A, remainder to B on condition that B passes the bar. 2. Destructibility of Contingent Remainders (Rule in Shelly’s Case) Example: O conveys life estate to A, remainder to B once B is 21. What if A dies before B is 21? - At common law, B’s interest would die a. Two ways contingent remainders could terminate i) Condition precedent did not occur at the end of the life estate ii) Life estate merged. See example below. e.g. To A for life, then to A’s heirs

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b.. No longer good law in California - Still good law in Texas (Abo Petroleum v. Amstutz) - J&A give life estate to two daughters, remainder in grandkids. If no grandkids, it will revert to estate and disperse as law provides. Then J&A conveyed reversionary interest to daughters. Now they have both life estate and reversion. Daughters sell it to Abo before they have kids. Then have kids and die. Abo urges Shelly’s Rule (destruction). Court decides to abandon Shelly’s rule. It should go to kids. The courts say the doctrine is old and shitty. (Sybert v. Sybert) - Texas continues to uphold Shelly’s Case rule. Springing Executory Interest or Remainders 1. A future interest is given to a class of people who may not exist at this time. To A and A’s kids. If A dies with no kids, then to B. e.g. City has 1 year to accept, then to B, or C, or D. 2. Class does not close at the time of the conveyance. - O gives life estate to A, remainder to A’s kids. At time of conveyance A has 3 kids. When A dies, he has 5. Remainder goes to all 5. Merging Interests 1. If A give to B a life estate, and later gives the remainder of the life estate to B as well, B has a fee simple absolute 2. If A gives to B a life estate, remainder to B’s heirs, B only has a life estate. CA does not follow the rule in Shelly’s case Rule Against Perpetuities - Cal Prob. Code § 21205 - Purpose of the rule is to cut off interests in 3d parties that could on forever 1. The Rule Future interests created in 3d parties must vest no later than lives in being + 21 years, or The interest either vests or terminates within 90 years of its creation - The interest is creates at time of conveyance or execution of will at death 2. Which Future Interests does it apply to - Executory Interests - Contingent Remainders 2. Rule of vesting - Contingency must be met in a certain amount of time (lives in being + 21 years) - Or within 90 years 3. Rule of possibilities - If you know at inception that it will possibly violate the Rule against Perpetuities, it is invalid right away 4. Remedy for violation of the Rule - Court will construe a possibility of reverter back to the grantor (City of Klamath Falls v. Bell) - 1925 Corp gives land given to city for library (fee simple subject to condition subsequent) if not, executory interest to corporation and its heirs. 1969 city stopped using as library. At very outset it is possible that city will use library past lives in being + 21 years. Invalid executory interest on its face. So reverts back to grantors, corp, and then to corp’s heirs. (Stoller v. Doyle) - Original conveyance: to F for life, then his wife, remainder in kids. 2d conveyance: reversionary interest to F, creating fee simple in Frank, executory interest in children. Franks now has fee simple subject to condition subsequent. Sells to Stoller. Stoller wants clean title, but cannot get it. Claims children have contingent remainder. Wrong. Remainders only follow life estates. Frank had fee interest after second conveyance. CA Marketable Title Act - CC § 885 - Purpose of the rule is to not have land ties up forever with power of terminations all over the place 1. Abolished the difference in CA between fee simple determinable and fee simple subject to condition subsequent 2. Power of termination expires 30 years after its creation 3. Owner of fee simple can claim defense of obsolescence of the power of termination 4. Statue of limitation is 5 years from notice of the condition being triggered. 5. If statute of limitations runs or 30 years passes, the holder of the fee simple now owns a fee simple absolute





VII. Concurrent Ownership
A. Introduction 1. Concurrent Ownership

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- Simultaneously having equal rights to possession and use of the land 2. Co-owners duties - Must share in upkeep and maintenance and taxes - Owner in possession must make accounting for other, non-possessing owners - Cannot interfere with other owners if in possession of the property NOTE: In most jx. (CA included) the occupying tenant does not owe rent to other co-owners If occupying tenant is profiting from 3d party (i.e. subletting), profit must be split among all owners (Laura v. Christian) - D was late in making mortgage payments, but not unreasonably late. Allowed back into the TIC upon paying his back fees. Co-owners are obligated to make their contributions to the TIC/JT. 3. Concurrent Ownership Has an Inherent Conflict of Interest - Two people cannot use 1 piece of land, 1 building, etc 4. If co-owners cannot agree about possession of the property - Partition suit will be employed to sell land, or have co-owners buy out interest of other co-owner - Can be instituted by any party - Cannot be stopped by other tenants - TIC or JT can agree to not sever/partition. Must be written into agreement. (Lee v. Yang) - Woman took all money from joint account and put into hers, then called off wedding. OK, she was entitled to withdraw from the account. A. Joint Tenancy (JT) 1. How to Create a Joint Tenancy There must be a. Equal in time - the JT must begin out of the same will/deed/conveyance - No longer a need for a straw man A wants to create JT with daughter B. A already owns land in fee simple. Does not have to convey away, then back to A&B. Can be done by statute now. b. Equal interest - each party must have an equal share (2 JT = 50% each, 3=33%, 4=25%, etc) c. Unity of title - All parties must acquire the title from the same source d. Equal right of possession - All parties have equal right to possess the whole property NOTE: You must EXPRESSLY create the joint tenancy. If there is any ambiguity, the court will read it as a TIC (In re Estate of Michael) - Without express language in the conveyance, it is assumed that that two tenancies by the entirety were TIC’s not JT’s 1. Right of Survivorship The surviving joint tenant(s) will absorb the dying joint tenant’s ownership %. e.g. A, B, C own land each 33%. A dies, B and C are now 50% owners. The last one standing - the property goes to his heirs, or by will 2. Destruction of Joint Tenancy a. Joint tenancy can be destroyed by a joint tenant destroying one of the four unities e.g. C conveys his interest in the JT to X. Suddenly the JT becomes a TIC If ABC in JT, and C conveys to X, AB are still in JT, with X a TIC b. A joint tenant can sever their interest at any time, without consent of other joint tenants Can sever by - Unilateral written declaration - Conveyance away - Upon severing the joint tenancy it becomes a tenancy in common (Riddle v. Harmon) - Wife wanted to leave home to daughter and severed JT, makes TIC. When W dies, she is able to leave ½ to daughter without her husband knowing or objecting. (Jackson v. O’Connell) - In a JT with more than 2 JT’s the severance by 1 JT destroys her JT, not the whole. So A,B,C & D are JT’s. If A severs, A is a TIC with [BCD]. B,C & D are still JT’s. NOTE: If the JT is recorded, the severance must also be recorded. Someone else can record the severance of the deed, but it must be done 3 days before death and recorded 7 days after. 4. Obligations of Joint Tenants for loans of others

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a. In CA - When one does something less than a complete conveyance (mortgage, loan, etc), it is only valid during the individual joint tenant’s live. If joint tenant dies, so does the obligation to pay back. b. Example: A&B in JT. B goes to bank and loans $100K, secures with his land held in JT. B dies, A has right of survivorship. Bank’s claim for repayment is extinguished. Sucks to be them. (Tennet v. Boswell) - H leases JT property to B, unknown to W. H dies, and now W has right of survivorship. Sorry B, lease died with H because lease was with H only, not with H&W. (Zigler v. Binell) - Judgment against A. A is a JT in property with B. A dies before judgment is enforced. Too bad, judgment dies with A. (in most jx, judgment goes to surviving tenant, but not in CA) (People v. Nogaar) - Mortgage is not a conveyance (in CA). Obligation to pay mortgage dies with that JT’s death. Surviving JT is off the hook because name is not on the loan. (Grothe v. Cortland) - Sheriff’s levy does not sever JT. Even though R died during “grace period” its too bad for the creditors. 5. Tenancy by the Entirety a. Used by married couples in about 20 states b. In addition to the 4 unities, adds the unity of marriage c. Tenancy cannot be severed or partitioned - Cannot be subject to the creditors of one spouse d. Upon death right of survivorship cannot be abridged. e. Only way to sever is by death or divorce B. Tenancy In Common (TIC) 1. Tenants in Common each own a % of a piece of property - Does not have to be a proportionate % as to each tenant Can be 25%, 25%, 50% 2. Each tenant has complete autonomy over his % of ownership - Tenant may sell his ownership in the TIC without approval from other Tenants - Tenant may convey his interest by will or inheritance. 3. The courts will assume concurrent ownership is TIC, unless contrary language that expressly creates JT C. Community Property 1. Used by married couples in 8 states (CA included) - Many other states use Uniform Marital Property Act (basically Community Property) 2. It is a form of concurrent ownership - It is not partitionable - All earnings are community property 3. Property acquired before/after marriage, gifts & inheritance gained during marriage remains separate from community property. 4. Rights of Surviving Spouse Community property cannot be taken by decedent spouse Decedent cannot leave spouse penniless either a. If decedent dies intestate - Surviving spouse gets all community property & % of separate property, depending on heirs of decedent b. If decedent dies with will - Surviving spouse gets community property and anything else subject to the will NOTE: Children have no rights to community property NOTE: 2 words - PRE NUP! 5. Homestead Rights a. Principal family residence cannot be got at by creditors - Florida is the only state that offers complete protection (That is why all the @sshole executives at TYCO, WorldCom and Enron live there) - In other states, it is a set $ amount which cannot be taken In CA if over 65, creditors can liquidate your home and leave you with $150K, single person is $75K. 6. Unmarried Couples - Can enter into a cohabitation K, but problem is upon disillusion, K award is counted as income, so the winner is the real loser in the tax game. 7. Same Sex Couples - State to state, it depends

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E. Problems between Co-owners 1. Waste If occupying tenant commits waste, other owners can sue - Not rule in CA 2. Accounting If 1 person unilaterally makes use of the property and never shares property, when does the statute of limitations run out? - Once the property is sold, you can come back and get them - Statute of limitations is 3 years for an accounting 3. Co-owner will not allow other onto the property - This is a continuing injury - Statute of limitations is 5 years in CA. F. Examples 1. O conveys to A&B a JT - Either A or B can sever it. If not severed, contains right of survivorship 2. O conveys life estate to A&B, then remainder to survivors or A or B, whoever lives longer. - Neither A or B can destroy the JT 3. A&B own an undivided interest in an estate (either TIC or JT). If A tries to convey a portion of estate by metes and bounds, TIC or JT can veto the conveyance because all tenants are owners of the whole.

VIII. Easements, Covenants and Servitudes
A. Introduction 1. Restrictions placed upon how property can be used B. Easements 1. Easement is a limited right in the owner of the right to use the property of another created by conveyance a. Dominant Parcel - Land which the easement benefits - Owner of the easement must maintain it (Sakansky v. Wein) - Owner of easement cannot be forced to give up easement even though reasonable alternate available route. b. Serviant Parcel - Land over which the easement places a restriction - Cannot interfere with the easement - The burdened (serviant) parcel must record the easement. NOTE: To interpret the nature of an easement, look the intent of the parties, not the specific language. 2. Easements must be limited in scope - Must be located on a particular part of the property - An unlocated easement is called a wild easement and is a title defect 3. Profit is the right to come onto another’s land and harvest or take - Pumpkins is an example 4. In contrast, a license is permission to be on another’s property and can be revoked by the property owner 5. Easement Appurtenant - Easements given to the land - These easements run with the land 6. Easement In Gross - Easements given to a person or entity PG&E has the easements over land for power lines 8. Easement by Necessity - Easement is created instantly and for as long as necessary. Applies only to landlocked properties. Right to: a. Access b. Utilities c. Irrigation (Finn v. Williams) - Dormancy does not indicate intent of abandonment. Landlocked property assumes access to road. Implied right of ingress/egress. Implied right must be reasonable. 9. Easement by Prior Consistent Use - Must be open and obvious use

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- Easement must be implied by its use - Must be know at the time of sale/purchase (Granite Properties v. Manns) - Estoppel by deed. When P purchased, even though no easement recorded, it was an obvious use of the land. Could not require the grocery store to deliver thru its front doors. 10. Prescriptive Easement You effectively get the property without paying for or recording an easement. You get a fee interest in the prescriptive easement - Must be notorious and open use - Of another’s property - Continuously - For 5 years (Beebe v. DeMarco) - Acquired easement by prescription of alley behind homes. Continuous, hostile, visible, open use. 5 year SOL had run. (Lindsay v. Clark) - D had been using wrong side of property for easement. P wants to enforce it, but in equity, it’s better to keep it the way it is. D did not abandon original, but gained access on wrong side by prescription. D must use it for intended use ONLY. 11. How can an Easement be lost a. Abandonment - Must be a manifest intent by the owner of the easement of abandonment (Urbaitis v. Commonwealth Edison) - Spur railroad line was fee in the deed. If it was an easement, it would be abandoned and original owners would get it back. No intent to abandon. b. Merger - When the owner of the dominant and serviant estate are the same c. Abuse - Using differently than previously contemplated (Kresge v. Winkelman) - Court can enjoin the misuse of the easement. Here they restricted it use to original contemplated. They did not take it away. Weak though because hard to enforce. Trucks going down alley to back of Sears. d. Duration - If the easement has a sunset provision C. Covenants 1. Covenants in General - A K between 2 or more people - If it runs with the land, it is a real covenant Could be 2 neighbors agree to maintain landscaping in front of buildings. - In landlord tenant, lease has the premises and the do’s and don’ts (covenants) - Often seen in developments. Called CC&R’s (covenants, conditions and restrictions) 2. Real Covenant a. Touches and Concerns the land - Restricts use of your and others land - Impacts value of benefited property - These are mutual and reciprocal - If well drafted and universally accepted, hard to overthrow b. Must be Privity of estate - Cannot be enforced by non-landowners - At common law, could not bind heirs because they were not in privity - Today they can, called equitable servitudes 3 Kinds of Privity i) Horizontal Privity - Between Grantor and grantee. Descends to successors of the land ii) Vertical Privity iii) Mutuality - Between neighbors and their successors (See rule in Spencer’s Case) c. All parties must intend the covenant to run with the land d. Must give notice to all an be in writing. 3. Rule in Spencer’s Case (Good law in CA)

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a. To have a covenant between a grantor/grantee and the neighbors, the covenant must be - In writing - Must use the words “and his assigns” - Respects use of the land or fees (HOA’s for example) - Recorded (Gallagher v. Bell) - Conveyance of burdened land ends grantor’s liability under the covenant D. Equitable Servitudes 1. These are agreements between neighbors - Must be mutuality. Without it, the covenant is unenforceable (Suttle v. Bailey) - Covenants must be mutually enforceable to be valid. This one restricted to residential use only. Illusory promise. Not valid. 2. Courts have the equitable power to enforce these covenants even if there is no privity (Tulk v. Moxhay) - T sells land to E with covenant that E will not build upon gardens. M buys from E knowing of the covenant. Still tries to build, citing lack of mutuality. Court, in equity, says its not fair for T’s promise to be sold out from under him. Imposes burden upon the land. 3. Only property benefited from the covenant can sue a. This includes agents of landowners (HOA) (Neponsit Property Assn. V. Emigrant Bank) - Despite owning no land, HOA has privity of estate with landowner because HOA acts as agent of all owners b. Any homeowner in a subdivision can bring suit on behalf of the covenant. (London Count v. Allen) - D agrees with Building commission to not build on certain parts reserved for roads. Subsequent buyers build upon the roads, citing lack of privity. Only property benefited from the covenant can sue on the covenant. Led to reciprocal covenants (anyone in 100 subdivided homes can bring suit) c. Homes in a subdivision can be subject to an architectural review if it is in good faith. - Decision must not be arbitrary, capricious or subjective (Rhue v. Cheyanne Homes) - A moves his Spanish style home to lot governed by CCR’s. A did not submit home plans to architectural committee. Court said if refusal of home is in good faith to harmonize buildings, A must follow guidelines. Tear down home. 4. Covenant can bind a burdened property by forcing it to refrain from suing for nuisance. (Waldrop v. Town of Brevard) - Covenant was a waiver of a right to sue the neighboring dump for nuisance. So long as dump was using land reasonably as a dump, covenant to not sue would be enforced. E. Interpreting Covenants and Servitudes 1. Covenants only apply to the land spelled out in the covenant. - Does not extend to neighboring lands not included in the covenant or servitude (Sprague v. Kimball) - 4 of 5 lots have restrictions on them. 1 does not. A buys 1 unrestricted and builds to his fancy. Others sue, claiming implied covenant. Court says no. Cannot imply restrictions. Must be a covenant. (Snow v. VanDam) - NOT GOOD LAW IN CA. Owners of south restricted lots in Cape Cod were able to show that the north unrestricted lots were governed under a “common plan” and were subject to restrictions. 2. Covenants cannot be retroactively applied if they impose more severe restrictions - If the restrictions are less strict they can be applied retroactively Amended deed restrictions do not bind if: a) Owner justifiably relied on the previous restriction b) Prejudice to owner if new restriction is enforced (McMillian v. Iserman) - A buys lot and then franchise to put in group home. NIMBY’s changed covenant after learning about this to not allow group homes. No good. 3. In interpreting a covenant, look to all surrounding circumstances AND the intent of the parties creating the covenant (Joslin v. Pine River Development) - In interpreting restriction on deed, look to all circumstances and intent of the parties. The use of lot #26 for access to the lake for 100’s of homeowners exploits the lot. Not intended by original parties. Not allowed. (Cowling v. Colligan) - Did not allow A to avoid covenant keeping his land residential. Surrounded on two sides by commercial and A wanted to make commercial to maximize land value. Court said no. Covenant was not waived and would create domino effect. F. (Anderson) - CA case. Wine and llamas in Woodside. Made all equitable servitudes and covenants in CA covenants. Said that if the restriction was recorded prior to the development of the suburb, it will be enforced upon all deeds. Need

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not be in each deed. Can be enforced horizontally, vertically and mutually.

IX. Conveyancing
A. The Real Estate Transaction 1. Land is sold by the escrow process - The reason for this is land is unique and the remedy at law is specific performance. In order to adequately safeguard the interests of the parties, use escrow. 2. The escrow process a. Escrow agent, a neutral 3d party (professional) takes title from the seller to make sure it is clean b. Agent also takes $ from the buyer c. In escrow there are many contingencies that must be met for the sale to conclude - Inspections - Financing - Bank qualifies you for a loan - Will not lend in excess of 65% of income or more than value of property - Insurance (title, fire, etc) - Full disclosure among the parties - Liquidated damages are usually set at the deposit price d. If title is clean, contingencies are met and financing in place escrow agent executes the equitable conversion - Equitable conversion is when the owner of the land and the owner of the $ switch places B. Financing 1. Mortgages a. Buyer borrows money from a bank, who in turn receives a lien against the home - Bank has power of sale, placed in a promissory note and the mortgage itself - Bank can sell the property under certain conditions (if borrower does not pay) b. California has two protections for borrowers under a mortgage i) Equity of redemption - Borrower has up to 3 months to rectify a defect in payment ii) Statutory period of redemption - Defaulter has 1 year to repurchase home if he pays back all arrears on the property - If not done within 1 year, bank may sell the property c. Because of this banks have to wait to recover on defaults, giving borrowers a year to rectify problems. Because of this, banks now use deeds of trust in CA. d. Anti-deficiency legislation protection - If the sale of the property by the bank yields less than the full loan amount, the bank cannot pursue any other assets of the borrower. 2. Deed of Trust a. Buyer will sign the deed over to a trust company and get a grant deed. b. Buyer signs over a deed of trust to the bank as well c. Upon default of the payments by borrower, Trust company takes possession - Buyer has 3 months to make payments - If no payments, trust company gives buyer 20 days notice of sale of the property - Any buyer at the sale gets ABSOLUTE title to the property, bank gets its $, borrower gets whatever, if anything, is left. d. Banks like this because there is no 1 year statutory waiting period. e. Anti-deficiency legislation still applies. 3. Construction loans a. Usually a high interest, short term loan b. Construction company puts a lien against your property 4. Installment Land Contracts a. Contract between buyer and seller. b. Seller holds title until buyer pays entire K amount. Then title transfers to B. - Parties negotiate everything. Amount paid, monthly payments, $ down, etc. c. Commonly used in inter-family transactions and agricultural setting d. Default of the installment Land K. - Look to see where in the K the parties are

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- If just 2 months into 20 year K, no problem, seller keeps $ and land - If 18 years, 3 months into 20 year K, lots of improvements made by buyer, it is not fair to make buyer forfeit all $ paid AND land. - Courts abhor forfeiture - However, if buyer pays only a little $, abandons the land, and had a bad motive for defaulting, forfeiture is OK. - Must decide to enforce the K as written or fashion another remedy 3 Remedies for breach of installment land K in CA i) Re-instate the installment K (McFadden v. Walker) - CA case. Willful breach by buyer alone will not allow forfeiture. Breach was because buyer hated seller. Installment K was re-instated. ii) Specific Performance - Allow buyer to pay off the entire balance and get the property - Buyer must pay $X by YY/YYYY date to recover, or else award to seller (minus excess). (Union Trust v. Blue Creek) - P was $585K into $750K land sale K. P defaults and D wants to keep all $ AND land. Court says there has been substantial performance and no abandonment. Allowed buyer to pay entire balance and get land. (Skendzel v. Marshall) - NOT GOOD LAW IN CA. D is $21K into $30K contract. D substantially performed. Must pay back balance + interest in timely manner iii) Excess rule - If you cannot put the buyer back into the K, seller must return in excess what he would have gotten in rent during the period of the K to the buyer. C. Realtors - In a real estate transaction, either the buyer, seller, or both can be represented by a real estate agent, working for a broker. 1. Brokers Brokers are like Century 21, GRUPE, etc. Brokers are liable under agency principals for the actions of real estate agents 2. Agents Agents do not work for brokers, but are independent. - Some work for only one broker exclusively - Can still bind brokers as an agent 3. Liability a. It is assumed that the seller’s agent knows all regarding the house b. There is no assumption of risk on behalf of the buyer (Easton v. Straussburger) - Agents held liable for their % of damages for failure to notice shift in land due to bad soil condition. c. After Easton: - Realtors have duty to investigate - Investigation must be reasonable - Kind that a licensed realtor would do - If defect discovered, agent MUST tell buyer 4. Disclosure a. CC § 787 Owner must disclose if someone died in the home in the past 2 years - But cannot disclose cause of death if it was AIDS b. CC § 1102 Owner must disclose ALL he actually knows about the property - Does not require owner to investigate or speculate. Only what he actually knows c. CC § 2079 Seller’s agent must disclose all that he knows, or all that he reasonably should know d. CC § 2279 Dual Agency Disclosure - If a single agent is representing both a buyer and seller - Agent for buyer must explain all his duties and buyer must sign off - Same goes for seller - Cannot tell the seller that the buyer is willing to pay more if he holds out - Cannot tell the buyer that the seller is willing to take less if buyer low-balls the offer. - Cannot undermine one party to help out another D. Deeds 1. Introduction - The deed is the instrument of conveyance for real property - States who was the grantor / grantee and the date of the conveyance

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- Contract to buy property is actually a contract to convey a deed - Owning a deed = owning property 2. Warranty Deed - Contains a promise from the seller that title is good. - If later another party has a claim to the property and you get sued, you can sue the seller 3. Quitclaim Deed - Caveat Emptor - No promise of clean title. - Seller is not responsible if another party has a claim to the property and you get sued. 4. California Grant Deed CC §§ 1092, 1113 Grant deeds imply 2 covenants: a. Covenant by grantor that the seller has not conveyed the property to anyone else (not clean title, just saying no fraud) b. Covenant by the grantor that the seller has not encumbered the land with mortgages, liens, etc - You can make exceptions for encumberments of record Grant deeds are used for both commercial and residential conveyances Once this deed is delivered and in compliance, seller is off the hook for liability 5. Delivery of the Deed a. Deed can be delivered directly - Dangerous, because once it is delivered, the K is over. Possibly that buyer will not pay, but have deed in hand. - Sellers never deliver deed directly b. Deed is conveyed to neutral 3d party (escrow agent) c. Can convey deed to 3d party for grantee upon death. - Called a death escrow. - Seller/grantor cannot renig upon this. E. Recording All real property transactions are a matter of public record and must be recorded. 1. Tract Indexing - Used in incorporated areas of California - Transactions are recorded by tract 2. Grantor/grantee Indexing - Used in unincorporated areas of California - Much harder to use than the tract indexes. - Transactions are recorded by who the grantor/grantee is by year. 3. Types of Recording Jurisdictions a. Pure Race - First to record has right to the property - Common law approach b. Race-Notice - This is California c. Notice 4. California Recording Rules a. CC § 1214 Every conveyance of real property . . . is void as against any subsequent purchaser or mortgagee of the same property, or any part thereof, in good faith and for a valuable consideration, whose conveyance is first duly recorded - Must be a purchaser (does not apply to grantors/grantees, or donees) (Eastwood v. Shedd) - CO case which nobody follows. Their recording statute protects ANYONE who records first (not just BFP for valuable consideration) b. CC § 1217 If buyer has actual notice, or should know of an unrecorded conveyance, the buyer is not a Bona Fide Purchaser - If buyer could have seen due to visual inspection of the premises, not a BFP. (Wineberg v. Moore) - W did not give actual notice of his ownership of all 880 acres, but his presence on (Strong v. Whybeck) - You can be a BFP if you purchase a quitclaim deed part of the property, and his paying taxes was enough to put NR on notice. Therefore even though NR recorded first, they had

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John Demeter Property Bassett Fall 2003
notice, and W is rightful owner. c. Recording of a facially valid deed will not be given effect if the deed is infact invalid. (Stone v. French) - Since warranty deed was stolen, not delivered, this deed was invalid despite it being recorded first. d. Conveying to an infant or insane person makes the conveyance invalid, even if properly recorded e. If deed is recorded, but does not observe the law, it is notice of imperfect title to the land - e.g. fraudulently notarized - However, in improper indexing, give it to the innocent party who relied upon the incorrect public record (Mortensen v. Linge) - M sells to A. A records, but indexer fucks up. M sells same prop again to L. L, relying on index records. As between two innocent parties, court awards land to L, relying on bad indexing. f. Recording Statute does not ask who is the first to be granted the property, it only looks to who has the proper claim to the property, regardless of whether the grantor really had anything to convey in the first place. (Earle v. Fisk) - F gave life estate to B, remainder to M. F dies, and S, her son, thinks he inherits land. S sells to E. E checks title and it is clean (B never recorded). E was BFP who gave valuable consideration and had no notice and first to record. His property. g. Land gained thru adverse possession/prescriptive easement is not covered by the Registry Act - Does not have to be recorded by owner, but can be (Mugaas v. Smith) - D bought land. P claimed a 3 foot prescriptive easement by adverse possession. Despite not being in record, P has fee interest in 3 feet. D’s only remedy would have been title insurance. h. Mortgages and Liens are governed by the Recording Statues as well (Simmons v. Stum) - M gets mortgage from S. M gets second mortgage from C using same property. C knows of S’s mortgage. C records first, S second. C conveys to 3d party to “clean title.” Clear misuse of the statute. (Gabel v. Drewrys) - Mortgager in this case did not give any consideration for the mortgage. So they were not a BFP. i. Constructive Trust will be construed in cases like the one below. The liquidation preference is #2, behind bona fide creditors. (Osin v. Johnson) - J buys home for no $ down and promise to pay and promises O he will record. He does not and uses property to secure 2 debts. When creditors come after J, O wants her money also. Even though the deed was not recorded, the court says this is a “constructive trust” Creditors have priority #1, Constructive trust has #2.

X. Land Use Regulations
A. Zoning 1. Held to be constitutional (Village of Euclid v. Amber Realty) - This case gave the USSC stamp of approval for zoning in US cities. Zoning is Constitutional. 2. Allows for case by case evaluations (Nectow v. City of Cambridge) - Allowed case by case grievances to be heard by the courts regarding zoning. The courts can strike down individual portions of zoning ordinance that are unfair. B. Eminent Domain Regulatory taking of land by the government. 1. Must be a compelling government interest 2. Must be narrowly tailored 3. Must be due process for the landowners (Hawaii Housing v. Midkiff) - Allowed taking of owners land by eminent domain and re-distribution to private landowners. Eminent domain used to avoid taxes. B. Williamson Act 1. Purpose - To protect agriculture and open space - To control expanding suburbs - Leapfrogging 2. Benefit to the landowner - The Williamson Act keeps the owners land taxed at low levels for keeping it as ag or open space

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John Demeter Property Bassett Fall 2003
- Upon cancellation, the taxes are gradually brought up to market value over a 10 year period 3. Terms of the agreement - Landowner enters into a 10 year contract with the municipality. - The 10 year K is renewed each year, so it is a perpetual 10 year K. - Notice of cancellation takes 10 years (gradual tax increases) - Provides for emergency cancellation - Must argue there is no viable use of the land - Pay exit penalty - Pay back taxes forgone 4. Cancellation - Must be a public hearing - Must have a good written decision. - Construe the purpose of the act to preserve open space for the whole world. - Pretty hard to cancel, but still it gets done Well intentioned, but not foolproof way to keep land open and curb over development. (Sierra Club v. Hayward) - People try to take land out of Williamson Act to develop. Reason for trying to cancel is the land is not put to its best use economically. Held that the reason for cancellation must be pretty compelling. Not allowed out in this case.

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