Property II
Adam’s Outline I. Easements easement = non-possessory, irrevocable right to use someone else’s land in a way that would otherwise constitute trespass license = same thing, revocable at will, expressly or implicitly elevates to easement by deed that complies with SoF profit = right to enter land and take something from it (i.e., lumber) A. Creation 1. easement vs. license: look to terms & language to determine intent 2. Attach to land or person? a. appurtenant = land b. in gross = person 3. Dominant vs. Servient a. dominant = land to which easement is attached b. servient = land subject to the easement/license/profit 4. Reservations vs. Exceptions a. reservations = created at conveyance i. common law: cannot reserve an easement in a 3 rd party ii. modern trend: permits easement in 3rd party c. Exceptions = preexisting, created before conveyance 5. How to Create a. usually must be created expressly in instrument that complies with SoF b. if not express, then: i. implication (1) prior existing use—intent was to be express, but mistake or (2) Necessity—imply easement across land from which it was severed ii. prescription requires (1) adverse/hostile (2) actual use (3) open/notorious (4) continuous (5) claim of right iii. license with estoppel (1) Some jurisdictions recognize, some don’t (2) license + substantial reliance = easement by estoppel (3) duration = as long as necessary to recoup investment c. general rule: Recording Acts only apply to express property rights
6. implied grant/reservation must be: (1) apparent and (2) necessary requires: (1) unity of ownership (2) necessity (3) necessity existed at time of severance 7. Duration of Easements very fact sensitive, but in general… a. appurtenant: FSA b. in gross: LE B. Assignability 1. easement in gross: a. common law: not transferable b. modern trend: nontransferable unless parties expressly intended otherwise c. new modern trend: i. commercial—assume transferability ii. residential—transferable unless easement appears otherwise d. problem: if divisibility and assignability are unlimited, then traffic is potentially unlimited solution: One Stock rule: all assignees must exercise easement as entirety 2. easement appurtenant a. runs with every inch of dominant land b. divisible and assignable C. Scope 1. owner of servient estate is free to use easement in any way that does not interfere with easement a. common law: cannot move easement at all without holder’s permission b. modern: may move easement so long as it does not unduly burden holder 2. misuse of easement = trespass 3. general rule: cannot use easement to benefit land other than dominant estate 4. must be limitation on easement to limit burden on servient estate reasonably foreseeable development allowed D. Termination
3 ways: (1) abandonment (2) merger (3) prescription 1. Abandonment a. = voluntary relinquishment of property rights b. non-use =/= abandonment c. owner of free and clear title cannot abandon property
E. Negative Easements right regarding how the owner of the servient estate can use it 1) light (blocking windows) 2) air (blocking air flow in channel) 3) water (interfering with flow of water) 4) lateral support (removing support of property) Construed very narrowly II. Covenants
A. 2 kinds: Real Covenant (must be created expressly) Damages requires: (1) privity (a) burden—Horizontal and Vertical (the exact same estate) (b) benefit—needs Vertical (any interest sufficient) (2) intent for covenant to run (3) touch and concern the land
Equitable Servitude (might be implied) injunctive relief requires: (1) notice (2) intent (3) touch and concern
B. Horizontal—2 kinds 1. instantaneous (a.k.a., successive): grantor-grantee, created at moment of conveyance 2. mutual: shared or preexisting property interest C. Vertical 1. burden: in order for burden to run, transferred estate must be identical to original policy = discourage running of burdens 2. benefit: in order for benefit to run, any interest in land is sufficient D. Adverse Possessor: 1. must abide by covenant during AP 2. when title changes, no vertical privity, no longer bound E. Common Scheme
only kind of implied covenant 1. Doctrine: if there is one common scheme for two or more lots so situated as to bear the relation, and with common grantor, then everybody within the scheme has standing to enforce covenants against everyone else 2. common grantor must have intent to create common scheme 3. can only imply an equitable servitude 4. must start with express restriction 5. requires: (1) inquiry notice (2) duty to search all deeds out from common grantor 6. can intent be implied? a. common law: no b. modern trend: yes F. Termination 1. Change in Neighborhood Doctrine changes in neighborhood are such that covenant no longer serves its purpose external change is irrelevant 2. Release 3. Abandonment III. Real Estate Transactions A. Statute of Frauds 1. applies strictly to deeds 2. purposes: evidentiary, ritualistic (finality), and protective 3. must include: (1) parties—enough to ID with reasonable certainty (2) properties—enough to ID with reasonable certainty (3) price—included if agreed, or method of calculation 4. Exceptions: a. part performance i. payment ii. possession—essential, plus either of other two iii. improvement b. promissory estoppel—reasonable reliance that would lead to injury B. Marketable Title 1. title = a bundle of rights perfect title = title free and clear of all restrictions 2. 4 levels of title: (1) perfect title (2) marketable title (default) (3) insurable (4) record title 3. Marketable title a. TARP would accept
b. free from reasonable doubt and from unreasonable defects determined by court c. Current Violation of Restriction i. public restriction (zoning): no effect on marketability ii. private restrictions (covenants): unmarketable per se iii. open & obvious public (utilities): no effect present violation of public or private is unmarketable if substantial 4. Key Issue: Can I get out of contract? a. general rule: contract is binding unless there is express provision in contract b. exception: duty to disclose c. seller’s claim based on AP 2-prong test i. true owners could not prevail if they sued ii. no real likelihood that such claim will occur 5. Equitable Conversion a. equity regards as done that which ought to be done b. General common law rule (majority): any change in property during escrow (natural disaster) does not affect contract c. modern trend: If house is important part of contract, and it is substantially damaged, then buyer may rescind; if damage insignificant, then buyer is entitled to abatement 6. C. Duty to Disclose 1. common law: buyer beware 2. modern trend: latent vs. patent duty to disclose all defects that: (1) are latent (2) materially affect value (3) seller knows about 3. scope: not limited to boundaries of land, does not extend to title D. Merger Doctrine 1. contract merges into deed 2. post-closing, deed is entire agreement 3. exceptions: a. fraud/misfeasance b. * promises deemed collateral to the land E. Implied Warranty of Quality 1. common law: buyer beware 2. modern trend: implied warranty of workman-like quality applies only to latent defects which arise within reasonable time (usually 5-10 years)
3. only first buyer can contract out of warranty 4. applies only to professional builders IV. Delivery A. = intent to relinquish control of title look to manifestations of intent B. Deeds not valid until delivery C. 2 kinds of delivery: 1. consideration: enforceable contract = force delivery 2. gift/donative: several variables a. written vs. oral: cannot place oral condition on deed b. 2nd vs. 3rd party: Escrow agent must be independent c. intervivos vs. testamentary: if effective at death, must be will D. Revocable deed 1. common law: invalid 2. modern trend: valid E. Death before closing 1. common law: stringent proof of intent; all doubts resolved against delivery 2. modern trend: intent Mortgage A. 2 documents: 1. promissory note = promise to pay back money 2. mortgage = right to property if promissory note unpaid B. mortgage = encumbrance = right in property C. 2 theories: (1) title theory: borrower gives deed to lender in fee simple determinable, for return upon repayment of loan (2) Lien theory: actual title is not transferred, but only an interest in property D. Equitable Right of Redemption if repossession of property would be unfair, then court may force bank to accept late payment E. Right of Foreclosure after a certain date, right of redemption is foreclosed F. Foreclosure 1. lender has lien on property for outstanding principal of loan 2. hypo: borrower owes $700,000, foreclosure collects $600,000 a. deficiency = $100,000 b. majority rule: bank’s only recourse is property c. minority: bank may recover deficiency from borrower G. How do you buy mortgaged property? 1. typical: buyer pays total amount, seller/borrower pays off mortgage 2. alternative: buyer may assume seller’s mortgage a. buyer only buys equity
V.
b. seller still liable unless express release H. 2 Mortgage 1. If mortgagee has to foreclose, then has right to sell quality of title that was present when they first acquired interest 2. default on 2nd mortgage: 2nd bank sells property subject to 1 st mortgage in effect, selling equity I. Installment sale contract—split of authority 1. default forfeits all interest, previous payments = rent 2. treated just like mortgage
nd
VI.
Recording System buyer is charged with constructive notice of all properly recorded duties attached to property deed does not have to be recorded to be effective recording = evidence of delivery failure to record leaves title vulnerable to subsequent bona fide purchaser without notice A. Searching the Records 1. assume date of delivery = date of execution of deed 2. for each grantor: a. start: date of execution of deed purporting to give title b. stop: first deed recorded purporting to give title out standard scope of search 3. split of authority a. general rule: duty to check only property at hand b. minority: duty to check all titles conveyed under grantor’s name NOTE: for any problem, 1 st question is: Pre- or Post- closing? pre: buyer wants out of contract post: only way a subsequent party can trump is through protection under recording act 4. Protection under recording act usually means Subsequent Bona Fide Purchaser Without Notice 5. 3 kinds of notice: (1) actual (2) record constructive (3) inquiry notice 6. Properly recorded = will be found within standard scope of search 7. Spelling of Names a. common law: idem sonans, similar-sounding is good enough b. modern trend: must be correct
policy: who bears burden B. Types of Recording Acts 1. Notice a. wild deed = recorded deed unattached to any chain of title b. Zimmer Rule: wild deed does not give proper recording 2. Race—first to record full chain of title trumps notice irrelevant 3. Race-Notice—need both full chain of title and notice C. Defect in the Acknowledgment 1. forgery = someone without authority signs grantor’s name void, never passed good title 2. fraud = actual owner signs deed after making false representations voidable, good unless contested 3. latent vs. patent a. Latent: still gives record notice b. recorder should have noticed; does not give constructive notice (but may give actual notice) 4. Misrecording—recorder’s fault a. Majority: treat as properly recorded b. minority: duty to check that deed is properly recorded D. Persons Protected 1. must be purchaser 2. must have paid nominal and substantial amount E. Inquiry Notice 1. easements that arise by matter of law are not subject to recording act 2. Inquiry Notice—from duty to inspect physical signs on property that would indicate to a reasonable person that someone else might have a prior interest F. Marketable Title Acts 1. purchaser has duty to check chain of title back to state 2. requires owner of land to rerecord every 30-40 years if not re-recorded, then interest can be extinguished 3. limits scope of search only recordings in last 40 years + root of title go back at least 40 years, then keep going until first recorded deed thereafter 4. problems: a. numerous exceptions b. if re-recorder doesn’t connect to main chain of title, then undermines entire purpose Title Insurance
VII.
A. does not protect against unrecorded encumbrances B. excludes discoverable defects (i.e., recorded defects which are discoverable) C. title insurance company have duty to disclose? 1. common law: no 2. modern trend: yes Warranties in the Deed A. 3 types of deeds: (1) general warranty—against all title defects (2) special warranty—against grantor’s own acts (3) quitclaim—no warranties B. 6 covenants/warranties 1. Present Covenants: breach happens, if at all, at moment of closing by mere existence of superior property interest (1) seisin—grantor owns property (2) right to convey—grantor has right to convey (3) against encumbrances—both recorded and unrecorded (Note: SoL begins to run at closing) 2. Future Covenants: requires assertion of superior property interest (4) general warranty—no one will interfere with use of land (5) quiet enjoyment—same thing (6) further assurances—grantor will execute any documents required to perfect title C. Gov’t Violations 1. building codes: present violation is marketable, pre-and post-closing 2. zoning ordinance: present violation is unmarketable pre-closing, marketable post D. Does warranty/covenant run with land? common law modern trend future covenants Yes: privity of estate = yes: if privity of contract passing of some interest or actual possession present covenants No: causes of action not Yes: assignable but subject assignable to SoL, but does not run with land Damages: each grantor liable only for the amount which he received (that he sold it for). VIII.