PROPERTY OUTLINE

PROPERTY OUTLINE By Lucy Schwallie Property: A set of social relations between people with respect to things. Property is subject to many restrictions. Property has (exceptions noted): 1. Freedom of action (ex. zoning, nuisance, covenants) 2. Tangibility (ex. intellectual property, intangible property) 3. Permanence (ex. future interest) 4. Exclusivity ( concurrent interest, tenancies) 5. Power to exclude (easements, tenancies, takings) Landlord Tenant I. Historical Background a. Feudal system: King  Landlord  Tenant. Relations like capital/labor, financier/operator. b. Common law approach: lease as conveyance i. L transferred right of possession to the tenant; governed by property rather than contract law ii. Favored the landlord prior to reforms in the 1970s 1. After transfer, O only must refrain from interfering with T‘s use and enjoyment; no further duty 2. Tenant had sole duty to repair and maintain structures on the premises 3. Had to pay rent even if structures were destroyed 4. Required to continue the tenancy and pay rent even if landlord breached lease obligations 5. Landlord had no duty to mitigate damages if tenant abandoned c. Modern law: move from viewing leasehold as a conveyance to viewing as a contract. The rise of urban housing as a social issue helped the shift continue. d. Residential leases (renting a home) enjoy greater protections now from judicial decisions and statutes; inequality in bargaining power led courts to interpret terms in favor of residential tenants. But in commercial leases (anything but a home), traditional pro-landlord doctrines still largely govern e. Property Model: transfers a bundle of rights, and the a dissolution of the relationship f. Contracts Model: Much more based on relationships, looks at things as if they were an ongoing set of understandings Creation of the Tenancy a. Categories of estates i. Term of years tenancy II. III. 1. An advance agreement that the arrangement will continue for a designated period of time 2. Expires: when agreed period ends ii. Periodic tenancy 1. Lasts for initial fixed period, automatically continues for additional equal periods until either landlord or tenant terminates the tenancy by giving advance notice. 2. Classic example is month-to-month lease 3. expires: at common law by oral or written notice, state statutes generally by 30 days notice iii. Tenancy at will 1. No fixed duration, endures as long as landlord and tenant desire. most arise by implication now 2. expires: at common law whenever landlord or tenant chose, state statutes generally by 30 days notice iv. Tenancy at sufferance 1. Not a true estate, but arises when a person in rightful possession of the land wrongfully continues after the right ends. usually arises when there is a holdover tenant 2. expires: L has sole discretion to decide to evict or hold tenant to a new tenancy, and can usually recover damages for the period of wrongful occupancy. criticism is that this tends to be unfair to the tenant Entering into the lease agreement a. Statute of Frauds: lease for a term of more than one year must be in writing, set forth basic terms (parties, description of premises, term, rent) and must be signed b. Security deposits i. security against vacating without notice and leaving the unit dirty and damaged and rent unpaid ii. 2/3 of states have regulatory statutes, usual provisions: limiting amount, requiring it put in trust account, interest paid, permissible deductions do not include wear and tear, refund within specified time period c. Delivering possession i. American Rule 1. L only obligated to deliver legal right when term begins, no duty to oust trespasser or holdover. 2. Based on theory of contract, landlord has not warranted against wrongful acts of third parties 3. Less economic waste; encourages continuous leasing, as property won‘t lay dormant 4. Now minority view ii. English Rule 1. L must deliver actual possession in addition to legal right IV. 2. Basis is obligation is implied covenant in the lease that premises will be vacant when term starts. 3. L-T relationship fundamentally unequal, L has superior ability to ensure the property is vacant d. Applied: Hannan v. Dusch (1930, p459) i. Facts: tenant entering into 15 year commercial lease, earlier tenant still in possession ii. Holding: affirmed for D, upholding application of American Rule (attn: minority view!) Landlord has no obligation to make sure that the property is clear and ready for move in. iii. Reasoning: no express covenant giving landlord responsibility. Am rule more consistent with general view to 3rd parties (blameless landlord shouldn‘t be responsible for tort of another), efficiency (if using English rule, landlord can‘t rent until unit is vacant), if both parties know situation no reason to favor English rule, and a prompt eviction remedy is available Assignments and Subleasing a. Key concepts i. Privity of contract: relationship between two parties who enter into contract to adhere to all terms, liable if breach. Privity of contract always stays until the lease is done, even if A re executes lease. Unless novation: which repeals contract. ii. Privity of estate: relationship between two parties re conveyance of the estate in land, rights/duties obligated to perform that run with the land as real covenants/equitable servitudes; right to sue if covenants of lease breached iii. For a covenant to be binding: original parties must intend successors to be bound, must ―touch and concern‖ the land (affect use and enjoyment), assignee has notice of covenant before acquiring the interest b. Assignment i. Transfer of all of the remaining lease, terms are controlled by the original lease. ii. Only bound by terms that run with the land. iii. Assignee is liable to the landlord, and sometimes to the tenant as well, depends on the agreements. iv. L-T-A triangle 1. Privity of contract: L/T, T/A 2. Privity of estate: L/A; A steps into T‘s shoes v. Partial assignment: transfer for rest of term, but not entire interest (eg 50 acres of the 100 you have) vi. T can sue for indemnity if he has to pay for A‘s mistakes. c. Sublease i. Transfer of some part of the lease ii. Terms are negotiated by the tenant and subtenant V. iii. Subtenant is bound by general restrictions that the original landlord put on the original tenant iv. L-T-S triangle 1. privity of contract: L/T, T/S 2. privity of estate: L/T, T/S; like two separate L-T relationships v. S obligations: 1. Sublease doesn‘t in theory affect L-T relationship, no legal liability connection in theory S/L. (S insulate themselves from liabiity) 2. Exceptions: if T‘s covenants in original lease bind successors in equitable servitudes, lessor will be able to enforce them against S, privity not required for burden to run to successors. L may sue under third party beneficiary. d. HYPO: L/T relationship. T assigns to A. A stops paying rent. L can sue T under privity of contract, and A under privity of estate. e. HYPO: L/T relationship. T sublets to S. S stops paying rent. L can sue T under privity of estate and privity of contract, but cannot sue S at all. f. HYPO: L/T relationship. T assigns to A1. A1 assigns to A2. L can sue T under privity of contract. L can sue A2 under privity of estate. A1 gets off scott free. g. Assignment and Sublease compared i. How do you know which one it is? 1. majority test: period of time where the transfer is made. Whole transfer is a assignment, partial is a sublet. 2. minority test: intent of parties ii. Why does it matter? S generally can‘t be sued by L (where A can) BUT 1. S can be required to comply with certain general restrictions on T‘s lease (eg, no building a fence) 2. S is subject to eviction if T not in compliance with lease 3. S can sometimes be sued directly for rent iii. Should we abolish assignment/sublease distinction? 1. yes: contract law fairness provides that transferee accepting benefits of contract is impliedly bound to perform obligations. sublease may pose trap for unwary, inconsistent with expectations of parties. 2. no: freedom of contract; sophisticated transferee should determine liability it wishes to incur Right to assign or sublease a. This is the default assumed right unless specified provision against it b. Two types of restrictions i. flat prohibition ii. landlord consent 1. sole discretion: arbitrary denial permitted; can deny for any reason whatsoever; issues of limitations on alienation, but clauses still upheld 2. reasonable denial allowed: can deny on objective, commercially reasonable basis considering factors like financial responsibility, nature of new use, suitability of new use, legality of new use, need for alterations to the premises, whether use will compete with L business or existing tenants; desire to obtain higher rent for the premises is not valid basis for refusal. 3. no standard: traditionally interpreted as sole discretion, emerging modern trend to reasonable c. Applied: Kendall v. Pestana (p473) i. facts: provision in lease of commercial hangar space that T may not assign or sublet without L‘s consent, but no standard whether consent may be unreasonably withheld ii. holding: adopts rising minority view, may withhold consent only for commercially reasonable objection Arguments for Kendell (Minority Rule) Implicit clarity of fair dealing It‘s been watered down, so it isn‘t really very FR- courts generally decide towards reasonable behavior Efficiency- land is at a premium, so we need to be able to transfer it easily. Arguments for Pestana (Majority Rule) There is personal choice, there shouldn‘t have to be anything else. The written language reflects intent of the parties. (circular) Landlord has a common law right to rent to no one but the tenant to rent (circular) Stare Decisis: Precedent should control (it is changing- judicial activism- plus the California supreme court never ruled on the decision) Landlord has a right to capture an increase in value Unreasonable restraint on alienation VI. Should we extend Kendall to residential leases? consider relative reliability, sophistication of parties, non-commercial factors that will involve L, commercial justifications for alienability not as strong in residential. Kendall has no been codified by the California Legislature. Landlords duty to Maintain Premises a. Common law: caveat lessee tilting duty toward tenant unless lease provision assigned repair to L, and even in that case T could not move out, only sue L for damages b. Trend: toward tilting duty toward L in response to the substandard housing old common law fostered d. c. Constructive eviction: L‘s wrongful conduct substantially interferes with tenant‘s beneficial use and enjoyment of the leased premises. T may vacate, terminate lease, and no liability for future rent i. no new duty on L, rather gives T a remedy for L breach of existing duty ii. Elements 1. Wrongful conduct: any affirmative act, or omission flowing from lease, statutory duty, or limited minimal repair duties; can be act of third party if L responsible for it. 2. Substantial interference: major enough to render dwelling uninhabitable, but not necessarily totally useless or permanent iii. Procedure: T must give notice, reasonable time to correct it, then it may vacate premises. iv. Remedies 1. Terminate lease and sue for damages: must provide L with notice, allow a reasonable time for cure, and vacate within reasonable time 2. Remain in possession and sue for damages v. Applied: Reste Realty v. Cooper (p509) 1. facts: D leased basement of office for jewelry firm, whenever it rained it flooded. L never fixed, and D vacated. Successor L sued for rent. 2. holding: Concluded there had been constructive eviction, rejecting argument that permanent interference was required, and L had breached duty to repair d. Implied Warranty of Habitability i. Burden of repair to L regardless of lease provisions; idea that housing is commodity/package of services, enter into the agreement with those expectations, and entitled to a remedy if L fails ii. Arguments for IWOH: 1. pro: typical tenant poor/not skilled in repair/looking for residential housing, and lacks negotiation skills or opportunity to negotiate 2. anti: reduces quantity of affordable housing because compliance with warranty imposes extra costs on Ls which they pass on to Ts through increased rents which Ts will be unable to afford iii. Scope: reasonable person would find premises uninhabitable, defined by 1. local housing codes: provides certainty, but some are skimpy or virtually no local codes at all state codes also work 2. fitness for human habitation: Hilder v. St. Peter (p519) illustrates, where tons of things broken and smell of sewage VII. and L never fixed. T got entire rent back, implication the place was valueless. Code can serve as starting point, but difficult to define. iv. Procedure: provide L with notice of specific problem and allow reasonable time for repair v. Remedies 1. Restitution- (rent paid over what it was worth) 2. Punitive damages for willful and wanton conduct or fraudulent conduct (this can be tough because it either needs to be really obvious or need to know intent) 3. Withhold payment of future rent 4. Repair and deduct 5. Rescission & reformation (change contract because of the conditions of the apartment) 6. Compensatory damages- compensating for the harms that are endured 7. Remember- IWOH is also a defense against eviction. Termination of the Tenancy a. Classes of termination: i. Surrender: T and L mutually agree to terminate lease, ending respective rights and duties ii. Tenancy comes to its normal end iii. Violation by Tenant of lease- rent or other terms iv. Abandonment: T vacates without justification, lacks present intent to return, and defaults in payment of rent 1. rights of L: three traditional options a. leave premises vacant and sue later for accrued rent: like continuing the lease in full force; two divergent trends in establishing all future rent immediately due (acceleration clause), abolishing this option entirely b. mitigate damages by reletting the premises and suing original T for unpaid balance c. continues the lease and relets the place on T‘s behalf; trend toward mandatory mitigation 2. policy-pro mitigation: waste of housing resources, L better situated to relet unit; burden on L econ efficient 3. policy-con mitigation: libertarian view, lease as conveyance. shouldn‘t have to accept replacement tenant 4. determining reasonable effort: extent L advertised, offered/showed, remaining length of original lease, cost of preparing property, market rent for comparable units, deviation of terms in replacement lease. L need not accept replacement if not willing to pay FMV. v. Applied: Sommer v. Kridel (p494). 1. facts: L leased apartment for two year term, T‘s wedding got cancelled and he never occupied the apartment. T sent letter asking to be released from lease. L left unit vacant for a year and sought to collect. 2. holding: damages reduced due to his failure to show a reasonably diligent effort to mitigate. 3. reasoning: in property, traditional view was that there was no mitigation duty. In contracts, however, there is a mitigation duty as an implicit purpose to minimize the harm inflicted on each party. vi. HYPO: One tenant abandons, they find a new one, then that one abandons. Which one is liable? 1. Privity of contract goes on for entire duration, unless there is novation 2. Privity of estate ends after there is a new tenant 3. If you accept the surrender, then you are basically accepting novation b. Eviction i. What can T be evicted for? 1. technically, anything that is part of T‘s performance 2. not much that just allows L to get damages, but if something is easily compensable (like holding deposit for spill on carpet) maybe no eviction. If there is a pattern of wanton destruction you may be able to. ii. Retaliatory eviction: when L looks to rid self of ―troublemaker‖ T who makes things difficult deservedly so for him; statutory protections in most states protecting certain conduct of Ts iii. evidentiary presumption of retaliation if L takes action within certain time after protected T action iv. mixed motives: different views allowing remedy if dominant purpose, sole motive, or even slight v. good cause: present in some states, in public/federally subsidized housing, and local rent control ordinances c. Self-help eviction i. Three approaches 1. traditional English: L may use force to extent reasonable to evict 2. modified: L may retake possession through peaceable methods only 3. No self-help at all ii. Criticism of self help: risk of violence, possibility of unjustified eviction, and availability of alternatives iii. Applied in Berg v. Wiley (p484) 1. facts: L spies on T and changes locks and the like. 2. holding: MN court rules against self-help eviction altogether VIII. 3. reasoning: even though there‘s the peaceable requirement, any self-help eviction is inherently susceptible to violence. Other policy reasons for getting rid of the self-help eviction: court processes have sped up, self-help gives landlord too much discretionary power over tenant iv. Court-ordered eviction 1. traditionally can be lengthy and difficult 2. Summary eviction: expedited procedure where L serves T with notice describing breach and gives opportunity to cure, and T will either do that or vacate d. holdover tenant: Applied in Crechale v. Polles (p 425) i. facts: T thought it had agreement for month-to-month lease from L while holding over and waiting for new residence. L supposedly rejected agreement but cashed one month‘s check after the end of the lease. ii. L options the landlord has at the end of a lease: 1. eviction: collect rent at the same rate or if a clause collect double rent 2. consider holdover renewal of lease for same term to a maximum of one year or month to month 3. seek actual damages 4. treat as tenancy at will (month to month) 5. can‘t treat them like trespassers because of Berg v. Wileybut we can get reasonable consequential damages iii. holding: court found new lease on month to month term because L never made clear what legal theory he wanted to use e. Pacific Heights: Keaton is just generally bad T, making noise and evading the Ls. Guy L tries to forcibly evict him, ends up in trouble for shutting off the electricity. Attorney informs that uncontested eviction will be relatively shorter than if contested, which can take as long as 8 months. Bargaining power between landlords and tenants- policy a. Negotiations usually center around terms where relationship is assumed to be good: rent, security deposit, additional tenant, pets, etc b. Why not negotiate the terms in case of bad relationship: tort liability, eviction procedure, etc? Thought this will generally will undermine your chance of getting apt (will look like a troublemaker), might just not think of them c. L incentives to bargain: eviction process lengthy/difficult; reason for high security deposits, rough financial terms d. Problem of affordable housing special case: Chicago Board of Realtors v. Chicago (p535) i. facts: challenge to Chicago landlord-tenant ordinance, which brought quality of living up. Some clauses include a requirement that security deposits held in IL banks and L should pay interest on them, limiting late fees, and protection against retaliatory evictions. IX. ii. Holding: court sustained ordinance, but Posner argues in a separate economic critique: insists that every provision will decrease efficiency, raise costs to Ls, and in turn these costs will be passed on to the Ts; housing quality comes at the cost of affordability. There is an implication that the renter will bear the cost of iwoh Fair Housing/ Housing Segregation a. pre-1968 i. Civil Rights Act of 1866: purpose to give blacks the same right as whites to use the legal system ii. Buchanan v. Warley (1917): pro-civil rights stance, prohibiting racial zoning iii. Shelley v. Kraemer (1948): private discrimination covenants not enforceable in court, because that would be putting state power behind discrimination. There had been concerns with existing black concentrations leading to complete transition of existing white neighborhoods that led to creation of systems of private restrictive covenants binding everyone in neighborhood to agreeing not to sell to minorities. Under the 14th amendment, the SC says that racial restrictive covenants are not okay. Practical effect was that Jews, Japanese, and Chinese did end up distributing throughout cities, but this didn‘t happen with blacks. iv. Jones v. Mayer (1968): allowed general language of civil rights act as basis for litigation in private suits, which would cover national origin and racial discrimination b. Fair Housing Act of 1968: certain types of discrimination prohibited, based on the Civil Rights Act of 1968 i. protected categories: race, color, religion, sex, familial status, national origin, and handicap (also must make reasonable accommodations to allow handicapped person equal opportunity to housing) ii. not protected: sexual orientation, marital status iii. two exemptions: single family residences rented or sold without assistance of broker or salesperson, and owner-occupied buildings with four or less units iv. governmental agency (Housing and Urban Development) acts as mediator first c. practical effect? some changing of statements/rules of lenders, some steering of certain groups towards others of their same group. Discrimination rates decreased substantially (100% in 1960s, 30-40% in 1977) d. method of obtaining relief under FHA i. P must establish prima facie case: can be done by showing discriminatory effect 1. disparate impact: D‘s conduct has disproportionate impact on persons in protected category e. f. g. h. 2. disparate treatment: how an individual applicant is treated ii. burden shifts to D to prove good faith legitimate reason for the discrimination iii. burden shifts back to P to show the legitimate reason served as a pretext for discriminatory purpose 1988 FHAA i. Broadened to include families w/children and people with disabilities, and overhauled the enforcement process ii. Damage caps were lifted, so people could get a lot more money iii. Average jury awards have gone up to about $50,000 Applied: Soules v. US HUD (p439) i. facts: P, who had a 12 year old daughter, responded to ad for 3 bedroom apartment. Rental agent asked child‘s age, P refused to answer and asked why agent wanted to know. Agent replied that the downstairs apartment was occupied by an elderly couple who wanted to ensure that the occupants of the upstairs unit did not make too much noise. Agent testified that P had a very bad attitude and didn‘t show the apartment to her, then falsely represented it as unavailable. Apartment was later rented to a single woman without children. ii. holding: affirmed dismissal of case by administrative law judge iii. reasoning: P had established prima facie case because she had tried to rent the apartment for her family, the rental agent was aware of the status and refused to rent to P, and apartment was later rented to person without children. However, the agent had a legitimate business reason for asking the age of the child in securing quiet neighbors. P then could not prove that the justification was mere pretext, largely because agent had offered to rent the place to another family with children New paradigm tenant: poor urban resident, dominant goal is shelter, not farm land. Principal interest is in the structure on the land, seeks package of goods and services; lacks skill necessary to repair defects. L is slumlord, owns many buildings in deplorable conditions. Milks units by charging rents high as the market will bear, spending little on repair and maintenance Remember → you can do whatever you want if you are looking for a roommate or something. And remember that disparate impact is the same as intentional discrimination. REAL ESTATE TRANSACTIONS I. The Sales Contract a. The focus is on the moment of sale instead of an ongoing relationship (as opposed to landlord/tenant law) b. What is involved in a real estate transactions? i. Identifying property; getting buyers and sellers to meet. (Real estate brokers involved heavily in this stage) ii. Real estate contract (timing, financing, disclosures, assurance of title): Making sure to are complying with statute of frauds. When can people get around the statute of frauds? Part performance and estoppel (equitable doctrines). iii. Buyer will arrange for the financing. iv. Abstract of title (from recorder of deeds), and then they get title insurance. Also figure out servitudes, which include easements and covenants. These restrictions take away from ownership, so it is important to know. v. Meet regulatory requirements (S/A termites in CA) vi. Escrow agent – the umpire of the transaction. This simplifies the transaction, because it acts as a third party that doesn‘t have either parties interests. Their focus is making lots of sounds transactions happen, which is bad news because thy won‘t really be looking out for you. vii. CLOSING. Everyone comes and all of the various parties are satisfied simultaneously. Issue deeds, which is the ultimate incarnation of the transaction (it replaces the real estate contract). c. Who are usually involved? i. the attorney: diminishing role, as attorneys are involved in 40% of transactions overall and usually late and shallow. Not typically involved in home sales in CA. Decreasing role much due to high cost of legal fees. ii. the broker 1. practicing law? probably not if helping client fill in blanks, but even if so, not prevented in most states 2. duties: fiduciary to client, to the other party traditionally just refraining from engaging in intentional fraud but many places now require disclosure of known defects 3. dual agency issues: often if only broker in transaction, led to laws requiring broker to disclose allegiance 4. commission a. open: seller must pay commission to that broker if he is first to find buyer b. exclusive agency: designated sole broker and receives commission for buyer any broker finds c. exclusive right to sell: receives commission no matter who found buyer, including seller d. Statute of frauds requirements i. Terms 1. identification of parties 2. expressed intent to buy or sell 3. purchase price: must specify financing terms or obligated to pay with cash II. 4. adequate description of property: reasonable certainty ii. in writing iii. signed by party against whom it is enforced iv. Exceptions 1. part performance: at least 2 of these factors a. taking possession of property b. paying all or part of price c. making improvements to property 2. equitable estoppel elements a. induced to substantially change position in justifiable reliance on oral contract b. and serious or irreparable injury would result from refusing performance v. Policy rationale of statute 1. evidentiary: proof of existence and terms of contract and allows good result if litigation occurs 2. channeling: distinguishes negotiations from enforceable contract, expression in legally effective manner 3. criticism: judicial interpretation eroded guidelines by accepting any written thing as sufficient and big loopholes Marketable title a. Defined: title is ―free from reasonable doubt, but not every doubt,‖ a condition and a promise; if fails, B excused from duties and can sue for damages. Courts have struggled, but usually think that it is: i. Title that it readily salable ii. No material impairments iii. Won‘t expose the owner to litigation iv. Easy to insure at a typical market rate b. What fails: 1) S doesn‘t own, 2) most all encumbrances, esp private covenants c. What is permissible encumbrances/exceptions: 1) insignificant blemish (eg. lease that long ago expired), 2) public land use regs (zoning, etc; B should reasonably expect some regs), 3) violation of building code (caveat emptor, defects more difficult to discover on part of S), 4) visible encumbrances (power lines, sewers, utilities) d. seller has time to cure defects once discovered e. Negotiation i. Marketable title usually specified (good title, clear title are same thing) ii. Insurable title can also be specified: if title company willing to issue policy; but policies contain exceptions and company may insure what reasonable buyer wouldn‘t accept iii. Record title can also be specified: showing record that S holds title iv. Buyer approval clause option: after reviewing, B can reasonably approve or disapprove of title f. v. Exclusion of defects: S and B can exclude known, can be problematic if broad categories waived Applied: Lohmeyer v. Bower (p568) i. facts: there was a private covenant against multiple story houses, which were violated. Parties signed contract w/clause that excepted almost all encumbrances from marketable title guarantee. ii. Types of deeds: 1. Quit Claim Deed: Not really sure if they really hae a deed, but they will sell you whatever interest they have in the property 2. General Warranty Deed: A warranty that no one will come around with a better deed than you iii. holding/reasoning: the violation in question was not excepted, and because it was a private covenant is covered by marketable title guarantee Zoning Ordinance Covenant Existance Not a marketability issue Generally, a problemincompatible with a marketable title because it is a legal impairment of full ownership Violation Big problem Big problem- makes property unmarketable in many jurisdictions again because it creates danger of litigation III. iv. What should Lohnmeyer‘s attorney have said? Never sign something that says you have to give marketable title OR something else. AND never sign something that says that it is subject to all easements of record. The only thing it should say about title insurance is that it has to be able to be insured at a market rate. Duty to Disclose a. Three levels of duty to disclose: i. Caveat Emptor ii. Stambovsky Standard iii. Modern duty b. Traditional standard: caveat emptor, no affirmative obligation to disclose but must not falsely misrepresent; distinguishes between nonfeasance (passive conduct) and misfeasance (words and acts). S can remain silent, but cannot mislead B by words or conduct c. Disclosure/towards consumer protection standard: S must disclose known latent defects to B if substantially affects value/desirability of the property. i. Applied: Johnson v. Davis (p584) d. e. f. g. 1. facts: S knew roof leaked badly, sold to B without disclosing. After putting down deposit, water was gushing in through ceiling and windows. 2. holding/reasoning: court provides remedy, determining caveat emptor not in tune with times and doesn‘t conform with notions of justice, equity, fair dealing. A move toward consumer protection standard. Policy justifications: i. S comparatively has more access to information than B ii. Personhood: unique nature of the family home/social value of increased protection to family home What must be disclosed: i. Material defects: 3 different jurisdictional standards 1. objective/reasonable person 2. objective/significant effect on property‘s market value 3. subjective standard taking into account the particular buyer (minority) ii. physical and some legal defects (sometimes code, zoning, etc) iii. sometimes off site conditions if posing particular harm (nuisance), factors being 1. proximity 2. magnitude of risk 3. gravity of harm. iv. some psychological (see Stambovsky standard) 1. generally no duty, but can be if significant impact to market value of property indicating public consensus that defect is material 2. new statutes: no need to disclose past occupant with HIV/AIDS, or homicide/suicide site 3. hazardous substances by law a. lead paint b. CERCLA/Superfund: hazardous substances. Innocent previous purchaser may be protected Stambovsky standard: S responsible if helped to create condition, materially reduces property value, B unlikely to detect through normal inspection. Alternative standard for intangible where materiality judged by consumer reaction. i. Applied in Stambovsky v. Ackley (p579). 1. facts: S had publicized house as haunted through various media outlets, but did not inform B from out of town. Who you gonna call problem—no way to find out about this defect. K rescinded due to S failure to disclose haunting. 2. Downside that standard like this has negative effect on stability of land title Implied Warranty of Quality: an implied warranty that accompanies sale of new home by any merchant of housing, that the house has been IV. constructed in workmanlike manner and is fit for human habitation. B can recover if the builder failed to exercise standard of skill and care custom for professional builders. Homebuilders have increasingly held to have some ongoing responsibility. Traditionally, not so b/c real estate transactions were cut off with the deed. i. policy justifications 1. expertise and appearance: B lacks expertise to discover defects, some defects not apparent for years 2. expectations: B reasonably expects that builder will construct suitable home 3. care: builder expertise allows him to avoid defects through careful construction 4. loss spreading: builder has ability to spread any loss by increasing costs 5. personhood perspective and magnitude of home purchase Mortgages a. What is a mortgage? i. defined: a conveyance of an interest in real property as security for performance of an obligation. Usually a loan or money evidenced by promissory note. b. Historical evolvement i. Historically the holder of mortgage was more the owner of property than buyer. Now, we think of ourselves (mortgage holders) as the home owner and the bank as being virtually uninvolved though lender does retain an interest. ii. Before the Depression, one would pay much more cash relative to loan; now guarantees set up for loaning banks, and secondary mortgage market (banks sell loans on national market to other institutions) c. Three theories of mortgage interest i. Lien: L security interest but not title, can foreclose if default but does not get possession (most states) ii. Title: transfer of title to L until debt repaid, right to take possession w/ rents and profits without foreclosure which rarely happens before default in practice. (few states) iii. Intermediate: L entitled to possession of property only upon default but before foreclosure is completed d. Players i. Buyer → gives a mortgage to a lender (―Mortgagor‖) ii. Lender → gives a mortgage loan to a buyer (―Mortgagee‖) e. The percentage that you don‘t mortgage is homeowner’s equity f. The loan i. Process 1. B completes application, supplies it to L. L investigates B‘s financial condition, appraises property. 2. L issues loan commitment as acceptance of B‘s offer stating terms and conditions L will require. 3. Customary, though not necessary, to record. ii. Ordinary mortgage s for 30 years and for a fixed authorization schedule iii. Second mortgages the interest is usually higher for because First mortgagees get first dibs on the equity and property in the event of a foreclosure. iv. Installment land contract: 1. Wards off foreclosure b/c you don‘t really get the title until you pay the note 2. Court gives rights to the buyer in this situation. v. Regulations on L 1. Federal Truth-In Lending Act: requiring disclosure of true costs of loan 2. Federal Fair Housing act: barring discrimination in financing 3. increasing statutes limiting redlining (denying where property is in low-income neighborhood) g. Foreclosure: cause the property to be sold and apply the sales proceeds to satisfy the unpaid debt i. Procedure 1. B gets written notice that foreclosure is beginning and has opportunity to pay off or contest 2. B retains right to redeem property by paying entire debt until end of process 3. public sale held where property sold at auction to highest bidder 4. surplus proceeds paid to junior lien holders or B 5. if sale fails to produce enough to satisfy debt B may be liable for deficiency judgment ii. judicial: 1. court-supervised foreclosure, can be drawn out but also more formal and less potential for abuse 2. Procedure a. initial proceedings: L files complaint against all persons holding interests subordinate to mortgage and alleges default, requests mortgage be foreclosed in court supervised sale b. B and others have opportunity to answer and raise objections c. successful L gets judgment that states amount due, directs property to be sold within specified period and establishes terms d. Sale: notice given to public, sale held in public location. L can bid without cash, using unpaid loan balance, whereas others including B must bid with cash e. judicial confirmation of sale iii. Power of Sale 1. purely private, permitted only when authorized by express terms of mortgage 2. Procedure: a. B must have adequate advance notice of foreclosure process starting b. L provides another notice announcing date, time, place of sale c. sale conducted by L or designated official in public location 3. challenging the sale: only exceptional circumstances, and no judicial confirmation necessary 4. fair and reasonable price requirement: some states require L to diligently try to obtain fair and reasonable price under circumstances iv. applied: Murphy v. Financial Development Corp (p637). 1. facts; Bs unable to make payments, bank gave notice of foreclosure. Bs tapped all resources and made all of the back payments but L added cost of processing. Foreclosure sale advertised at city hall and elsewhere. It snowed the night before. Parties at the sale were B, L, and auctioneer. House sold for $27K, bank as only bidder; within 24 hours bank resells at $48K. 2. holding: Court finds that L did not satisfy due diligence in obtaining a fair price in this case. 3. reasoning: standards fuzzy; price not so low as to ―shock the conscience,‖ but not yet uniform standards 4. criticism of fair/reasonable price requirement: may lower bid prices (bid less due to risk of sale being set aside), and potential to increase overall interest rates. v. Inherent problems w/foreclosures: bank has no incentives, so rushed, homeowner has no incentive to make home nice, statutory right to redemption, hostility of the mortgagor. h. Mortgagor protection laws i. generally: states intervened to provide special statutory protection for cushioning homeowners, farmers, and other small scale owners from economic downturns when employment scarce and property values artificially depressed ii. anti-deficiency/fair value legislation 1. limit amount of L‘s deficiency judgment to difference between unpaid loan balance and the fair market value of the property 2. some states bar deficiency judgments in certain situations V. iii. statutory redemption 1. may redeem property after foreclosure/regain title by paying set amount (usually foreclosure sale price plus other expenses) to successful bidder within certain period 2. in theory, helps prevent underbidding at foreclosure sale, but critics say in reality it encourages underbidding, because new B must pay price immediately but can‘t take possession until redemption period ends, and may also be concerned that M may not maintain property in good condition. i. Comparing Renting and Owning i. There has been a revolution in the real estate market, which makes people able to buy more. ii. There is more mortgage protection (above) and adjustable rate mortgages which take care of liquidity problems and keeps stability j. What could we do to help people in the foreclosure process? Try and define procedures for the lender, shape incentives, make the auction more appealing. Perhaps get rid of the bank altogether because they are an interested party and try and do the process with a neutral third party. The Deed a. Types i. general warranty: most title protection, 6 covenants warranting against any defect in grantor‘s title ii. special warranty: same title covenants, applies only to defects caused by the acts or omissions of grantor; no protection against 3rd parties. why would buyer accept? custom, availability of title insurance iii. quitclaim: no title covenants, conveys whatever right, title, or interest grantor MAY have; common use to release doubtful title claim, clean up transactions b. Requirements i. Be in writing ii. Name the parties iii. Signed by Seller iv. Describe the property v. Should discuss ‗delivery‘ (but you don‘t totally have to) c. Problems arrive when unsophisticated owners try to use a deed instead of writing a will d. Delivery: a deed is not effective until delivered i. delivery presumed if deed recorded or grantee has physical possession ii. special cases 1. ―deed in a box‖: usually some evidence of intent will help it be considered delivered VI. 2. conditional delivery: most states d/n allow; some will invalidate delivery whereas others will ignore condition and vest absolute title. Note: same result by unconditionally delivering conditional future interest. If grantor reserves right to revoke, most courts will still find valid delivery. Modern acceptance of revocable substitutes (inter vivos trusts, life insurance, joint bank accounts) courts increasingly reluctant to invalidate the revocable deed 3. third party escrow: if grantor can recover the deed from a third party, sufficient retained control to preclude delivery. Once conditions fulfilled, delivery effectuated relating back to deposit 4. death escrow:; irrevocable death escrow usually held valid; construed to immediately convey future interest to the grantee, becoming possessory when grantor dies iii. Applied: Sweeney, Administratrix v. Sweeney (p622) 1. facts: Maurice has estranged wife who is his intestate; his strategy of preventing wife from getting the property is to transfer deed to brother John and John makes deed back, in the case of Maurice predeceasing him. Wife sues John. 2. holding: uphold the deed to Maurice as delivered; logic of court‘s decision is that the bright line rule of delivery should take precedence over the intent of the parties and the conditional second deed, which shouldn‘t be upheld. remands for new trial. 3. reasoning: ultimately courts look at overall effects to determine parties to protect; general rules d/n always produce fair results, the resulting muddled reasoning that leads to inconsistent rules about deeds. (Public policy interests in trying to dissuade fraud, and therefore they think there was delivery) 4. Maurice could have: given to john as a life estate and have John execute a will leaving M the remainder. They could have formed a joint tenancy w/ right of survivorship. Recording System a. U.S. is a little more laissez-faire than most country, and it is the same with land – you have no requirement to contact the government when you buy land b. Recording system is to protect owner and buyers, but it is not ―required‖ in any way c. You can think of the recording system as a contest between owners d. Quiet title action- lawsuit to get a decree from a court saying two has the title, you want the court to quiet the competing claims e. Title records doesn‘t say who owns the land or property, just shows that some kind of transaction occurred f. How far you go back is fairly arbitrary- you go back, then you go forward to see if there is anything that leaves the basic line g. If you find anything, you try and get them to execute a quit-claim deed h. Tract index has simplified stuff a lot when doing a title search, as has i. Computerized private index (made by title insurance companies)- but only kind of works for more recent properties j. How far back should you go- why should you okay getting only fifty years? i. Well, adverse possession takes care of a lot of those ―Stale‖ claims to the land k. Recording Acts i. Provides a method for resolving claims between people with recorded and unrecorded properties ii. Basic Rule- between competing owners, the first in rime owner prevails HOWEVER 1. If you come later, you are still protected if you are a bona fide purchaser w/o notice of the prior purchase a. Easiest way is to record, because then any subsequent purchasers have notice of your claim iii. Usually the problem s that people have an interest, but not an absolute property interest, not people selling the property over and over again l. How does someone get notice? i. actual notice: when someone tells you the interest exists ii. constructive notice: what you get from the recording acts 1. even if you didn‘t look up the title, you treat them like they have notice iii. inquiry notice: generally being aware of facts on the ground that should tell you that an interest exists 1. this has a ―reasonable‖ basis- if you reasonably should have made an inquiry, then you are on notice iv. imputed notice : if one of the other things applies to your real estate notice, you get held liable m. There are three types of recording systems i. RACE 1. race to the recording office 2. only two states 3. kind of condones systematic fraud, but actually doesn‘t really work that way because the harmed person can sue for fraud after it happens ii. NOTICE 1. a subsequent purchaser that doesn‘t have notice of a prior interest iii. RACE NOTICE VII. VIII. 1. kind of a combo of the two, so bona fide purchasers still need to record before the other does, but if they do, then they are protected 2. you need to protect your virtue by recording, because otherwise you are negligent and you do not need to be protected n. Requirements for recorded documents to be considered to provide constructive notice i. meet formal requirements for recording ii. contains no technical defects 1. notary acknowledgement flaw 2. non-phonetic variation of name 3. incorrect property description iii. recorded in the chain of title iv. properly indexed Title Assurance a. Six covenants of title in deeds i. seisin: grantor is owner, of both type of estate and quantity of land ii. right to convey: grantor has legal right to transfer title iii. no encumbrances: existence of ordinances and regulations fine, but private covenant is a breach; some allow exception of visible and obvious encumbrances iv. warranty: promise to defend grantee‘s title against other claimants, breached when someone holding superior title evicts the grantee v. quiet enjoyment: no one w/superior title will disturb grantee‘s possession/enjoyment of property vi. further assurances: will execute additional docs and actions reasonable to protect grantee‘s title b. remedies for breach i. compensatory damages not to exceed purchase price plus interest. ii. for encumbrances: usually amount paid by buyer to remove defect, if impossible measured by diminution in fair market value on the purchase date iii. Is it wise to only rely on covenants to buttress another form of title protection, like an insurance policy. why? 1. practical value of the covenants hinge on solvency of grantor 2. statue of limitations may bar any action 3. damages may not be adequate if changes in market or if buyer made improvements to home c. title opinions and abstracts i. attorney opinion based on examination of public records ii. used to condition purchase, and can later sue if negligently prepared Title Insurance a. Why popular? b. c. d. e. i. covers off-record defects like forgery and incapacity ii. title insurer strictly liable for covered defect iii. companies are allowed to solicit business (unlike attorneys who prepare opinions) iv. uniform national system for protecting title advantageous w/rise of secondary mortgage market v. people are very risk averse when it comes to property functions i. before closing: tests quality of title and B may condition purchase on willingness to issue policy. ii. after closing: company has duty to defend against legal challenges and the duty to indemnify steps to obtaining policy i. company searches title and issues preliminary report ii. buyer and seller try to eliminate the blemishes on the title iii. terms of insurance specified, and issues a policy for the buyer and one for lender standard policy: i. covers four risks: title held by another, defect/lien/encumbrance, unmarketable title, or insured owner has no right of access to land ii. exceptions: may except some known defects iii. most important service: the title search iv. exclusions: matters that could be discovered through inspection or survey of land, problems created by the insured party, defects not shown by public records affecting land title, impact of any law/ordinance/regulation relating to the land v. split jurisdictional views of allowing negligent tort recovery. tort recovery issues vi. Applied: Rogge v. Chelsea Title (p723) 1. facts: P bought tract of land, and 6 years later discovered that the quantity was 6 acres less than believed. Sues insurance company to recover difference, alleging it knew and failed to disclose 2. ii. holding/reasoning: court remands, but comments that company-insured relationship is ―essentially contractual,‖ because the end result is the issuance of the policy. vii. Most title insurance policies do not protect buyers against adverse possessors because the insurer does not conduct physical inspections of the land and generally exempts from the insurance defects that arise from physical events on the land. viii. The policy doesn‘t insure against any law or government regulation restricting the use of land. This includes building codes, zoning ordinances, and subdivision regulations. An alternative would be a registration of title system. Cars get registered. Why not have a system like that for property? NUISANCE LAW Nuisance: a “nuisance” is an unprivileged interference with a person’s use and enjoyment of her land.  Every person should so use his own property as not to injure that of another Nuisance law is a jungle. Some ways of getting out of the jungle: 1. Who has there first? 2. Who was the least cost avoider? 3. How does the burden fall on the parties? 4. Minimize social cost? 5. Who‘s hurting whom? 6. What is the benefit of the burden? 7. Is the P hypersensitive? 8. Is it an objective or subjective nature of sensitivity? 9. Strict liability for physical invasions 10. Gross deviation from social custom 11. Impact on property value 12. Attractive Nuisance 13. Suitability of location 14. Spite- absence of benefit I. Public Nuisances: This is a nuisance which adversely affects the public as a whole. - if the use is permitted by statute or ordinance, it is not a public nuisance - penal sanctions may be available to curb it  Nuisance per se = nuisance at law: an act, occupation or structure which is a nuisance at all times and under any circumstances regardless of location or surrounding II. Private Nuisances: conduct that causes a substantial interference with the private use of land.  a substantial nontrespassory invasion of use and enjoyment of land that is caused by negligent, reckless, or ultrahazardous activities, or by activities that are intentional and unreasonable - Doesn‘t include - Trespass - Zoning violations - Public nuisances—these are illegal everywhere in the jurisdiction  There are 3 elements to private nuisances. (a) there must be a substantial interference with the plaintiff‘s use and enjoyment of her land caused by the defendant (b) the defendant must act intentionally (meaning intending to cause the action which produces the offense—must be unreasonable), or unintentionally and negligently (including wanton, reckless, ultrahazardous) (c) the plaintiff must be entitled to the use and enjoyment of the land (example: she must be in possession, but need not be the owner)  Nuisance per accidens = nuisance in fact: that which becomes a nuisance by reason of its location or by reason of the manner in which it is constructed (usually idiosyncratic) III. Factors to consider - first in time - legitimate activity v. malice - compelling social need - whether the act threatens the health of neighbors - weighing the costs to each party (balancing the equities) IV. Demsetz: private property i. thesis: solution to externalities problem is assigning property rights, going from a common system to a private system. When benefits exceed the transaction costs involved (socioeconomic, etc), change of the system will occur. A paradigm shift occurs from the externalities. A shift occurs from communal regime to a individual rights regime. Privitization is the way to deal with externalities. ii. relates story of fur trading and how that changed property concepts in a tribe; when there are private conceptions of ownership of parcels of the forest, individuals will bear the costs of over hunting and thus will make better decisions as to how to conserve the population in their sector. Procedure is to demarcate sections of the forest, decide how to split it up, and enforce it. V. Hardin: social regulation i. thesis: extensive government regulation of the commons necessary to prevent depletion; common resources tend to be over-utilized, so if we don‘t regulate use they tend to be destroyed. Long ago, when people took what they needed and supply was endless, this was fine. Now, when need equals resources, we need to figure out a way to control use. Regulation is the way to deal with externalities. ii. common structure undermined by immoral/free-riders; can‘t just urge the behavior because there will always be people who buck it, therefore we nee more aggressive intervention iii. Hardin-type solutions, for example: regulation of fertility in China, regulating industrial pollution, carpool lanes Applied in Morgan v. High Penn 1953 Facts: Refinery generated a lot of fumes, and sues for damages and an injunction to have them stop the fumes. Holding: Court determines that a) behavior does not have to be negligent to constitute a nuisance and b) the nuisance has impair in a substantial manner the plaintiff‘s use and enjoyment. It needs to be intentional and unreasonable. Gravity of Harm Character of the harm Social value of plaintiff‘s use Suitability of plaintiff‘s location Extent of the harm Burden on plaintiff of avoidance Damages you can get: 1) Temporary Damages 2) Permanent Damages 3) Injunction Utility of Conduct Social Value of D‘s conduct Suitability of location Cost of avoidance Balance of equities applied in Estancias Dallas v. Shultz (p. 753) Facts: Schultzes live next to an apartment building with a really loud air conditioner; bring suit for nuisance. If foreseen, could have spent $40,000 more for different system but now at least $150,000 to fix. P value decreases by $10-15,000. If solely based on economics, D should win. Holding: In fact, court rules for P, enjoins building. The defendant made a lot of wrong moves here (see notes). VI. CALABRESI/MELAMUD—TYPES OF RULES: Different Solutions for Nuisance Cases 1. Property: clear nuisance, no offsetting considerations a. someone is committing a nuisance for no social reason b. the other party was there first c. the court will give a property right to person who brought the lawsuit— entitlement d. according to the Coase Theorem, the parties can negotiate and transfer the right to the highest valued use (they can voluntarily bargain for it) 2. Property: no nuisance at all a. a person is hypersensitive b. the court won‘t recognize it c. D has the right to keep doing what he was doing Under #3 and #4, the land may not be marketable and diminishes its value (permanent) 3. Liability: nuisance continues, P compensated—servitude a. there is a nuisance, but it‘s an economically important activity b. ask what the impact is on the parties c. if economics is worse for D, allows D to continue d. requires compensation to be paid servitude e. this has the effect of giving the right to P, but forcing a sale of it to D (damages) f. since the forced sale is at the price of P‘s damage, P gets his damages but D gets all the possible gains from the trade 4. Liability: nuisance is stopped, D is compensated a. maybe D was there first, yet P‘s harm is greater than the business‘ b. thus, D is compensated c. this has the effect of giving the right to P, but forcing P to pay for it d. this solution tends to bring about efficient resource allocation because P, who claims the right is worth more to P than to D but is unwilling to or cannot bargain with D for transfer of the right, is forced to back up his claim for a judicially enforced transfer with cash 5. Inalienability: public nuisances a. just don‘t want people to do this b. this approach doesn‘t work where society thinks that the benefits of an activity outweigh some predictable loss of human life c. this is a big exception: embracing activities from air pollution to automobile d. in these situations, the treat to human life can almost never be pinpointed to any specific person e. if it could, it would probably be circumscribed by an inalienability rule VII. Coase Theorem  First Coase Theorem: Under certain conditions, the assignment of property interests over interfering uses will not affect the amount of interference that results  Key conditions needed for the First Coase Theorem to ―work‖ smoothly—absence of transactions costs (a) Absence of ―bilateral monopoly‖: this exists in situations where two parties are locked into dealing with one another. In such situations, each party has a strong incentive to try to capture the other party‘s potential benefits from making a deal. (b) Absence of ―collective actions‖ and ―free rider problems: there must be a small enough number of parties in each transaction so that no individual has an opportunity to either ―hold out‖ (demand to be bribed to take part in the transaction) or ―free ride‖ (refuse to pay one‘s share in the hope that others will want an agreement enough to pick up the tab) (c) Adequate wealth among each party so that parties are able to ―buy‖ the level of ―rights‖ they desire in the controversy at hand (d) Knowledge by each party of what outcome is best for itself  the first Coase Theorem works well when transactions costs are relatively modest  when transaction costs are substantial, the ―Second‖ Coase Theorem applies  Second Coase Theorem: When transaction costs are substantial, courts should assign property interests to the party that would probably buy them if transaction costs were zero. When in doubt, courts should err in favor of parties that lack sufficient wealth to buy their ―optimal‖ property interests. A liability rule is called for: (a) A court may try to set the ―level‖ of a nuisance at roughly the point where the marginal cost (to the nuisance generator) of further abatement equals the marginal benefit (to the victim) of further abatement (marginal cost = marginal benefit) (b) In actual judicial practice, this means assigning an absolute property right to the more socially ―valuable‖ user of the property interest  In either of these cases, damages may be used to compensate the plaintiff for unusual, ongoing intrusions  Because of the law of diminishing returns, each additional increase of a unit costs more. Thus, there is a big surplus between cost and benefit—we want courts to have enough information so that they can make judgments at different levels of abatement. 15. Solving pollution problems using the Coase Theorem property rule: permits violation of entitlement only if get permission of owner liability rule: permits violation of entitlement if one pays a judicially determined sum to its owner Regulation v. Incentive System  Regulation: everyone needs to reduce the pollution by 30% (use this when reducing cost is low)  this will lead to intensive lobbying  polluters will exaggerate  the social cost of achieving the goal is higher  Incentive: apply the Coase Theorem and use tradeable permits to reduce pollution (when high cost), rather than command, they induce  Where MC = MB is determined by the social market (the costs of permits/pollution are immediately available)     This captures the elements of the Coase Theorem Companies will cut costs (so that they can buy permits) Or companies will minimize emissions (so that they can sell permits) If the cost is originally low, regulators will buy up permits to raise the cost IX. X. XI. Applied in Boomer v. Atlantic Cement Co. CB 758: a. Facts: D‘s cement plant was creating a nuisance. The court found that 2 options were available: (i) grant an injunction but make the date far enough to allow technological development sufficient for D to eliminate the nuisance, (ii) grant the injunction conditioned on D‘s payment to Ps of permanent damages. b. Holding: The court took economics into consideration and found it was more equitable for D to pay damages. c. Reasoning: This is a new approach where you give permanent damages and permit the activity (i.e. calabresi #3) Applied in Spur Industries Inc. v. Del E. Webb Dev. CB 765: a. Facts: There was a nuisance with the cattle feed—health and safety implications. b. Holding: Academics affected this case: the court used Calabresi‘s model to apply a liability rule—the court enjoined D, but required P to pay damages. c. Reasoning: This is a liability rule where the court was trying to do the most equitable thing. Courts are more willing to take on liability rules these days, kind o fbecause things are getting more complicated. (Calabresi #4) Where does this leave Coase? a. Calabresi have brought the second Coase theorem into the picture by assigning the property rights to the more socially useful but assign damages to equate liability issues. The idea of the Coase theorem is still very powerful. There is a context where the first coase theorem works. WILLS, ESTATES, PRESENT AND FUTURE INTERESTS I. Property at death with a Will a. Basic concept of wills and intestacy: you material self goes to probae when you die. The issue is whether you die intestate or testate b. The Will: written instrument, effective only upon death, by which an owner disposes of property i. testator/testatrix: person making will ii. devise: transfer of real property iii. legacy: transfer of personal property; bequeath is process c. requirements for validity i. in writing, signed by testator, presence of two witnesses II. ii. holographic exception, some states: entirely in handwriting of testator, signed valid even if not witnessed d. probate: process for determining validity of will, distributing estate i. executor/executrix: named by testator, establishes will‘s validity ii. administrator: if no executor/ix designated, court appoints iii. administration: process of collecting, managing, and distributing estate e. Interests created by a will are ordinary legal interest, but recently people want to create equitable interests instead. You make these through trusts. Intestate Sucession a. English foundation i. land governed by feudal laws that favored eldest male descendant (primogeniture) ii. personal property dominated by ecclesiastical law, share for spouse and equal shares for children iii. why? feudal duties easier to enforce when owed by single, identifiable person, the male; avoided splitting of family lands b. Modern rules: apply to both types of property, distributed among family members, preference for close relatives; illegitimate children have rights c. Modern Succession- we split it up by representation i. Hierarchy: Spouse → Kids → Parents → Siblings → Grandparents → Uncles and Aunts → Cousins d. If you don‘t have any descendants then the state gets your land ( it escheats) Estates a. fee simple absolute i. almost all privately-owned land in the US, freehold estate whose duration is potentially infinite ii. modern preference for assuming conveyance of entire estate rather than lesser; old was for life estate c. no duties to other interest holders, but rights affected by utilitarian restrictions imposed to benefit society b. life estate i. freehold whose duration is measured by lives of one or more persons; language must specify in creation ii. Applied in White v. Brown 1. facts: Jesse was part of a big family, and left her house to her sister in law with the words: ―I wish Evelyn White to have my home to live in and not to be sold‖ 2. Issue: do we have a life estate or fee simple? 3. Holding: The sentence did not clearly state the intent, so it must be construed as a fee simple absolute. iii. How can we figure out what estate is made? 1. Effectuate Testator‘s Intent 2. Bias in favor of finding a fee simple over a life estate III. 3. Avoid partial intestacy iv. Rights 1. use and enjoyment of the land, but cannot commit waste 2. transfer: restricted; can transfer what she has (possession of the estate for life) but no more c. Fee Tail i. defined: obsolete freehold estate, duration measured by lives of descendants of a person, passes through until family line expired ii. purpose: ensure land passed on to generations of descendants, alienation limited to keep it in family iii. rights 1. use and enjoyment of land, but committing waste that would affect future interest holders 2. very limited right of transfer d. Restriction on use: waste i. doctrine: owner may not unreasonably injure the affected land and thus reduce value of future interest ii. affirmative waste: voluntary acts, permissive waste: inaction iii. applied: Baker v. Weedon (p219) 1. facts: man dies leaving estate to second wife (Anna) in will, daughters of first marriage estranged and left out of will, when Anna died property to go to their children. Anna continued living on the land, and a highway was built that greatly increased its value. Anna wants to compel its sale for the financial benefit, and the kids want to hold onto it in hopes that it will increase in value 2. holding: remand, best interest of all parties would not be served by judicial sale; power to order sale should be exercised with caution and only when need is evident. Lower court had ordered sale by creating notion of economic waste by not allowing the land to be used; settled outside of court on a compromise, grandchildren end up selling land and allow Anna a small parcel to live on. 3. The husband in Weedon really should have created a trust e. Restraints on Alienation i. Fee simple absolute- total restrictions on alienation are void, partial restrictions are sometimes void ii. Evaluating restraints on alienation: 1. Does the condition overly discourage improvements? 2. How much is the universe of buyers constrained? 3. How tidy is the restriction? 4. How harsh is the penalty for violation? 5. Does the restriction eliminate externalities, and efficiently regulate land-use? 6. Does the availability of restriction encourage charity? IV. 7. Is the goal of the restriction reasonable and useful? Defeasable Fee Estates V.