Property Outline; Present Estates

Property 1 Present Estates Types 1. 2. 3. 4. Fee Simple Absolute Fee Tail Defeasible Fees Life Estate What to know? 1. What language will create the estate? 2. Is the estate devisable (will), descendible (intestate), and/or alienable (transferable inter vivos)? 3. Which future interests, if any, is the estate capable of? FEE SIMPLE ABSOLUTE “to A” “to A and his heirs” Creation  “and his heirs” are no longer necessary to create Distinguishing Characteristics  Absolute Ownership of potentially infinite duration  Freely devisable, descendible, and alienable. Accompanying Future Interest  None.  A living person has no heirs. While person is alive, he only has prospective heirs. FEE TAIL “to A and the heirs of his body” Creation  “to A the heirs of his body” Distinguishing Characteristics  Virtually abolished in the US today  Historically, the fee tail would pass to grantees’ lineal blood descendants no matter what.  The attempted creation of a fee tail creates a fee simple absolute Accompanying Future Interest  In grantor (O), a reversion  In 3rd party (someone other than O), a remainder Property 2 DEFEASABLE FEES Types 1. Fee Simple Determinable 2. Fee Simple Subject to Condition Precedent 3. Fee Simple Subject to Executory Interest. Fee Simple Determinable “To A for so long as…” “To A during…” “To A until…” Creation  Grantor must use clear durational language.  If the stated condition is violated, forfeiture is automatic. Distinguishing Characteristics  Freely devisable, descendible, and alienable, BUT always subject to the condition.  You may convey less than what you started with, but you can’t convey more. Accompanying Future Interest  Possibility of Reverter in the Grantor Paul conveys Blackacre “to Ringo so long as the premises are used as a recording studio.” Ringo= fee simple determinable; Paul= possibility of reverter Same, now Ringo conveys to Mick, who seeks to convert the recording studio into a bowl-a-rama. If Mick does so, he forfeits the estate, which reverts back to Paul. Fee Simple Subject to Condition Subsequent “To A, but if X event occurs, grantor reserves the right to reenter and retake” Creation  Grantor must use clear durational language AND must carve out the right to re-enter. Distinguishing Characteristics  The estate is not automatically terminated, but it can be cut short at the grantor’s option, IF the stated condition occurs. “its his prerogative” Accompanying Future Interest  Right of Entry (aka power of termination) by the grantor Ross conveys “to Rachel, but if coffee is ever consumed on the premises grantor reserves the right to re-enter and retake” Rachel= fee simple subject to condition subsequent Ross= right of entry Property 3 Fee Simple Subject to Executory Limitation “To A but if X event occurs, then to B” Creation  “To A, but if X event occurs, then to B”  someone other than the grantor takes Distinguishing Characteristics  The estate is just like the fee simple determinable only now if the condition is broken, the estate is automatically forfeited in favor of someone other than the grantor. Accompanying Future Interest  Shifting executory interest to the 3rd party. “To Barry Manilow, but if Manilow ever performs music on the premises, then to Mandy” Barry= fee simple subject to Mandy’s shifting executory interest Mandy= shifting executory interest Important Rules of Construction for ALL Defeasible Fees 1. Words of mere desire, hope or intention are insufficient to create a defeasible fee. a. Courts disfavor restrictions on land, thus they will not find a defeasible fee unless clear durational language is used. “To A for the purpose of…”; “To A with the hope that…”; “To A with the expectation that…” ≠ allowed 2. Absolute restraints on alienation are void a. An absolute restraint on alienation is an absolute ban on the power to sell or transfer, that is not linked to any reasonable time-limited purpose. “To A so long as she never attempts to sell” ≠ allowed “To A so long as she does not attempt to sell until 2008” = ok LIFE ESTATE “To A for Life” Creation  This is an estate that must be measured in Explicit Lifetime Terms and NEVER in terms of .years (otherwise it’d be a leasehold interest).  Life Estate Pur Autre Vie= Life Estate measured by life other than the grantee O conveys “To Madonna, for the life of David Letterman” Madonna= life estate pur autre vie O= reversion (at the end of David Letterman’s life) O conveys “to Madonna for life”. Madonna sells entire interest to David Letterman David Lettermna = life estate per autre vie O = reversion (at the end of Madonna’s life) Distinguishing Characteristics- WASTE  2 General Rules o The life tenant is entitled to all ordinary uses & profits from the land. Property 4 o The life tenant must NOT commit waste (i.e. must not do anything to harm the future interest holders. 3 species of waste o Voluntary or affirmative waste  Natural Resources: the life tenant must not consume or exploit natural resources on the property (such as timber, oil, or minerals).  4 EXCEPTIONS (PURGE)  Prior Use (prior to the grant, the land was used for exploitation) o Open Mines Doctrine: if mining was done on the land before the life estate began, the life tenant may continue to mine, but is limited to the mines already open.  Reasonable Repairs (life tenant may consume natural resources for reasonable repairs and maintenance of the premises).  Grant (life tenant may exploit if expressly granted the right to do so.)  Exploitation (land is suitable only for exploitation o Permissive Waste, or Neglect  Maintenance: Occurs when the land is allowed to fall into disrepair OR the life tenant fails to reasonably protect the land.  The Life tenant must simply maintain the premises in reasonably good pair.  Taxes: the life tenant is obligated to pay all ordinary taxes on the land, to the extent of income or profits from the land. If there is no income or profit, the life tenant is required to pay all ordinary taxes to the extent of the premises fair rental value. o Ameliorative waste  The life tenant must not engage in acts that will enhance the property’s value, UNLESS all the future interest holders are known and consent.  Accompanying Future Interest  If held by the grantor, than a reversion.  If held by a third party, than a remainder. O conveys “To A for Life” A = life estate O = reversion Property 5 Future Interests Future Interests Capable of Creation in the Grantor 1. Possibility of Reverter a. Accompanies a fee simple determinable 2. Right of Entry a. aka power of termination b. accompanies only the fee simple subject to condition precedent. 3. Reversion a. Future interest that arises in a grantor who transfers an estate of lesser quantum than she started with, other than a fee simple determinable or a fee simple subject to a condition subsequent. O conveys “To A for life.” O has conveyed less than what she started with. O= reversion. O conveys “To A for 99 years.” O has conveyed less than what she started with. O conveys “To A for life, then to B for 99 years” O has still conveyed less than a fee simple absolute, which lasts forever. Future Interests in Transferees 1. Vested Remainder a. 3 types i. Indefeasibly vested remainder ii. Vested remainder subject to complete defeasance (aka vested remainder subject to total divestment) iii. Vested remainder subject to open 2. Contingent Remainder 3. Executory Interest a. 2 types i. shifting executory interest ii. springing executory interest Difference between Vested Remainders and Contingent Remainders What is a remainder  A remainder is a future interest created in a grantee that is capable of becoming possessory upon the expiration of a prior possessory estate created in the same conveyance in which the remainder is created.  Remainder always accompanies a preceding estate of known fixed duration. That preceding estate is usually a life estate or a term of years  Remainder NEVER follows a defeasible fee. o Remainder cannot cut short or divest a prior transferee. If your present estate is a defeasible fee, your interest is NOT a remainder, it is an executor interest. Remainders are either Vested or Contingent  A remainder is vested if it is both (1) created in an ascertained person and (2) not subject to any condition precedent.  A remainder is contingent if it is (1) created in an unascertained person OR is (2) subject to a condition precedent, OR BOTH. Property 6 o Contingent remainder created in as yet unborn or unascertained persons*** “To A for life, then to B’s first child.” A is alive, B, as yet, has no children. “To A for life, then to B’s heirs” A is alive. B is alive. Living people have no heirs. While B is alive his heirs are unknown. “To A for life, then to those children of B who survive A” A is alive. We don’t know which, if any, of B’s children will survive A. o Contingent remainder that is subject to a condition precedent***  A condition is a condition precedent when it appears BEFORE the language creating the remainder OR is woven into the grant to the remainder holder. “To A for life, then, if B graduates from college, to B.” A is alive. B is now in high school. Before he can take, he must graduate from college. He has not yet satisfied this condition precedent. B= contingent remainder, O = reversion. (if B graduates from college during A’s lifetime; B’s contingent remainder is transformed into an Indefeasibly Vested Remainder).  Rule of Destructibility o At common law, a contingent remainder was destroyed if it was still contingent at the time the preceding estate ended. “To A for life, and if B has reached the age of 21, to B.” A dies when B is 19. At common law, B’s contingent remainder would be destroyed and O or O’s heirs would take in fee simple absolute. o The Rule of Destructibility has been abolished. “To A for life, and if B has reached the age of 21, to B.” A dies when B is 19. Today, when A dies, O or O’s heirs would hold the estate subject to B’s springing executory interest. Once B reaches 21, B takes.  Shelley’s Case o At common law, the rule would apply in only one setting O conveys “To A for life, then, on A’s death, to A’s heirs.” A is still alive. Historically, the present and future interests would merge, giving A a fee simple absolute. o The rule in Shelley’s Case is a rule of law, and not a rule of construction. It would apply even contrary to grantor intent. o Today, the Rule is Shelley’s case has been virtually abolished. O conveys “To A for life, then to A’s heirs” A = life estate; A’s as yet unknown heirs = contingent remainder; O = reversion since A could die without heirs.  Doctrine of Worthier Title (aka Rule against remainder in grantor’s heirs) o This doctrine is still viable in most states today. It applies when O, who is alive, tries to create a future interest in his heirs. O, who is alive, conveys “To A for life, then to O’s heirs” -If the Doctrine of Worthier Title DID NOT APPLY; A= Life Estate, O’s Heirs= contingent remainder, because O is still alive and a living person has no heirs. -Because the Doctrine of Worthier Title DOES APPLY; the contingent remainder in O’s heirs is Void. Thus, A = Life Estate, and O= reversion. o The Doctrine of Worthier Title is a rule of construction, and not a rule of law.  The grantor’s intent controls. If grantor clearly intends to create a contingent remainder in his heirs, that intent is binding. Property 7 Distinguish between 3 types of Vested Remainders (only remainders can be vested) Indefeasibly Vested Remainder  The holder of this remainder is certain to acquire an estate in future, with no conditions attached. “To A for life, remainder to B.” A is alive. B is alive. A= Life Estate B= indefeasibly vested remainder “To A for life, remainder to B” A is alive. B dies. B’s interest passes by his will or by intestacy to his heirs Vested Remainder Subject to Complete Defeasance  aka Vested Remainder Subject to Total Divestment.  Here, remainder is NOT subject to any condition precedent. However, his right of possession could be cut short because of a condition subsequent o NOTE: the difference between a condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to complete defeasance. To tell the difference, apply the COMMA RULE: when conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder, the condition is a condition subsequent, and you have a vested remainder subject to complete defeasance. O conveyes, “To A for life, remainder to B, provided, however, that if B dies under the age of 25, to C.” A is alive. B is 20 years old. A= Life Estate B= vested remainder subject to complete defeasance C= shifting executory interest. (If B is under 25 at the time of A’s death, B still takes. But B must live to 25 for his estate to retain his interest. Otherwise, B’s heirs lose it all, and C or C’s heirs take.) O conveys “To A for life, and if B has reached the age of 25, to B” A is alive. B is 20 years old A= Life Estate B= contingent remainder **** O= Reversion (If B is still alive but under 25 at the time of A’s death, B cannot take. Instead, the estate reverts back to O or O’s heirs, who holds it subject to B’s what now becomes a springing executory interest. Vested Remainder Subject to Open  Here, a remainder is vested in a group of takes, at least one of whom is qualified to take possession.  But each class member’s share is subject to partial diminution because additional takes not yet ascertained can still qualify as class members.  A Class is either Open or Closed o A class is open if it is possible for others to enter o A class is closed when its maximum membership has been set, so that persons born thereafter are shut out.  When is a given class closed? Rule of Convenience o Rule of Convenience= class closes whenever any member can demand possession. Property 8  Womb Rule= Child in the womb who would be a member of the class if alive will share in the class. A child is the womb is considered alive. “To A for life, then to B’s children.” A is alive. B has two children, C and D. C & D=Vested Remainder Subject to Open. At B’s death, or at A’s death, the class closes. That’s when C & D can demand possession. IF C predeceases A, at common law, his share would go to his devisees or heirs. Distinguish Remainders from Executory Interests Executory Interest  =future interest created in a transferee (third party), which is not a reaminder and which takes effect by EITHER cutting short some interest in (1) another person (“shifting”) or in the grantor or his heirs (“springing”)  Shifting Executory Interest o If always follows a Defeasible Fee o Cuts short someone other than  Springing Executory Interest o Cuts short the grantor. “To A and her heirs, but if B returns from Canada sometime next year, to B and his heirs.” B= shifting executory interest A= fee simple subject to B’s shifting executory interest. *1 year limit makes it so this conveyance does not violate the rule against perpetuities. “To A, but if A uses the land for nonresidential purposes at any time during the next 20 years, then to B.” B= shifting executory interest A= fee simple subject to B’s shifting executory interest. *20 year limit makes it so this conveyance does not violate the rule against perpetuities. “To A, if and when he marries.” A is unmarried. A= springing executory interest O= fee simple subject to B’s springing executory interest. *Does not violate RAP, because we will know by the end of A’s life if he has married. “To A, if and when he becomes a lawyer.” A is in high school. A= springing executory interest O= fee simple subject to B’s springing executory interest. *No. Because we will know by the end of A’s life if the condition is met or not. Property 9 Rule Against Perpetuities The Rule: Certain kinds of future interests are void if there is any possibility, however remote, that the given interest will vest more than 21 years after the death of a measuring life. 4 Step Technique for Assessing Potential RAP problems: 1. Determine which future interests have been created by the conveyance. The RAP does NOT apply to (1) any future interest in the grantor, (2) indefeasibly vested remainders, and (3) vested remainders subject to complete divestment. The RAP potentially applies ONLY to: a. Contingent remainders, b. Executory Interests c. Vested Remainders Subject to Open. 2. Identify the conditions precedent to the vesting of the suspect future interest. a. Ie. Person must die or some event must happen or some condition met or unmet. 3. Find a measuring life. Look for a person alive at the date of the conveyance and ask whether that person’s life or death is relevant to the condition’s occurrence. 4. ASK: will we know, with certainty, within 21 years of the death of our measuring life, if our future interest holder(s) can or cannot take? If so, the conveyance is good. If not (if there is any possibility, however remote, that the condition precedent could or could not occur more than 21 years after the death of a measuring life), the future interest is void, and the interest will revert back to the grantor. a. Fertile Octogenarian Rule= presumes that a person is fertile no matter his or her age. “To A for life, then to the first of her children to reach the age of 30.” A is 70. Her only child, B, is 29 years old. 1. Classify the future interest Children= contingent remainder 2. What are the conditions precedent to the vesting of the future interest A must die; A must have a child to reach 30. 3. Find a measuring life. A. (why not B? because the conveyance is not B specific.) 4. Will we know with certainty, within 21 years of the death of our measuring life, if a future interest holder can take? In other words, is there any possibility, however remote, that A would not have a child to reach 30 until more than 21 years after A’s death? YES. B, who is 28, could die tomorrow. Thereafter A could have another child, no matter that A is 70 (Fertile Octogenarian Rule). A could die in labor, or A could live. We just don’t know for sure, today, whether the condition precedent to any potential newborn’s takingthe child’s turning 30- will be satisfied within 21 years of A’s death. THERFORE: A= Life Estate O= reversion. 2 Bright Line Rules of Common Law Rule Against Perpetuities.  A gift to an open class that is conditioned on the members surviving to an age beyond 21 violates the common law RAP. o “Bad as to One, bad as to all.” To be valid, it must be shown that the condition precedent to every class member’s taking will occur within the perpetuities period. If it is possible that a disposition might vest too remotely with respect to any member of the class, the entire class gift is void. Property 10  Many shifting executory interests violate the RAP. An executory interest with no limit on the time within which it must vest violates the RAP. “To A for life, then to such of A’s children as live to attain the age of 30.” A has two children, B and C. B is 35 and C is 40. A is alive. C and C’s vested remainder subject ot open are voided by RAP’s “bad as to one, bad as to all” rule. Thus, under the common law RAP, we are left with: A= Life Estate O= Reversion. “To A and his heirs so long as the land is used for farm purposes, and if the land ceases to be so used, to B and his heirs.”. B has a shifting executory interest. If A stops using the land for farm purposes, B’s interest will vest. A is the measuring life. We will not know with certainty, within 21 years that A will stop using the land for farm purposes. Once the offensive language is stricken, we are left with: “To A and his heirs so long as the land is used for farm purposes” A= fee simple determinable O= possibility of reverter **Remember, RAP doesn’t apply to future interests in the grantor. ““To A and his heirs but if the land ceases to be used for farm purposes, to B and his heirs.”. Same result as above, except now, once the offensive future interest (to B and his heirs) is stricken, the conveyance is not grammatically sound. Thus, the entire conditional clauseis stricken and A now has a fee simple absolute and O has nothing. The Charity-To-Charity Exception  A gift from one charity to another does not violate RAP ““To the American Red Cross, so long as the premises are used fro Red Cross Purposes, and if they cease to be so used, then to the YMCA”. Ordinarily, the YMCA would have a shifting executory interest. However, because of the charity-to-charity exception to the RAP, the gift is good. Thus: American Red Cross= fee simple subject to YMCA’s shifting executory interest YMCA= shifting executory interest Reform of the RAP  “Wait and See” or “Second Look” Doctrine o Under this majority reform effort, the validity of any suspect future interest is determined on the basis of the facts as they now exist at the conclusion of the measuring life. o This eliminates the “What If?” Anything Is Possible Rule  USRAP (Uniform Statutory Rule Against Perpetuities) o Codifies the common law Rap and, in addition, provides for 90 year vesting period.  Both USRAP and “Wait and See” reforms embrace two doctrines: o Cy Pres Doctrine= “As near as possible”  If a given disposition violates the rule, a court may reform it in a way that most closely matches the grantor’s intent while still complying with the RAP. o The Reduction of any offensive age contingency to 21 years.  If a given transfer is void, these reform measures knock down the age contingency to 21 (i.e. if it was at 30 or something). Property 11 Concurrent Estates Forms of Concurrent Ownership 1. Joint Tenancy 2. Tenancy in the Entirety 3. Tenancy in Common JOINT TENANCY Distinguishing Characteristics  Right of Survivorship (when 1 dies, his share passes automatically to the surviving joint tenants).  Joint Tenant’s Interest is alienable o BUT, the interest is not devisable or descendible. You can seel but not will it away. Creation  The 4 Unities (T-TIP): Joint Tenancts must take their interests: o Time: at the same time o Title: by the same instrument (title) o Interest: with identical equal interests o Possession: with identical rights to possess the whole  **Grantor must clearly express the right of survivorship. o Joint Tenancies are disfavored because people use them to avoid probate. Therefore, in addition to the 4 unities, the grantor must clearly state the right of survivorship.  Use of a Straw (middleman). Ex. D holds Blackacre in a fee simple absolute. He wishes to hold it as a joint tenant with his best friend Paul. In order to satisfy the 4 unities, Dave must use a straw (middleman). Step 1: Dave conveys Blackacre to straw Step 2: Straw conveys Blackacre to Dave and Paul with right of survivorship. Now, all 4 unities are present. Severance of a Joint Tenancy  Severance and Sale: o RULE: A joint tenant can sell or transfer her interest during her lifetime.  She may do so secretly, without the other’s knowledge or consent.*** o One joint tenant’s sale severs the joint tenancy as to the seller’s interest because it disrupts the 4 unities. Thus, buyer becomes a tenant in common.  If more than two joint tenants, JT remains intact as between the other, nontransferring joint tenants. O conveys Blackacre “To Phoebe, Ross, and Monica as joint tenants with the right survivorship.” Each owns presumptive 1/3 share plus the right use & enjoy the whole. Phoebe then sells her interest to Chandler. What is the state of the title? Phoebe’s act severs the joint tenancy as to Phoebe’s interest. Ross and Monica still hold 2/3 as Joint Tenant’s, and Chandler holds 1/3 as their tenant in common. Later, Ross dies, leaving behind his heir, Rachel. Monica takes Ross’s share. Thus, Monica now holds 2/3s with Chandler, who holds 1/3. Monica and Chandler are tenants in common. Rachel takes nothing. Property 12 o **Equitable Conversion: in equity, a joint tenant’s mere act of entering into a contract for sale of her share will sever the Joint Tenancy as to that contracting party’s interest. “equity regards as done that which ought to be done” On January 1, Ringo enters into a contract for sale of his interest in the joint tenancy to George, with the closing to take place on April 1. The severance as to Ringo’s interest occurs on January 1, under equitable conversion. So if Jon dies before April 1 but after January 1, Ringo cannot take anything because he has no survivorship rights.   Severance and Partition o By voluntary agreement: allowable peaceful way to end the Joint Tenancy o Partition in kind: judicial action for physical division if in the best interests of all parties. o Forced Sale: judicial action if in the best interests of all. Land is sold and proceeds divided up proportionally. Severance and Mortgage o MAJORITY RULE: Lien Theory of Mortgages: a joint tenant’s execution of a mortgage on his or her interest will not sever the joint tenancy. o MINORITY RULE: one joint tenant’s execution of a mortgage or a lien on his or her share will sever the joint tenancy as to that now encumbered share. TENANCY IN THE ENTIRETY Distinguishing Characteristics  Protected marital interest between H & W with the right of survivorship  Recognized in 21 states  Right of Survivorship  Very Protected form of ownership o Creditors- creditors of only one spouse can’t touch this tenancy in the entirety o Unilateral Conveyance- neither tenant, acting alone, can defeat the right of survivorship by a unilateral conveyance to a 3 rd party. Creation  Can only be created in Husband and Wife  Arises Presumptively: in any conveyance to H&W, unless clearly stated otherwise (only in the states where it is recognized). TENANCY IN COMMON Distinguishing Characteristics  2 or more owned with no right of survivorship  Each co-tenant owns an individual part.  Each co-tenant has the right to possess the whole  Each interest is descendible, divisible, and alienable.  Presumption favors Tenancy in Common Property 13 Rights & Duties of Co-Tenants Possession  Each co-tenant is entitled to Possess and Enjoy the Whole  If one co-tenant wrongfully excludes another co-tenant from possession of the whole or any part, he has committed wrongful ouster. Rent from Co-Tenant in Exclusive Possession  Absent ouster, a co-tenant in exclusive possession is NOT LIABLE to the others for rent. Rent from Third Parties  A co-tenant who leases all or part of the premises to a 3 rd party must account to his co-tenants, providing them their fair share of the rental income. (proportionate %-wise) Adverse Possession  Unless he has ousted the other co-tenants, one co-tenant in exclusive possession for statutory adverse possession period CANNOT acquire title to the exclusion of the others. o Why not? The hostility element of adverse possession is absent. There is no hositility because there was never any ouster. Carrying Costs  Each co-tenant is responsible for his fair share of carrying costs (such as taxes and mortgage interest payments, based upon the undivided share that he or she holds.) (%-wise). Repair  The repairing co-tenant enjoys a right to contribution for REASONABLE & NECESSARY repairs, provided that she has notified the others of the need for the repairs. Improvements  1 co-tenants improvement could be another’s nightmare”  During the life of the co-tenancy, there is No right to contribution for “improvements” o However, at partition, the improving co-tenant is entitled to credit, equal to any increase in value caused by her efforts. o AND, at partition, the so-called “improver” bears full liability for any decrease in value caused by her efforts. Waste  A co-tenant must NOT commit waste.  3 types of waste voluntary, permissive, ameliorative  A co-tenant can bring an action for waste during the life of the co-tenancy, she doesn’t have to wait for partition. Partition  A joint tenant or tenant in common has a right to bring an action for partition.  Tenant in the entirety cannot without getting a divorce. Property 14 LANDLORD/TENANT LAW The Four Leasehold or Nonfreehold Estates 1. Tenancy for Years 2. Periodic Tenancy 3. Tenancy at Will 4. Tenancy at Sufferance TENANCY FOR YEARS L leases Blackacre to T “from January 1, 2003 to July 1, 2003”. Distinguishing Characteristics  Lease for a fixed determined period of time.  When you know you have the termination date from the start, you have tenancy for years.  A term of years GREATER THAN 1 YEAR, must be in writing. Termination  NOTICE is NOT required.  A tenancy for years simply terminates at the agreed upon date. PERIODIC TENANCY Distinguishing Characteristics  This is a lease which continues for successive or continuous intervals, until landlord (L) or tenant (T) give proper notice of termination. Creation  Expressly. “month to month” “year to year” L conveys “to T from month to month”= express  Implied (3 ways) o (1) Land is leased with no mention of duration, but provision is made for the payment of rent at set intervals. T rents an apartment from L, beginning June 1. Nothing is said about duration. T pays rent each month = implied. o (2) An oral term of years in violation of the statute of frauds  if it violates the statute of frauds (transfer of interest greater than 1 year), it creates an implied periodic tenancy with the intervals based on the way rent is tendered. L and T negotiate on the telephone for a commercial lease. They orally agree on a 5 year lease with rent at $1000 a month. This violates the statute of frauds (transfer of interest greater than 1 year). First rental payment renders T’s interest an implied periodic tenancy with intervals based on the way rent is tendered. o (3) Holdover. In a residential lease, if L elects to holdover a T who has wrongfully stayed on past the conclusion of the original lease, an implied periodic tenancy arises measured by the way rent is now tendered. Property 15 T holds over after the expiration of her one-year lease, but sends another month’s rent check to L, who cashes it. This creates an implied month to month periodic tenancy. Termination  Written Notice is required to terminate a periodic tenancy.  Amount of Notice o Common law: must give notice at least equal to the length of the period itself, UNLESS otherwise agreed.  For a month-to-month lease, one months notice is required.  For a week-to-week periodic tenancy, one weeks notice is required.  EXCEPTION: if the tenancy is from year-to-year or greater; only 6 months notice is required. L leased Blackacre to T on January 1, 2003, for a periodic tenancy of month-to-month. On May 15, 2003, T sends written notice of termination. T is bound until June 30th, 2003. o By private agreement, the parties may lengthen or shorten these common-law prescribed notice provisions. (Freedom of Contract) TENANCY AT WILL To T for as long as L or T desires. Distinguishing Characteristics  No fixed period of duration  Unless the parties expressly agree to a tenancy at will, the payment of regular rent will cause a court to treat the tenancy as an implied periodic tenancy.** Termination  Tenancy at will may be terminated by either party at any time, HOWEVER, a reasonable demand to vacate is required. TENANCY AT SUFFERANCE Creation  Created when T has wrongfully held-over past the expiration of the lease.  We give the wrongdoer a leasehold estate (tenancy at sufferance) to permit L to recover rent. Termination  Last until Either (1) L evicts T, or (2) L elects to hold T to a new term. Property 16 TENANT’S DUTIES Types of Tenant’s Duties 1. T’s liability to 3rd parties 2. T’s duty to repair 3. T’s duty to pay rent. T’s liability to 3 rd Parties  T is responsible for keeping the premises in reasonably good repair  T is liable for injuries sustained by 3 rd parties T invited, even where L has expressly promised to make all repairs. T always loses. May seek indemnification from L, but T is liable. L leases building to T, expressly promising to maintain the premises in a state of good repair. T’s invitee trips over a loose floorboard and sues T. If invitee sues, T, T will lose. T always loses. T’s duty to repair T’s duty to repair when lease is silent  T must maintain the premises and make ordinary repairs.  T must NOT commit waste. o Voluntary waste- overt harmful acts o Permissive waste- neglect o ***Ameliorative waste- alterations that increase the premises value. Fixtures  the law of waste walks hand in hand with the law of fixtures.  Rule: when a tenant removes a fixture, he commits voluntary waste.  A fixture is a once movable chattel that, by virtue of its annexation to realty, objectively shows the intent to permanently improve the realty.  Common Examples of fixtures o Heating Systems; Furnace o Custom Made Storm Windows o Certain Lighting Installations  T must NOT remove a fixture, no matter if T installed it.  Fixtures pass with ownership of the land.  How to tell when a tenant installation qualifies as a fixture o Express agreement controls: an agreement between L & T on the issue is binding (freedom of contract). o In the absence of an agreement, T may remove a chattel that she has installed so long as removal does not cause substantial harm to the premises. o If removal WILL cause substantial harm, then in objective judgment if T has shown the intent to install a fixture, then the fixture must stay put. T’s duty to repair when T has expressly convenanted in the lease to maintain the property in good condition for the duration of the lease.  Common Law: T was responsible for any loss including loss attributable to force of nature (i.e. Act of G-D).  Majority View: T may terminate the lease if the premises are destroyed without T’s fault. Property 17 T’s duty to pay rent T breaches duty to pay rent AND is in possession  The landlord’s only options are to evict through the courts or to continue the relationship and sue for rent. o If the landlord moves to evict, she is nonetheless entitled rent from the tenant until the tenant, who is now tenant at sufferance, vacates.  Landlord must NOT ENGAGE IN SELF HELP, such as changing the locks or forcibly removing T or removing any of T’s possessions. o Self-help is flatly outlawed, and is punishable civilly and criminally. T breaches duty BUT is out of possession (S I R)  Ex. T wrongfully vacates with time left on a term of years lease  Surrender o L could choose to treat T’s abandonment as an implicit offer of surrender, which L accepts. o Surrender= T demonstrates by words or conduct that she wishes to give up the Leasehold  Ignore o L can ignore the abandonment and hold T responsible for unexpired rent, just as if T were still there. o This option is available only in the minority of states.  Re-let o L can re-let the premises on the wrongdoer tenant’s behalf and hold him liable for any deficiencies.  **Majority Rule: L must TRY to re-let. Mitigation principle. LANDLORD’S DUTIES Duty to Deliver Possession  English Rule (majority): requires that L put T in actual or physical possession of the premises. o Thus, if at the start of T’s lease a prior holdover T is still in possession, L is in breach and the new T is entitled to damages.  American Rule (minority): does not require that L put T in actual physical possession. Implied Covenant of Quiet Enjoyment  Applies to BOTH residential & commercial o T has a right to quiet enjoyment of the premises without interference from L.  Breach by actual wrongful eviction. o Occurs when L wrongfully evicts T or excludes T from the premises.  Breach by Constructive Eviction (S I N G)**** o i.e. everytime it rains, the apartment floods. MUST SHOW 3 ELEMENTS. o 3 elements  Substantial Interference: attributable to L’s actions or failure to act. Property 18 Notice: T must give L notice of the problem, L must fail to respond meaningfully.  Goodbye: Get out. T must vacate within a reasonable time after L fails to correct the problem. ** Landlord is NOT liable for acts of other tenants. o EXCEPTIONS  L has a duty not to permit a nuisance on the premises  L must control common areas.   Implied Warranty of Habitability  Applies only to residential leases.  Non-waivable  Standard: The premises must be fit for basic human habitation. Bare living requirements must be met. o The appropriate standard may be supplied by local housing code OR independent judicial conclusion.  The sorts of problems to trigger breach of the implied warranty of habitability are: o Failure to provide heat in the winter o Lack of plumbing o Lack of running water.  T’s entitlements when the implied warranty of habitability is breached. (M R³) o Move Out and terminate lease o Repair and Deduct, allowable by statute in a growing number of jurisdictions. T may make the reasonable repairs and deduct their cost from future rent. o Reduce Rent, or withhold all rent until the court determines fair rental value. Typically T must place withheld rent into an escrow account to show her good faith. o Remain in Possession, pay rent and affirmatively seek money damages. Retaliatory Eviction  If T lawfully reports L for household code violations, L is barred from penalizing T, by, for example (1) raising rent, (2) ending lease, (3) harassing tenant, (4) other reprisals. ASSIGNMENT v. SUBLEASE  In the absence of some prohibition in the lease, a T may freely transfer his or her interest in whole (thereby accomplishing an Assignment) or in party (thereby accomplishing a Sublease).  In the lease, L can prohibit T from assigning or subletting without L’s prior written approval. o However, once L consent to one transfer by T, L waives the right to object to future transfers by that T, unless L expressly reserves the right. Assignment  One tenant transfers whole interest to a 3 rd party, a new tenant.  New Tenant (T2) and landlord (L) are in Privity of Estate o Privity of Estate = T2 and L liable for all of the covenants of the original lease that run with the land. Property 19 o L can recover from whoever he is in privity of estate with, and cannot recover from those he is not in privity, UNLESS the tenant has expressly assumed all promises of the original lease. Old Tenant (T1) and landlord are in Privity of Contract, UNLESS T2 expressly assumed the performance of all promises of the original lease. o As a result, L and T1 are secondarily liable to each other (can only recover if the privity of estate person is insolvent or unavailable L and T1 are not in Privity of Estate, and L and T2 are not in privity of Contract.   T1 has 10 months remaining on a two-year term of years. T1 transfers all 10 months to T2. L and T2 are in PRIVITY of ESTATE L and T1 are in PRIVITY OF CONTRACT (secondarily liable to each other) L leases Blackacre to T1. T1 assigns to T2. T2 assigns to T3. T3 then engages in flagrant abuse of the premises. L & T3 are in PRIVITY OF ESTATE, so L can recover from T3 L & T1 are in PRIVITY OF CONTRACT, so if T3 is unavailable or insolvent, T1 is accountable. L & T2 are not in any privity, UNLESS Sublease  L and sublessee are in neither privity of estate nor privity of contract. o They share no nexus. Instead the tenants are liable to each other. LANDLORD’S TORT LIABILITY General Rule: In TORT, L is under no duty to make the premises safe. 5 Exceptions to the General Rule ( CLAPS)  Common Areas: L must maintain all common areas (i.e. hallways and stairwells).  Latent Defects Rule: L must warn T of hidden defects, of which L has knowledge or reason to know.  Assumption of Repairs: while under no duty to make repairs, once undertaken, L must complete them with reasonable care. If L makes those repairs negligently L is liable.  Public Use Rule: L -who leases public space (such as a convention center or museum), and who should know, because of the (1) nature of the defect and the (2) length of time on the lease, that T will not repair- is liable for any defects on the premises.  Short Term Lease of Furnished Dwelling: L is responsible for any defect that harms T. T does not have time to fix it. Property 20 SERVITUDES Types of Servitudes 1. Easements 2. Covenants 3. Equitable Servitudes EASEMENTS Defined  Easement = the grant of a nonpossessory property interest that entitles its holder to some form of use or enjoyment of another’s land called servient tenement. o i.e. the right to go onto or do something on servient land.  Examples o Privilege to lay utility lines on another’s land o Easement giving its holder the right of access across a tract of land.  Easements can be affirmative or negative. (most are affirmative) Negative Easement  Negative Easement entitles its holder to prevent the servient landowner from doing something that would otherwise be permissible. Negative easements are generally recognized in only 4 categories. (L A S S) o Light o Air o Support o Streamwater from an artificial flow o Minority (including California) Scenic View  Negative Easements can only be created expressly, by writing signed by the grantor. There is no natural or automatic right to a negative easement. Appurtenant v. In Gross  Easement Appurtenant= benefits its holder in his physical use or enjoyment of his property. o 2 parcels must be involved  Dominant Tenement= derives the benefit of the easement  Servient Tenement= bears the burden of the easement. A grants B a right of access across A’s land, so that B can more easily reach his land. B’s land is benefited by the easement. In easement parlance, it is the dominant easement. A’s land is serving B’s easement. It is the servient tenement. Notice that two parcels are involved. B has an easement appurtenant to B’s dominant tenement.  Easement In Gross= confers upon its holder only some personal or pecuniary advantage that is not related to his use or enjoyment of his land. Here, servient land is burdened.. However, there is no benefited or dominant tenement. o No accompanying dominant tenement. o Examples of Easement in Gross  Right to place a billboard on another’s lot  Right to fish or swim in another’s pond  Utility Company’s Right to Lay Power Lines on another’s land Property 21  Easement and Transferability o The appurtenant easement passes automatically with the dominant tenement, regardless of whether it is even mentioned in the conveyance. o An easement in gross is not transferable unless it is for commercial purposes. A has an easement entitling her to cut across B’s lawn to get more easily to her land. A sells her parcel to Mr. X, with no mention of the easement. This is an easement appurtenant. A’s land= dominant. B’s land= servient. Upon transfer, the easement appurtenant passes automatically with the dominant land. A has an easement entitling her to swim in B’s lake. Only one parcel of land is involved, B’s land. A cannot transfer this easement. It is personal to A. Starkist has an easement to use B’s lake to fish for bait for Starkist's tuna company. This is an easement in gross. It is transferable because it is used for commercial purposes. Affirmative Easement Creation (P I N G)  Prescription o An easement may be acquired by satisfying the elements of adverse possession.  Continuous Use for given statutory period  Open & Notorious Use  Actual Use  Hostile Use (meaning without servient owner’s consent.  Implication (aka easement implied from existing use) o Court will imply an easement if  (1) the previous use had been apparent AND  (2) the parties expected that the use would survive division because it is reasonably necessary to the dominant land use and enjoyment. A owns 2 lots. Lot 1 is hooked up to a sewer drain located on Lot 2. A sells Lot 1 to B, with no mention of B’s right to continue to use the drain on A’s remaining Lot 2. The court may nonetheless imply an easement on B’s behalf if (1) the previous use had been apparent AND (2) the parties expected that the use would survive division because it is reasonably necessary to the dominant land use and enjoyment.   Necessity o The landlocked setting. o An easement of right of way will be implied by necessity if grantor conveys a portion of his land with no way out except with some part over grantor’s remaining land. Grant o An easement to endure for more than one year must be in a writing that complies with the formal elements of a deed. (Because of Statute of Frauds). o The writing to evidence the easement is called deed of easement. Scope of Easement  The scope of the easement is determined by the terms of the grant or the conditions that determined it.  Unilateral Expansion is not allowed. A grants B an easement to use A’s private road to get to and from B’s parcel, Blackacre. B has an Easement Appurtenant to B’s Dominant Land. A’s parcel is servient. Property 22 Subsequently, B purchases the adjacent Greenacre, with its small marina. B may NOT unilaterally expand the use of the easement to benefit Greenacre. Termination of an Easement (E N D C R A M P)  Estoppel: o Here, the servient owner materially changes his or her position in reasonable reliance on the easement holder’s assurances that the easement will no longer be enforced. A tells B that A will no longer be using her right of way across B’s parcel In reasonable reliance, B builds a swimming pool on B’s parcel, thereby depriving A of the easement. In equity, A is estopped from enforcing the easement.  Necessity: o Easements created by necessity expire as soon as the necessity expires. However, if the easement attributable to necessity, was nonetheless created by express grant, it does NOT automatically end once the necessity ends. O conveys a portion of his ten-acre tract to A, with no means of access out except over a portion of O’s remaining land. The parties reduce their understanding to express writing. Thereafter, the city builds a public roadway affording A access out. The easement nonetheless persists because it was created by an express grant     Destruction o Destruction of the servient land, other than through the willful conduct of the servient owner, will terminate the easement. Condemnation: o Condemnation of the servient easement by eminent domain will terminate the easement. Release: o A written release, given by the easement holder to the servient owner. Abandonment o The easement holder must demonstrate by physical action the intent to never uyse the easement again. o Mere nonuse, or mere words are insufficient to terminate the abandonment.  **Abandonment requires physical action by the easement holder. A has a right of way across B’s parcel. A erects a structure on A’s parcel that precludes her from ever again reaching B’s parcel. That is the sort of action to signify abandonment.  Merger (aka Unity of Ownership) o The easement is extinguished when title to the easement and title to servient land become vested in the same person. o NOTE: if complete unity of title is achieved, the easement is extinguished. Even though there may be later separation of title, the easement is not automatically reinstated. A has a right of way across B’s parcel, to enable A to better reach her parcel. A’s land is dominat land. A is the holder of an easement appurtenant. B’s land is servient. Later, A buys B’s parcel. The easement is therefore extinguished because of merger. Assume A later sells the parcel over which she once enjoyed the right of way. The easement is NOT revived to create it. A would have to start from scratch.  Prescription: o The servient owner may extinguish the easement by interfering with it in accordance with the elements of adverse possession  Continuous interference Property 23    Open & Notorious Actual Hostile to the Easement Holder A has an easement of right of way across B’s parcel. B erects a chain link fence on B’s parcel, thereby precluding A from reaching it. Over time, B may succeed in extinguishing the easement through prescription. THE LICENSE Definition  The license is the mere privilege to enter another’s land for some delineated purpose o Licenses are NOT subject to the statute of frauds. Thus, you do not need a writing to create a license. o Licenses are freely revocable, at the will of the licensor, unless estoppel applies to bar revocation. Classic License Cases  Ticket Cases o Tickets create freely revocable licenses o Go to the theatre- they can revoke it at any time. (have a K matter, not property)  Neighbors Talking by the fence o Nothing good comes when neighbors talk by the fence. o An oral easement that violates the statute of frauds creates a freely revocable license. Neighbor A, talking by the fence with neighbor B, says, “B, you can have the right of way across my land.” ***This is an oral easement. It is unenforceable because it violates the statutes of frauds. Instead, it creates a freely revocable license.  Estoppel: o Estoppel will apply to bar revocation only when the licensee has invested substantial $ or labor or both in reasonable reliance on the license’s continuation. THE PROFIT  Profit entitles its holder to enter the servient land and take from it the soil or some substance of the soil such as minerals or timber or oil.  The profit shares All the rules of easements. THE COVENANT I promise not to build for commercial purposes. Definition  The covenant is a promise to do or not do something related to land. It is UNLIKE the easement because it is not the grant of a property interest, but rather a contractual limitation or promise regarding land. Property 24 Restrictive Covenants (i.e. Negative Covenants)  The restrictive covenant is a promise to refrain from doing something related to land.  “I promise not to…” Affirmative Covenants  The affirmative covenant is a promise to do something related to land. Covenant v. Equitable Servitude  The difference between a covenant and an equitable servitude is based on the basis of the relief Plaintiff seeks. o If $ damagescovenant. o If Injunctionequitable servitude. ***When Covenants that Run with the Land, i.e binding on their successors Neighbor A promises neighbor B that A will no build for commercial purposes on A’s property. A’s parcel is burdened by the promise. B’s parcel is benefited. Later, A sells her burdened parcel to A-1. B sells his to B-1. Now, A-1 has commenced manufacture of a steak sauce plant on the premises. B-1 wishes to proceed against A-1 for money damages (see money damages, think covenant). (burdened parcel) A ------------------------------- B (benefited parcel) | horizontal privity | | | | | vertical | | vertical privity | | privity | | | | A-1 B-1 Does the Burden of A’s promise to B run from A to A-1?  Elements ( W I T H N )  Writing o Original promise between A & B must have been in writing.  Intent o Original parties intended that covenant would run. o Courts are generous in finding the requisite intent  Touch & Concern Land o The promise must affect the parties’ legal relations as land owners and not simply as members of the community at large o NOTE: covenants to pay money to be used in connection with the land (such as homeowners’ association fees) and covenants not to compete DO touch and concern the land.  Horizontal Privity***** Property 25 o Refers to the nexus between the originally promising parties (A & B) o Requires that they be in succession of estate, meaning that they were in a Grantor-Grantee, or Landlord-Tenant, or Mortgagor-Mortgagee relationship. o Very hard to establish. Vertical Privity o Refers to the nexus between A & A-1. o Requires some Non-hostile nexus, such as Contract, Devise, Descent. o The only time vertical privity will be ABSENT is if A-1 acquired her interest though adverse possession. Notice o A-1 had notice of the promise when she took.   Does the Benefit of A’s promise to B run from B to B-1?  Elements ( W I T V )  Writing o Original promise must have been in writing  Intent o Original parties intended for the benefit to run  Touch & Concern Land o Promise affects the parties as landowners  Vertical Privity o Some non-hostile nexus between B & B-1.  Note: Horizontal privity and Notice are not required for the benefit to run. EQUITABLE SERVITUDE Defined  The equitable servitude is a promise that equity will enforce against successors. It is accompanied by injunctive relief. Creation  To create an equitable servitude that will bind successors: ( W I T N E S ) o Writing  Generally, but not always, the original promise is in writing. o Intent  Parties intended that promise would be enforceable by and against successors o Touch and Concern  Promise affects the parties as landowners o Notice  Successors of burdened land had notice of the promise.  Privity is NOT required to bind successors!!!!! Property 26 Implied Equitable Servitude- the general or common scheme doctrine  Elements o General Scheme  When the sales began, the sub-divider had a general scheme of residential development which included Defendant’s lot o Notice  Defendant lot holder had notice of the promise contained in the prior deeds.  Notice Imputed to Defendant (A I R)  Actual Notice o = literal knowledge of the promises in the prior deeds  Inquiry Notice o = neighborhood conforms to the common restriction o i.e. “lay of the land” o i.e. “take a look around.”  Record Notice o the form of notice sometimes imputed to buyers on the basis of publicly recorded documents. o With respect to record notice, courts are split. Some take the view that a subsequent buyer is on record notice of contents of prior deeds to others by a common grantor. The better view, taken by other courts, is that the subsequent buyer does NOT have record notice of the contents of those prior deeds transferred to others by the common grantor. A subdivides her land into 50 lots. She sells lots 1 through 45 through deeds that contain covenants restricting use to residential purposes. A then sells one of the remaining lots to a commercial entity, B, by deed containing no such covenant. B now seeks to build a convenience store on his lot. B can be enjoined if the two elements of the general or common scheme doctrine apply. Under the Common Scheme Doctrine, the court will imply an equitable servitude to hold the unrestricted lot holder to the restrictive covenant. Equitable defenses to enforcement of an equitable servitude  Changed Conditions o The changed circumstances alleged by the party seeking release from the terms of an equitable servitude must be so pervasive that the entire area has changed. o What is never good enough? Mere pockets of limited change. Property 27 ADVERSE POSSESSION Basic Concept  Possession for a statutorily prescribed period of time can, if certain elements are met, ripen into title. Elements of Adverse Possession (C O A H)  Continuous o Uninterrupted for the given statutory period  Open and Notorious o Sort of possession that the usual owner would make under the circumstances.  Actual o Entry cannot be hypothetical or symbolic. (i.e. a letter of intent is NOT ok.)  Hostile o Possessor does not have true owner’s permission to be there. **Possessor’s subjective state of mind is irrelevant. Tacking (2 adverse possessors)  One adverse possessor may tack on to his time with the land his predecessor’s time, so long as there is privity, which is satisfied by any non-hostile nexus, such as Blood, Contract, Deed, or Will.  Tacking is NOT allowed when there has been an ouster. O owned Blackacre in 1980 when A entered adversely. A was on her way to satisfying the elements of adverse possession when, in 1986, Mr. X ousted her. Mr. X stays on the land through 2000. Our jurisdiction has a 20 year statute of limitations. In 2000, O own Blackacre, because ouster defeats privity. Disabilities  The statute of limitations will NOT run against a true owner who is afflicted by a disability at the inception of the Adverse Possession.  Common Disabilities: o Insanity o Infancy o Imprisonment O owned Blackacre in 1980 when A entered adversely. In 1990, O went insane. In 2000, O recovered. Our jurisdiction has a 20 year statute of limitations. In 2000, A owns Blackacre, assuming she has met the COAH elements. O cannot claim the benefit of the disability because he wasn’t suffering from it at the inception of the adverse possession. Property 28 LAND CONVEYANCE: THE PURCHASE & SALE OF REAL ESTATE 2 Step Process  Every conveyance of real estate consists of a two-step process o The land Contract o The Closing, where the deed becomes our operative document. The Land Contract The Land Contract and the Statute of Frauds  The land contract must be in writing, signed by the parties to be bound. Must describe the land and state some consideration.  EXCEPTION: o **Doctrine of Part Performance: if you have two of the following three: (1) Buyer takes possession, (2) Buyer pays all or part of the purchase price, and/or (3) Buyer makes substantial improvements to the premises. Land is different from the Contract Terms  When the amount of land recited is more than the actual parcel of land, the remedy is specific performance with a pro rata deduction in purchase price. B enters into a contract to purchase a farm. The contract recites that the farm is 100 acres. When B has a survey done, B learns that the farm is actually 98 acres. B’s remedy is specific performance with a pro rata deduction in purchase price Risk of Loss  Equitable Conversion- equity regards as done that which ought to be done.  In Equity, once a contract is signed, B is owner of the land, subject of course to the condition that he pay the purchase price at closing.  Destruction o If, in the interim between contract and closing, Blackacre is destroyed through no fault of either party: Buyer bears the risk of loss UNLESS the K says otherwise. o Buyer bears the risk of loss UNLESS the K says otherwise. Implied Promises in Every Land Contract 1. Seller promises to provide marketable title o Marketable title is title free from reasonable doubt, meaning free from lawsuits & threat of litigation. o 3 circumstances will render title unmarketable  Adverse Possession: if even a portion (no matter how small) of the title rests on adverse possession, it is unmarketable. Seller must be able to provide good record title.  Encumbrances: marketable title means unencumbered fee simple. Thus, servitudes and mortgages render title unmarketable unless buyer has waived them.  NOTE: Seller has the right to satisfy an outstanding mortgage or lien at the closing, with the proceeds of the sale. Thus, buyer cannot claim title is unmarketable because it is subject to a mortgage prior Property 29 to closing, so long as the parties understand that the closing will result in the mortgage being satisfied or discharged.  Zoning Violations: title is unmarketable if the property violates a zoning ordinance.  the mere presence of a zoning ordinance is of NO legal consequence. It is the violation. 2. Seller promises not to make any false statements of material fact o Majority: Seller is liable for failing to disclose latent material defects.  Seller is on the hook for his material lies and material omissions.  Silence is NOT Golden o If the contract contains a general disclaimer, (i.e. property sold as is or with all faults), the disclaimer will NOT excuse seller from liability from fraud or failure to disclose. No implied warranties of fitness or habitability  Common law norm: Caveat Emptor (“Buyer Beware”) o Exception: the implied warranty of fitness and workmanlike construction applies to the sale of a new home by a builder-vendor. The Closing The Deed  Our controlling document is no the DEED.  Deed= passes legal title from seller to buyer.  How does the deed pass legal title from seller to buyer? It must be LEAD- Lawfully Executed And Delivered. Lawful Execution of a Deed  The Deed must be in writing, signed by the grantor. o NOTE: the deed need not recite consideration, nor must consideration pass to make a deed valid. Description of the land  The description of the land does NOT have to be perfect.  Legal Litmus Test: The law requires only an unambiguous description & a good “LEAD” (lawfully executed and delivered. The deed recites that O conveys “all of O’s land,” or “all of O’s land in Essex County.” This deed is good if the provide a good LEAD. We can research and discern what “all my land” means. O conveys “some of my land in Sussex County.” This deed is NO good. “some of my land” is an ambiguous description. Delivery Requirement  Physical or Manual Transfer o The delivery requirement could be satisfied when Grantor physically or manually transfers the deed to the grantee. Property 30 It is permissible to use the mail, an agent, or a messenger. However, delivery does NOT necessarily require actual physical transfer of the instrument itself. Present Intent Requirement o The standard for delivery is the legal standard, and the test is solely one of Present Intent.  Ask: did the grantor have the present intent to be immediately bound, irrespective of whether or not the deed itself has been literally handed over.  i.e. Put deed in a safe. If intent is there, delivery is good. Rejection o Recipient’s express rejection of the deed defeats delivery As a surprise graduation gift, A’s Aunt Gertrude executes a deed conveying Blackacre to A. A responds, “I can’t accept such a lavish gift” Blackacre belongs to Aunt Gertrude, because A expressly rejected the deed.      Oral Condition o If a deed, absolute on its face, is transferred to grantee with an oral condition, the oral condition drops out, it is not provable & delivery is indeed accomplished. O conveys a deed to Blackacre that is absolute on its face, but says to grantee, “Blackacre is yours only if you survive me.” This oral condition is void and delivery is deemed accomplished.  Delivery by Escrow o Delivery by escrow is permissible o Grantor may deliver an executed deed to a third party, known as an escrow agent, with instructions that the deed must be delivered to grantee once certain conditions are met. Once the conditions are met, title passes automatically to grantee. o Advantage of Escrow  If grantor dies before or becomes incompetent or is otherwise unavailable before the express conditions are met, title will still pass from escrow agent to grantee once the conditions are met. Covenants for Title & 3 Types of Deeds Quitclaim Deed  It contains NO covenants.  Grantor isn’t even promising that he even has title to convey. This is the worst deed buyer could hope for.  **Grantor does, however, implicitly promise to provide marketable title at the closing. General Warranty Deed  The best deed a buyer could hope for because general warranty deed warrants against all defects in title, including those attributable to grantor’s predecessors.  The general warranty deed typically contains all six of the following covenants. o Present Covenants: a present covenant is breached, if ever, at the time the deed is delivered. The statute of limitations for breach of a present covenant begins to run from the instant of delivery.  COVENANT OF SEISIN Property 31   Grantor promises he owns the estate he now promises to convey. COVENANT OF RIGHT TO CONVEY  Grantor promises he has the power to make the conveyance, meaning there are no temporary restraints on Grantor’s power to sell.  “I’ve got the power” COVENANT AGAINST ENCUMBRANCES  Grantor promises that there are no servitudes or mortgages on the land.  o Future Covenants: a future covenant is not breached, if ever, until Grantee is disturbed in possession. Thus the statute of limitations for breach of a future covenant will not begin to run until that future date.  COVENANT FOR QUIET ENJOYMENT  Grantor promises that grantee will not be disturbed in possession by a 3 rd Party’s lawful claim of title.  Grantor promises he is not a dirty double dealer. COVENANT OF WARRANTY  Grantor promises to defend grantee should there be any lawful claims of title asserted by others. COVENANT FOR FURTHER ASSURANCES  Grantor promises to do whatever future acts are reasonably necessary to perfect the title, if it later turns out to be imperfect.   Statutory Special Warranty Deed  Provided for by statute in many states, this deed contains TWO promises that grantor makes only on behalf of himself. (Note: Grantor makes no representations on behalf of his predecessors in interest.)******** o (1) Grantor promises he hasn’t conveyed the estate to anyone other than grantee (quiet enjoyment) o (2) Grantor promises the estate is free from encumbrances made by the grantor. (against encumbrances). Property 32 THE RECORDING SYSTEM Model: The case of the double dealer. O conveys Blackacre to A. Later, O conveys Blackacre, the same parcel, to . O, our double dealer, skips town. In the battle of A v. B, who wins? 2 Bright-line rules 1) If B is a Bona Fide Purchaser, and we are in a NOTICE jurisdiction, B win, regardless of whether or not she records before A does. 2) If B is a Bona Fide Purchaser, and we are in a race-notice jurisdiction, B wins if she records properly before A does. Recording acts exist to protect only Bona Fide Purchasers and Mortgagees (Creditors) Bona Fide Purchaser  Purchases Blackacre for Value  Without Notice that someone got there first Value  Bargain Basement Sale B paid $50,000 cash for Blackacre, when its fair market value is estimated at $100,000. B is a purchaser for value as long as B pays substantial pecuniary consideration.  The doomed donee B is O’s heir, or devisee, or donee. In a recording statute question, B loses subject to the shelter rule. Recording statutes do not protect Donees, heirs, or devisees, unless the shelter rule apples. Forms of Notice ( A I R )  Actual notice o Prior to B’s closing, B gets literal knowledge of A’s existence  Inquiry Notice o Whether he looks or not, B is on inquiry notice of whatever an examination of the land would reveal. o The buyer of real estate has a duty to inspect the premises before transfer of title, to see, for example, whether anyone else is in possession. If another is in possession, B is on an inquiry notice of that fact, regardless of whether buyer actually bothered to inspect or not. o Thus, in our model, if A had taken possession, B would be on inquiry notice of that fact, thereby defeating B’s status as a BFP. o If a recorded instrument makes reference to an unrecorded transaction, grantee is on inquiry notice of what a reasonable follow up would have revealed.  Record Notice o B is on record notice of A’s deed if at the time B takes, A’s deed is properly recorded so that it exists in the chain of title. Property 33 o If A has not recorded, or has not recorded properly at the time B takes it depends on which recording statute the jurisdiction has enacted. In a notice state, B wins. In a race-notice state, to win B must be a BFP and B must also win the race to record. Recording Statutes NOTICE STATUTE  “A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded. o If at the time B takes, he is a BFP, he wins. It won’t matter that A may ultimately record first, before B does. It won’t matter, in the A v. B contest, that B never records. RACE NOTICE STATUTE  “any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded.  To prevail, B must (1) be a BFP and (2) B must win the race to record. On March 1, O conveys to A, a bona fide purchaser who does not record. On April 1, O conveys the same parcel to B, a bona fide purchaser, who does not record. On May 1, A records. In a NOTICE jurisdiction, B wins because at the time B took, B was a BFP. In a RACE-NOTICE jurisdiction, A wins because A, a BFP for value, was the first to record Back to the original model, note that in either a notice or race-notice jurisdiction, B’s status as a subsequent bona fide purchaser will be defeated if A had promptly and properly recorded before B takes. In other words, A’s proper recordation places a subsequent buyer on record notice, thereby defeating their status as BFPs. Chain of Title To give record notice to subsequent takers, the deed must be recorded properly within the chain of title, which refers to that sequence of recorded capable of giving record notice to later takers. In most states, the chain of title is established through a title search of the Grantor-Grantee Index. 3 Chain of Title Problems 1. Shelter Rule 2. Wild Deed 3. Estoppel by Deed Shelter Rule  One who takes from a BFP will prevail against any entity that the transferor- BFP would have prevailed against. In other words, the transferee “takes shelter” in the status of her transferor, and thereby “steps into the shoes” of the BFP even though she otherwise failst o meet the requirements of BFP status. O conveys to A, who does not record. Later O conveys to B, a BFP, who records. B then conveys to C, who is a mere donee or who has actual knowledge of the O to A transfer. In the contest of A v. C, C wins, BOTH a race-notice and notice state, because of the shelter rule. C steps into the shoes of B, who was a BFP who recorded first. Property 34 Wild Deed  Rule: If a deed, entered on the records (A to B), has a grantor unconnected to the chain of title, the deed is a wild deed. It is incapable of giving record notice of its existence.  A wild deed is incapable of being record. O sells Blackacre to A, who does not record. Then, A sells to B. B records the A-to-B deed. The A to B deed, although recorded, is Not connected to the chain of title because it contains a missing grantor. The OA link is missing from the public record. The A to B deed, therefore, is a Wild Deed. O then sells Blackacre to C. Assume that C has no actual or inquiry knowledge of the O-A or the A-B conyenance. C records. C wins in both a notice and race-notice state. Estoppel by Deed  One who conveys realty in which he has no interest is estopped from denying the validity of that conveyance if he subsequently acquires that interest he had previously transferred. In 1950, O owns Blackacre. He is thinking about selling it to X, but for now decides against it. In 1950, X, who does not own Blackacre, sells it anyway, to A. A records. In 1960, O finally sells Blackacre to X. In 1970, X, a double dealer, sells Blackacre to B. B records. 1960-1969: Between A an X, A owns Blackacre because of the rule of estoppel by deed. In 1970, B owns Blackacre as long as he is a BFP. A’s 1950 recordng is a nullity. A recorded too early. B’s title searcher would not find A’s deed. One is entitled to assume that no one sells land until they first own it. Thus, B’s title searcher would not discover X’s 1950 pre-ownership transfer to A. Property 35 MORTGAGES Creation of a Mortgage  A mortgage is the conveyance of a security interest in land, intended by the parties to be collateral for the repayment of a money obligation.  A mortgage is the union of two elements o A Debt o A voluntary transfer of security interest in debtor’s land to secure the debt.  Debtor= mortgagor  Creditor= Mortgagor Legal Mortgage  The mortgage typically must be in writing to satisfy the Statute of Frauds (aka Legal Mortgage) o A Legal Mortgage is evidenced by a writing (aka a Note, a security interest in land, a mortgage deed, a deed of trust, a sale leaseback) Equitable Mortgage  Instead of executing a legal mortgage, ie note, the mortgagor gives the creditor (ie mortgagee) the deed to the land he is mortgaging.  **Parol Evidence is freely admissible to show parties true intent. O owns Blackacre. Creditor lends O a sum of money. The parties understand that Blackacre is the collateral for the debt. However, instead of executing a note or a mortgage deed, O hands Creditor a deed to Blackacre that is absolute on its face. This is called an equitable mortgage. If Creditor sells Blackacre to bona fide purchaser X, X owns Blackacre, and O’s only recourse is to proceed against the creditor for fraud & recover the proceeds of the sale. Parties’ Rights Once a Mortgage has been Created  DEBTOR: Unless and until foreclosure, debtor-mortgagor has title & the right to possession  CREDITOR: creditor-mortgagee has a Lien a right to look to the land if there is a default. Transfer of Interest- HOLDER IN DUE COURSE***  The mortgage automatically follows the properly transferred note.  The Creditor-mortgagee can transfer his interest by: o Endorsing the note & delivering it to the transferee, OR o By executing a separate document of assignment,./  NOTE: if the note is endorsed and delivered, the transferee is eligible to become a holder in due course. This means he takes the note free of any personal defenses that could have been raised against the original mortgagee. o Personal defenses include…  Fraud in the inducement  Unconscionability  Waiver  Estoppel  Lack of Consideration Property 36 o Therefore, the holder in due course may foreclose the mortgage despite the presence of an personal defense. HOWEVER, the holder is due course is still subject to the REAL DEFENSES that the maker might raise (MAD FIFI4) o Material Alterations o Duress o Fraud in the Factum (i.e. lies about the instrument) o Incapacity o Illegality o Infancy o Intsolvency To be a holder in Due course, the following criteria must be met o The note must be negotiable, made payable to the named mortgagee o The original note must be indorsed, singed by the named mortgagee o The original note must be delivered to the transferee, a photocopy is unacceptable. o The transferee must take the note in good faith without notice of any illegality. o The transferee must pay value for the note, meaning some amount that is more than nominal. All recording statutes (NOTICE & RACE-NOTICE) apply to mortgages as well as deeds. Mortgages have to be recorded. If it is recorded, a buyer of land is on record notice. In a race-notice jurisdiction, it depends on who wins the race to record. Must be a BFP.**** Liability on the debt o If Buyer assumes the mortgage both Owner and Buyer are personally liable. Buyer is primarily liable, Owner remains secondarily liable. o If Buyer takes “subject to the mortgage”, B assumes no personal liability. Only Owner is personally liable. o ***But, if recorded, the mortgage remains on the land, thus if O does not pay, the mortgage may be foreclosed. On January 10, Madge took out a $50,000 mortgage on Blackacre with First Bank. First Bank promptly and properly recorded its interest on January 10. Thereafter, on January 15, Madge sold Blackacre to Buyer. Buyer had no actual knowledge of the lien. Buyer promptly and properly recorded its deed. Buyer holds the deed subject to First Bank’s Mortgage. All recording statutes apply to mortgages as well as deeds. Thus, a subsequent buyer takes subject to a properly recorded deed. It does NOT matter which recording statute the jurisdiction has enacted. In a NOTICE state, Buyer takes subject to the lien because buyer is on record notice of the lien at the time buyer takes. In a RACENOTICE state, buyer takes subject to the lien because buyer is on record notice & 1st Bank won the race to record. On January 10, Madge took out a $50,000 mortgage on Blackacre with First Bank. -On January 15, Madge sold Blackacre to Buyer. Buyer had no knowledge of the lien. -On January 20, First Bank recorded its mortgage in Blackacre. -On January 30, Buyer records his deed to Blackacre. In a NOTICE jurisdiction, Buyer wins, so long as he was a BFP when he took. In a RACE-NOTICE, Buyer loses, because First Bank won the race to record.     Property 37 Foreclosure  The Mortgagee must foreclose by proper judicial proceeding. At foreclosure, the land is sold. The sale proceeds go to satisfying the debt.  If proceeds of Sale < Amount Owed o The mortgagee can bring a personal action against the debt for a deficiency judgment.  If proceeds of Sale > Amount Owed o Junior liens (i.e. liens of secondary creditors) are paid off in order of their priority. Any remaining surplus goes back to debtor.  FIRST, you must take off the top: 1. Attorneys fees 2. Expenses of foreclosure 3. Any accrued interest on first bank’s mortgage  NEXT, The sales proceeds are then used to pay off the mortgages in the order of their priority. o Each Claimant is entitled to satisfaction IN FULL before a subordinated lienholder may take. Blackacre has a fair market value of $50,000 and is subject to three mortgages executed by its owner, Madge. First Bank, with first priority, is owed $30,000. Second Bank, with second priority, is owed $15,000, and Third Bank, with third priority, is owed $10,000. First Bank’s mortgage is foreclosed and Blackacre is sold for $50,000. Assuming that the Off the top expenses (attorneys fees, etc.) are 0, First Bank takes $30,000, Second Bank takes $15,000, and Third Bank gets $5,000. Third bank can then proceed for a deficiency judgment. Same facts, but instead Blackacre sold for $60,000. After all the creditors are paid in full, the $5,000 surplus goes to the debtor-mortgagor. Effect of Foreclosure on Various interests  Foreclosure will terminate interests junior to the mortgage being foreclosed but will not affect senior interest. o This means that junior lienholders will be paid in descending order with the proceeds from the sale, assuming funds are leftover after full satisfaction of superior claims. Junior lienholders should be able to proceed for a deficiency judgment. But once foreclosure of a superior claim has occurred, with the proceeds distributed appropriately, junior lienholders can no longer look to Blackacre for satisfaction.  Those with interests subordinate to those of the foreclosing party are necessary parties to the foreclosure action. o The Debtor-Mortgagor is also considered a necessary party and must be joined, particularly if creditor wishes to proceed against debtor for a personal deficiency judgment. o Failure to include a necessary party results in the preservation of that party’s claim, despite the foreclosure and sale. Thus, if a necessary party is not joined, his mortgage will remain fixed to the land.  ***Foreclosure does not affect any interest senior to the mortgage being foreclosed. The buyer at the sale takes subject to such interest. o This means that the buyer is NOT personally liable on the senior debt, but, as a practical matter, if the senior mortgage is not paid, sooner or later, the senior creditor will foreclose against the land. Property 38 Blackacre has a fair market value of $50,000 and is subject to three mortgages executed by its owner, Madge. First Bank, with first priority, is owed $30,000. Second Bank, with second priority, is owed $15,000, and Third Bank, with third priority, is owed $10,000. Second Bank forecloses. First Bank’s mortgage exists but is not in default or its holder has not yet take action to foreclose it. Foreclosure does not affect any interest senior to the mortgage foreclosed. Thus, foreclosure of Second Bank’s mortgage will not affect 1st Bank’s Mortgage. First Bank’s mortgage will continue to exist on Blackacre’ in the hands of the foreclosure buyer. BUT, if the senior debt is not paid up, First Bank is entitled to foreclose on Blackacre. The foreclosure sale buyer has a strong incentive to pay off 1st Bank’s lien, otherwise, buyer is subject to the later foreclosure action by first bank. Therefore, Buyer should bid up to $20k which represents Blackacre’s FMV minus the amount buyer would have to pay to discharge 1st Bank’s mortgage ($30k). Priorities  As a creditor, you MUST record. o Until you record properly, your mortgage will have no priority. o Once recorded, priority is determined by the norm of 1st in time, 1st in right.  Purchase Money Mortgage o PMM= A mortgage given to secure a loan that enables the debtor to acquire the encumbered land C lends O $100,000 so that O can purchase Blackacre. C takes as collateral a security interest in Blackacre, the very parcel that C’s extension of value enabled O to acquire. C is a Purchase Money Mortgagee If C records properly, he has first priority as to parcel he financed. o Purchase Money Mortgagee’s SUPERPRIORITY  The purchase money mortgagee has superpriority over the parcel of land that the mortgagee has a security interest in. (probably only works in the case of the After Acquired Collateral Clause.) C1 lends $200,000 to O, taking a security interest al All of O’s Real Estate Holdings, “whether now owned or hereafter acquired”. (This is called an After Acquired Collateral Clause. It is permissible). C1 records the mortgage note. Six months late, C2 lends O $50,000 to enable O to acquire a parcel known as Blueacre, taking back a security interest in Blueacre and recording that interest.. Subsequently O defaults on all outstanding obligations. All that he has left is Blueacre. C2 has 1st Priority as to Blueacre because it is the parcel C2 fiannced. The purchase money mortgagee has superpriority.  Subordination agreements o Subordination agreements are permissible. By private agreement, a senior creditor may agree to subordinate its priority to a junior creditor. Redemption  Equitable redemption= debtor has the right to redeem the land & free it of the mortgage. o It is universally recognized up to the date of sale. o Any any time prior to the foreclosure sale, debtor can redeem o Once a valid foreclosure has taken place, the right to equitable redemption is cut off. o To exercise the right to equitable redemption, the debtor must pay off the missed payment, plus interest & costs. o Acceleration clause: an acceleration clause permits the mortgagee to declare the full balance due in the event of default.  If the mortgage contains an acceleration clause, the full balance, plus accrued interest, plus costs, must be paid to redeem. Property 39 o ***The debtor/mortgagor CANNOT waive the right to redeem. This is called “clogging”. It is prohibited. Statutory Redemption o Recognized in half-the states. o Gives the debtor-mortgagor a statutory right to redeem for some fixed period after the foreclosure sale has occurred (typically six months to one year). o Where recognized, statutory redemption applies only after foreclosure has occurred. The amount to be paid is usually the foreclosure sale price, rather than the amount of the original debt. o During the statutory redemption period, the mortgagor will have the right to possession of Blackacre during the statutory period.  When a mortgagor redeems, the effect is to nullify the foreclosure sale. The redeeming owner is restored to title.  Property 40 LATERAL SUPPORT Basic Concept  If land is improved by buildings and an adjacent landowner’s excavation causes that improved land to cave in, the excavator will be liable only if he acted negligently o Standard = negligence  Strict Liability does not attach to the excavator’s actions UNLESS plaintiff shows that because of Defendant’s actions, Plaintiff’s improved land would have collapsed even in its natural state. WATER RIGHTS Two Major Systems for Determining Allocation of Water  Riparian Doctrine  Prior Appropriation Doctrine Riparian Doctrine  Water belongs to those who own the land bordering the water course. o These people are known are as Riparians, who share the right of reasonable use of the water. o Thus, one riparian will be liable if his or her use unreasonably interferes with other’s use. Prior Appropriation Doctrine  The water belongs initially to the state, but the right to divert it and use it can be acquired by an individual, regardless of whether or not he happens to be a riparian owner.  Rights are determined by priority of beneficial use. o The norm for allocation is First in Time, First in Right. Thus, a person can acquire the right to divert and use water from a watercourse merely by being the first to do so. Any productive or beneficial use of the water, including use for Agriculture, is sufficient to create the appropriation right. Ground Water (aka Percolating Water)  Ground water= water beneath the surface of the earth that is not confined to a known channel.  The surface owner is entitled to maker reasonable use of ground water, however, the use must NOT be wasteful. Surface Waters  Surface water= those which come from rain, springs, or melting snow, and which have not yet reached a natural watercourse or basin.  Common Enemy Rule: o A landowner may change drainage or make any other changes/improvements on his land to combat the flow of surface water. Many courts have modified the common enemy rule to prohibit unnecessary harm to other’s land. Property 41 POSSESSOR’S RIGHTS The Possessor of Land has the right to be free from trespass and nuisance Trespass  Invasion of land by tangible, physical object  To remove a trespasser, bring an action for Ejectment. Private Nuisance  Substantial & unreasonable interference with another’s use and enjoyment of land.  NOTE: Unlike trespass, nuisance does not require tangible physical invasion. Thus, odors and noise could give rise to a nuisance, but not a trespass  Hypersensitivity & Specialized Use  There is NO nuisance if the problem is the result of Plaintiff’s super-sensitivity or her specialized use. A operates a dog kennel located near a power plant. A notices that her dogs are chronically agitated, causing her to lose business. She learns that the power plant emits a high frequency sound heard by animals but not humans. A sues the plant for nuisance. A would lose because A’s use would be considered hypersensitive. No nuisance if the problem is the result of Plaintiff’s super-sensitivity or her specialized use. EMINENT DOMAIN Definition  Government’s 5th Amendment Power to private property for public use in exchange for just compensation. Explicit Takings  = acts of governmental condemnation  ex. Government condemns your land to make way for a public highway. Regulatory Takings  A governmental regulation that, although not intended to be a taking, has the same effect.  Remedy for Regulatory Taking o Compensate the owner for the taking o Terminate the regulation & pay the owner for damages that occurred while the regulation was in effect. You buy land in North Carolina for development. Three months later, the government imposes a band on all development. Note that you have not been the target of overt condemnation. Still you argue that the regulation is an implicit taking. It has worked an economic wipeout of your investment. Property 42 ZONING Definition  Pursuant to its police powers, government may enact statutes to reasonably control land use. Variance  Variance is the principal means to achieve flexibility in zoning.  Proponent for the variance must show: o Undue Hardship o Variance won’t work a detriment to surrounding property values.  The variance is granted or denied by the zoning board. Non-Conforming Use  Non-conforming Use= A once lawful, existing use now deemed nonconforming by a new zoning ordinance.  It cannot be eliminated all at once unless just compensation is paid. Otherwise, it could be deemed an unconstitutional taking. Unconstitutional Exactions  Exaction= the amenities the government seeks in exchange for granting permission to build.  Exactions are inherently suspect (Because it is tantamount to government extortion.)  To pass constitutional scrutiny, these exactions must be reasonably related in both nature and scope to the impact of the proposed development. You are a developer seeking permission to build a 200 unit residential development in the town of Utopia. The town tells you that it will grant you the requisite permit if you agree to provide several new streetlights, a small park and wider roads. To pass constitutional scrutiny, these exactions must be reasonably related in both nature and scope to the impact of the proposed development. Property 43