Property 1 Present Estates • Fee Simple Absolute “to A” o Absolute ownership of potentially infinite duration o Freely devisable, descendible, & alienable o **a living person has no heirs o No accompanying future Interest • Fee Tail “to A and the heirs of his body” o Virtually abolished; attempted creation of fee tail creates Fee Simple Absolute o Accompanying future interest= reversion in grantor or remainder in 3rd • Defeasible Fees o Fee Simple Determinable “to A for so long as…” “to A during…” “to A until…” Grantor must use clear durational language If state condition is violated, forfeiture is automatic Freely devisable, descendible, & alienable, but always subject to the conditon Accompanying future interest= Possibility of Reverter o Fee Simple Subject to Condition Precedent “to A, but if X event occurs, grantor reserves right to reeneter” Grantor must use clear durational language and must carve out right to reenter Estate is not automatically terminated, but it can be cut short at grantor’s option, if the stated condition occurs. Accompanying future interest= Right of Entry o Fee Simple Subject to Executory Interest “to A, but if X event occurs, then to B” Someone other than the grantor takes If the condition is broken, forfeiture is automatic in favor of someone other than the grantor. Accompanying future interest= Shifting Executory Interest o Words of mere desire, hope, or intention are insufficient to create a defeasible fee o Absolute restraints on alienation are void.*** • Life Estate “to A for life” o Estate measured in explicit lifetime terms and never in terms of years o Life Estate pur autre vie: life estate measured by life other than the grantee. o General Rules= life tenant is entitled to all ordinary uses & profits of the land; cannot commit waste. Types Voluntary or Affirmative Waste: life tenant must not consume or exploit natural resources on the property (such as timber, oil, or minerals) • Exceptions PURGE o Prior Use: if prior to the grant the land was used for exploitation. Open Mines Doctrine: use mines already used, not new ones o Reasonable Repairs-can use natural resources to make reasonable repairs. o Grant: life tenant may exploit if expressly granted the right to do so. o Exploitation: land is suitable only for exploitation Permissive Waste (maintenance & taxes): must maintain premises in reasonably good repair, must pay ordinary taxes from income or fmv. Ameliorative Waste: life tenant cannot engage in acts that will enhance the property’s value. o Accompanying Future Interest= reversion in grantor, or remainder in 3rd party Property 2 Future Interests • In Grantor o Possibility of Reverter Accompanies a fee simple determinable o Right of Entry Accompanies a fee simple subject to condition precedent o Reversion Accompanies life estate, tenancy for years, periodic tenancy etc. where the future interest is held by the grantor. • In 3rd Party o Vested Remainder Indefeasibly vested remainder “to A for life, remainder to B” • If A is alive, B has an indefeasibly vested remainder. If A is dead, B’s heirs do. • The holder of the remainder is certain to acquire an estate in future, with no conditions attached. Vested Remainder subject to complete defeasance “to A for life, remainder to B, provided, however, that if B dies under the age of 25, to C.” • = subject to a condition subsequent • aka Vested remainder subject to total divestment • Here, remainder is not subject to a condition precedent, however it is subject to a condition subsequent. • The difference between a condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to complete defeasance, is where the conditional language is. Comma Rule. Vested Remainder subject to open “to A for life, then to B’s children” • A class is open if it is possible for others to enter. • Remainder is vested in a group of takers, at least one of whom is qualified to take possession. Each class member’s share is subject to partial diminution because additional takers not yet ascertained can still qualify as class members. • Rule of Convenience o A class closes whenever any member can demand possession. o In this example, the class closes when either A dies or B dies. • Womb Rule o Child in the womb who would be a member of the class if alive will share in the class. A child in the womb is considered alive. o Contingent Remainder “to A for life, then to B’s first child” or “to A for life, then, if B graduates, to B.” A remainder either (1) created in an unascertained person OR subject to a condition precedent, or BOTH. ****Like a vested remainder, always accompanies a preceding estate of known fixed duration, like a life estate or a term of years. Doctrines • Rule of Destructibility ---abolished o At common law, contingent remainder was destroyed if it was still contingent at the time the preceding estate ended. o Now it would create a fee simple subject to a springing executory interest. • Shelley’s Case o At common law, would apply if to A, then on A’s death, to A’s heirs o A has no heirs because A is alive. So create a reversion-back to O. Property 3 o This rule has been abolished. It is a rule of law, not of construction, so grantor’s intent does not matter. • Doctrine of Worthier Title O conveys “to A for life, then to O’s heirs” o Applies when O, who is alive, tries to create a future interest in his heirs. o Rule of construction, so the grantor’s intent controls. If grantor clearly intends to create a contingent remainder in his heirs, that intent is binding. o O would have a reversion. o Executory Interest “to A, if and when he marries” (springing); “to A, but if A does not use the land for farming, to B” (shifting) Future interest created n a transferee, which is not a remainder and which takes effect by EITHER cutting short some interest in (1) another person (“shifting”) or in the grantor or his heirs (“springing”) Shifting-always follows a defeasible fee, cuts short someone other than the grantor Springing-cuts short the grantor “to A if and when he passes the bar exam” o Difference between contingent remainder & vested remainder Vested= (1) created in an ascertained person AND (2) not subject to any condition precedent Contingent= (1) created in an unascertained person OR (2) subject to a condition precedent, or BOTH. Rule Against Perpetuities • Definition: A future interest is 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. • Applies to: (1) Contingent Remainders; (2) Vested Remainders Subject to Open; (3) Executory Interests. • Rules to remember: o A gift to an open class that is conditioned on the members surviving to an age beyond 21 violates the common law RAP. o Many shifting executory interests violate the RAP. An executory interest with no limit on the time within which it must vest violates the RAP. • Analysis o (1) determine which future interests are created (must be one of the three to apply) o (2) Identify the conditions precedent to the vesting of the suspect future interest o (3) Find a measuring life o (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? • Charity to Charity Exception: a gift from one charity to another does NOT violate the RAP. • Reform of the RAP: o (1) “Wait & See” Doctrine: majority reform effort, look at the facts at the conclusion of the measuring life. o (2) Uniform Statutory RAP: codifies common law RAP and makes it 90 years instead of 21. o (3) Cy Pres Doctrine: if violates, a court may reform it in a way that most closely matches the grantor’s intent while still complying with the RAP. o (4) Reduce the offensive age contingency to 21 years (i.e. if it was 30 or something). Property 4 Concurrent Estates • Joint Tenancy o Dual ownership with right of survivorship (when 1 dies, his share passes automatically to the surviving joint tenants). o Interest is alienable o Creation of a Joint Tenancy (T-TIP) Time: JTs take at the same time Title: by the same instrument Interest: with identical equal interests Possession: with identical rights to possess the whole. ***Must State the right of survivorship (JTs are disfavored because people use them to avoid probate. Therefore, the grantor must clearly state the right of survivorship People sometimes use a Straw (i.e Middleman) to help them create a joint tenancy to satisfy the 4 unities. o Severance of a Joint Tenancy Sale: A joint tenant can sell or transfer her interest during her lifetime, with or without other JTs consent or knowledge.* • Sale severs the 4 unities, and therefore you have a Tenancy in Common but only between the new buyer and the JT(s). JT remains intact between the other, nontransfferrin JTs • Equitable Conversion: a JT severing her share will sever it at time of entering into a contract, not at closing-so if one JT dies, they cannot get right of survivorship. Partition: (1) voluntary agreement; (2) partition in kind (judge decides how to split land up); (3) Forced Sale (sell and divide proceeds. Mortgage: Majority rule= a JTs execution of a mortgage on his interest will NOT sever. Minority rule= a mortgage WILL sever. • Tenancy in the Entirety o Protected marital interest between H&W with the right of survivorship. o Very protected form of ownership. Creditors of only one spouse can’t touch this tenancy in the entirety No Unilateral conveyance o Can only be created in Husband & Wife; arises presumptively in any conveyance to Husband & Wife, unless clearly stated otherwise. • Tenancy in Common o 2 or more owned with no right of survivorship; T-TIP not required. o Each co-tenant owns an individual part, with right to possess the whole; o Each interest is descendible, divisible, and alienable. o Presumption favors Tenancy in Common • Rights & Duties of Co-Tenants o Possession: each co-tenant is entitled to possess and enjoy the whole. No Ouster (exclude) o Rent: (1) Co-tenant is possession is not liable to others for rent; (2) 3rd party rent shared (%) o Adverse Possession: co-tenant cannot acquire title via AP, unless there is an ouster. o Carrying Costs: each co-tenant is responsible for their share of carrying costs (i.e. taxes, mortgage interest payments) (%) o Repair: each co-tenant enjoys right to contribution for reasonable & necessary repairs. Notice. o Improvements: no contribution for improvements; BUT at partition, entitled to credit, equal to any increase in value caused by efforts (or decrease in value caused by efforts)** o Waste: a co-tenant must not commit waste (1) Voluntary; (2) Permissive; (3) Amerliorative o Partition: a JT or TinC can bring an action for partition, a TinE cannot. Property 5 Landlord/Tenant Leasehold & Nonfreehold Estates • Tenancy for Years “to A from Jan. 1, 2003 to July 1, 2003” or “to A for 1 year” o Lease for a fixed determined period of time o Statute of Frauds: a term of years greater than 1 year must be in writing. o Termination-notice not required; simply terminates at the agreed upon date • Periodic Tenancy “to A from month to month,” o Lease which continues for successive or continuous intervals, until L or T give proper notice of termination o Creation • Express: “month to month” or “year to year” • Implied (3 ways) • (1) Land is leased with no mention of duration, but provision is made for payment of rent at set intervals • (2) an oral term of years in violation of the statute of fraudscreates an implied periodic tenancy. • (3) Holdover-in a residential lease, if L elects to holder 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. o Termination • Written notice is required to terminate a periodic tenancy • Amount of Notice: (1) for month-to-month1 month; week-to-week1 week; Exception: (3) for year-to-yearonly 6 months notice is required. • By private agreement, parties may lengthen or shorten these Notice. • Tenancy at Will “to T for so long as L or T desires” o No fixed period of duration o Unless the parties express agree to a Tenancy at Will, payment of regular rent will cause court to treat the tenancy as an implied periodic tenancy. o Termination-at any time. A reasonable demand to vacate is required. • Tenancy at Sufferance o Created when T has wrongfully heldover past the expiration of the lease. o Lasts either until (1) L evicts T or (2) L elects to hold T to a new term. Tenant’s Duties • T’s Liability to 3rd Parties o T is responsible for keeping the premises in reasonably good repair o T is liable for injuries sustained by 3rd parties T invited, even where L has expressly promised to make repairs. T always loses. May seek indemnification. • T’s Duty to Repair o When lease is silent: T must maintain the premises and make ordinary repairs. • T cannot commit waste. (1) Voluntary, (2) Permissive, (3) Ameliorative**** o FIXTURES= voluntary waste • When a tenant removes a fixture, he commits voluntary waste. • Fixture= once movable chattel that, by virtue of its annexation to realty, objectively shows the intent to permanently improve the realty.****** • T MUST not remove fixture, even if T installed it. • Examples of fixture= heating systems, furnace, custom made storm windows, lighting • Hot to tell whether an installation qualifies as a fixture? Property 6 • Express Agreement Controls • In absence of an agreement, T can remove a chattel if T can do so without causing substantial harm to the premises. • 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. o Majority Rule: T may terminate the lease if the premises are destroyed without T’s fault. (At common law, loss was attributable to T). • T’s Duty to Pay Rent o T breaches duty to pay rent & is in possession • Landlords Options= (1) evict through courts; or (2) continue L-T relationship and sue for rent. • Landlord CANNOT engage in self-help. o T breaches duty to pay rent but is Not in possession (S I R) • Surrender: L could treat T’s abandonment as offer to surrender, which L accepts. • Ignore: Ignore abandonment, hold T liable for unexpired rent (only in Minority Rule) • Re-Let: L must try to re-let. Mitigation principle. Hold T liable for deficiancies Landlord’s Duties • Duty to Deliver Possession: English Rule (Majority)-L must put T in actual & physical possession. o If at start of T’s lease, there is another T who is a holdover, L is in breach. • Implied Covenants: o Implied Covenant of Quiet Enjoyment: • Apply both to residential & commercial leases • Breach by actual wrongful eviction: if L wrongfully evicts or excludes T from the premises • Breach of Constructive Eviction (S I N G) • 3 Elements: (1) Substantial Interference; (2) Notice (t must give L notice); (3) Goodbye (T must vacate within a reasonable time after L fails to correct the problem • *L not liable for acts of other tenants, Exceptions – duty not to permit nuisances; duty to control common areas. o Implied Covenant of Habitability: • Applies only to residential leases • Non-waivable • Standard: premises must be fit for basic human habitation. Bare living requirements must be met. • Examples= failure to provide heat during winter, plumbing, running water • T’s entitlements when Implied Covenant of Habitability is breached (M R3 • (1) Move Out; (2) Repair & Deduct; (3) Reduce Rent (must put in escrow); (4) Remain in Possession (pay rent and affirmatively seek money damages) • No Retaliatory Eviction (i.e. raising rent, ending lease, harassing tenant, other) Assignment v. Sublease • Unless prohibited in lease, T may freely transfer his interest in whole (Assignment) or in part (Sublease). • L can prohibit T from assigning or subleasing in lease without T’s prior written approval; however; once T consents to one transfer, L waives the right to object to future transfers, unless L expressly reserves the right. Property 7 • Assignment: new T and L are in Privity of Estateliable for all covenants of original lease; and T1 and L are in Privity of Contract, so T1 and L are secondarily liable to each other. • Sublease: new T and L are not in Privity of Estate or Privity of Contract Landlord’s Tort Liability • General Rule: In Tort, L is under no duty to make the premises safe • Exceptions: (C L A P S) o (1) Common Areas; (2) Latent Defects Rule (L must warn of hidden defects); (3) Assumption of Repairs (no duty to repair, but if L does repair, liable for negligent repairs; (4) Public Use Rule (if public space and length of time on lease is short, L is liable for defects; (5) Short Term Lease of Furnished Dwelling (L responsible for nay defect that harms T that T doesn’t have time to fix). Servitudes • Easements o = entitles holder some form of use or enjoyment of another’s land. o Negative Easements: prevent Servient landowner from doing something (1-light; 2-air; 3-support, 4-stream-water from artificial flow, 5-scenic view). Can only be created expressly, by signed writing of grantor. o Appurtenant v. In Gross Easement Appurtenant= 2 parcels involved (Dominant Tenement (benefit) & Servient Tenement (burden) • Transferability= transfer automatically with the dominant tenement Easement in Gross= personal or pecuniary advantage that is not related to his use or enjoyment of the land (Only Servient Tenement) • Transferability= not transferable UNLESS for commercial purposes. • Examples= right to place billboard on another’s lot; right to swim or fish; utility poles & power lines o Creation of Easement (P I N G) Prescription: an easement may be acquired by satisfying the elements of adverse possession (COAH) Implication: Court will imply an easement if (1) previous easement was appurtenant; AND (2) parties expected that the use would survive division because it is reasonably necessary to the dominant land use and enjoyment. Necessity: (landlocked setting), if grantor conveys a portion of land with no way out Grant: an easement to endure for more than one year must be in writing (statute of Frauds) o Scope of Easement Determined by the terms of grant or the conditions that determined it. Unilateral expansion is not allowed. o Termination of Easement (END CRAMP) Estoppel: 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. Necessity: Easement created by necessity expires as soon as the necessity expires (unless created by express grant) Destruction: Destruction of Servient land, other than through willful conduct by Servient owner, terminates the easement. Condemnation: condemnation of Servient land eminent domain Release: written release, given by easement holder Property 8 Abandonment: easement holder demonstrates by physical action the intent never to use easement again (mere nonuse or mere words not enough). Must have Physical Action Merger: Unity of ownership. Servient & Dominant land become vested in same person Prescription: Servient owner interferes with easement under adverse possession • License o License = mere privilege to enter another’s land for some purpose. o Do not need a writing (no Staute of Frauds) o Freely Revocable, unless Detrimental Reliance o If NO easement, you have a license!!!!!!!!!!!!!! (essay tip) o Classic License Cases: (1) Ticket Cases-freely revocable licenses; (2) Neighbors talking by the fence (oral easement that violates statute of frauds create a freely revocable license); (3) Estoppel-detrimental reliance bars license’s revocability! • The Profit o Profit entitles its holder to enter the Servient land and take from it the soul or some substance of the soil such as minerals or timber or oil. (Profits follow the rules of easements) • Covenants o = promise to do or not do something related to land. (Unlike an easement because it is not the grant of a property interest, rather a contractual limitation or promise regarding land). o Restrictive Covenants (aka Negative Covenants): promise to refrain from doing something o Affirmative Covenants: promise to do something related to land o Covenant v. Equitable Servitude= remedy! Covenant= $ damages Equitable Servitude= injunction o When Covenants Run with the Land-BURDEN & BENEFIT Burden (W I T H N) • (1) WRITING (original promise in writing), • (2) INTENT (original parties intended covenant would run) • (3) TOUCH & CONCERN LAND (promise affects the parties as landowners; i.e. homeowners’ association fees) • (4) HORIZONTAL PRIVITY (original promising parties created covenant, i.e. grantor-grantee, landlord-tenant, or mortgagor-mortgagee relationship); • (5) VERTICAL PRIVITY (only time absent is adverse possession); • (6) NOTICE (new burdened covenant owner had notice of covenant when he took) Benefit (W I T V): • (1) WRITING; (2) INTENT; (3) TOUCH & CONCERN LAND; (4) VERTICAL PRIVITY. • Equitable Servitudes o = promise that equity will enforce against successors o Creation (1) WRITING: generally, original promise is in writing (2) INTENT: parties intended promise would be enforceable by and against successors (3) TOUCH & CONCERN LAND: Promise affects parties as landowners (4) NOTICE: successors of burdened land had notice of the promise o Implied Equitable Servitude (where one O who divides land up for residential development) General Scheme: when sales began, subdivider had general scheme Notice: ∆ lot holder had notice of promises contained in prior deeds • (1) Actual; (2) Inquiry; (3) Record o Equitable Defenses: Changed Conditions (must be persuasive, no mere pockets of limited change. Property 9 Adverse Possession • =possession for statutorily prescribed period of time can ripen into title. • Elements (C O A H) o Continuous: uninterrupted for given statutory period o Open & Notorious: sort of possession that usual owner would make under the circumstances o Actual: entry cannot be hypothetical or symbolic o Hostile: possessor does not have true owner’s permission to be there. • Tacking (2 adverse possessors): one adverse possessor may tack on his time to a predecessor’s time, so long as there is privity (i.e. blood, contract, deed, or will). No tacking allowed if Ouster. • Disabilities: SoL will NOT run against a true owner who is afflicted by a disability at the inception of Adverese Possession. (i.e. insanity, infancy, imprisonment) Land Conveyance-Purchase and Sale of Real Estate • Land Contract o Statute of Frauds: Requires writing & must describe land and state some consideration. Satisfaction by part performance= need 2 of 3 (possession, purchase, improvements) o Land is different from K Termsremedy= specific performance with pro rata deduction in purchase price. o Risk of Loss-Buyer bears risk of loss unless the K says otherwise. o Implied Promises in Every Land Contract Seller promises to provide marketable title • Marketable title= title free from lawsuits and threats of litigation • 3 circumstances will render title unmarketable: (1) ADVERSE POSSESSION (even the smallest portion); (2) ENCUMBRANCES (marketable title means unencumbered fee simple—thus, servitudes and mortgages render title unmarketable unless buyer has waived them.; (3) ZONING VIOLATIONS (title is umarketable if the property violates a zoning ordinace. Seller promises not to make any false statements of material fact • Majority Rule: seller is liable for failing to disclose latent material defects. (Silence is not golden***) Caveat Emptor (“Buyer Beware”): No implied warranty of habitability or fitness (exception: sale of a new home by a builder-vendor) • Closing o The Deed= passes title from seller to buyer. Must be Lawfully Executed & Delviered. Lawful Execution= writing, signed by grantor (need not recite consideration), with description of the land (need not be perfect; but no unambiguous statements, i.e. O coneys “some of my land”≠allowed) Delivery*** • Physical or manual transfer-delivery requirement could be satisfied when Grantor physically or manually transfers the deed to the grantee. • Present Intent Requirement-standard for delivery is the legal standard, and the test is solely one of Present Intent • Rejection: recipient’s express rejection of the deed defeats delivery. • Oral Condition: 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. (ex. “Blackacre is yours only if u survive me”) • Covenant for Title & 3 Types of Deeds o Quitclaim Deed: contains NO covenants. Does contain implied covenants. (Implied covenants of (1) marketable title & (2) promise not to make any false statements of material facts) buyer isn’t even promising that he has title to convey. Property 10 o General Warranty Deed: warrants against all defects in title Present Covenants: (1) COVENANT OF SEISIN (grantor promises he owns estate); (2) COVENANT OF RIGHT TO CONVEY (grantor promises he has power to convey); (3) COVENANT AGAINST ENCUMBRANCES (Grantor promises that there are no servitudes or mortgages). Future Covenants: (4) COVENANT FOR QUIET ENJOYMENT (grantor promises grantee will not be disturbed in possession by a 3rd Party’s lawful claim of title; (5) COVENANT OF WARRANTY (grantor promises to defend grantee should there be any lawful claims of title asserted by others); (6) 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. o Statutory Special Warranty Deed: provided for by statute in many states, contains two promises that grantor makes only on behalf of himself: (1) Covenant For Quiet Enjoyment; (2) Covenant Against Encumbrances. (note: grantor makes no representations on behalf of his predecessors in interest.) The Recording System • O conveys Blackacre to A. Later, O conveys Blackacre to B. O skips town. A v. B. Who wins? • Recording acts exist to protect Bona Fide Purchasers and Mortgagees (Creditors) • Bona Fide Purchaser= purchases for value and without notice. o Value: all that is required is a substantial pecuniary sum (paying ½ of fmv satisfies) o Notice (A I R) Actual Notice: literal knowledge of existence Inquiry Notice: buyer has a duty to inspect. If another is in possession, Buyer in on inquiry notice Record Notice: Depends on the Recording Statutes • NOTICE STATUTE: a conveyance of land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded. • 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. • Chain of Title o To give record notice to subsequent takers, the deed must be recorded properly within the chain of title, which refers to that sequence of record capable of giving notice to later takers. In most states, the chain of title is established through a title search of the Grantor-Grantee Index. 3 specific Chain of title problems o Shelter Rule: one who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against. If the BFP did not have notice, but his transferee did, the transferee “takes shelter” in the status of the BFP, even though the transferee is not a BFP. o Wild Deed: if a deed, entered on the records has a grantor unconnected to the chain of title, the deed is a wild deed-incapable of giving record notice of its existence. A wild deed is incapable of being recorded. o Estoppel By Deed: one who conveys realty in which he has no interest is estopped from denying the validity of the conveyance if he subsequently acquires that interest he had previously transferred. Property 11 Mortgages • 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. Debtor= mortgagor; Creditor= Mortgagee • Mortgage is the union of two elements: (1) a debt & (2) voluntary transfer of security interest in debtor’s land to secure the debt. • Legal Mortgage= (aka Note) evidenced by a writing (must satisfy the Statute of Frauds) • Equitable Mortgage= instead of executing a legal mortgage, mortgagor gives the creditor the deed to the land he is mortgaging. (Parol evidence is freely admissible to show parties true intent) • Parties rights one a mortgage has been created o Debtor: unless and until foreclosure; debtor-mortgagor has title & right to possession o Creditor: creditor-mortgagor has a LIENright to look to the land if there is a default. • Transfer of Interest-HOLDER IN DUE COURSE o The Creditor-Mortgagor can transfer his interest by: Endorsing note and delivering it to transferee, OR • 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. (i.e. fraud in the inducement, unconscionability, waiver, estoppel, lack of consideration). • HOWEVER, the holder in due course is subject to the Real Defenses that the maker may raise (MAD FIFI4) o (1) Material Alterations; (2) Duress; (3) Fraud in the Factum (i.e. lies about the instrument); (4) Incapacity; (5) Illegality; (6) Infancy; (7) Insolvency. By executing a separate document of assignment o To be a Holder in Due Course: (1) note must be negotiable, i.e made payable to the named mortgagee (2) original note must be indorsed, singed by the named mortagee (3) the original note must be delivered to the transferee, no photocopies (4) the transferee must take the note in good faith without notice of any illegality. (6) the transferee must pay value for the note. o 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. o Liability on the debt-buying a mortgaged property If Buyer assumes the mortgage, both owner and buyer are personally liable. Buyer is primarily liable, owner remains secondarily liable. If Buyer takes “subject to the mortgage”, Buyer assumes no personal liability. Only owner is personally liable. But, if recorded, the mortgage remains on the land, thus if O does not pay, the mortgage may be foreclosed. • Foreclosure o The mortgage must foreclose by proper judicial proceeding. At foreclosure, the land is soldsaal proceeds go to satisfying the debt. o If proceeds of Sale < Amount Owed-mortgagee can bring o If proceeds of Sale > Amount Owed-junior liens are paid off in their priority-any remaining surplus goes back to debtor. o First, you must take off the top (1) Attorneys’ Fees; (2) Expenses of Foreclosure; (3) Any accrued interest on 1st Bank’s mortgage. o Next, the sales proceeds are then used to pay off the mortgages in the order of their priority. Property 12 *Each claimant is entitled to satisfaction IN FULL before a subordinated lienholder may take. o Effect of Foreclosure Foreclosure will terminate junior interests to the mortgage being foreclosed but will not affect senior interests. • Junior lienholders will be paid in descending order with the proceeds from the sale-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 the foreclosing party are necessary party. If a necessary party is not joined, his mortgage will remain fixed to the land. (Debtor must be joined to get a deficiency judgment. Foreclosure does not affect any interest senior to the mortgage being foreclosed. The buyer at the sale takes subject to such interest. Buyer is not personally liable on the senior debt, but if the senior mortgage is not paid, senior creditor will foreclose. • Priorities o Creditors must record. 1st in time, 1st in right. Until you properly record, you no priority. o Purchase Money Mortgage = mortgage given to secure a loan that enables the debtor to actually BUY the encumbered land Super-priority—purchase money mortgage has super-priority over the parcel of land that the mortgage has a security interest in. o Subordination: subordination agreements are permissible. By private agreement, a senior creditor may agree to subordinate its priority to a junior creditor. • Redemption o Equitable Redemption: debtor has the right to redeem the land & free it of the mortgage. To exercise the right to equitable redemption, the debtor must pay off the missed payment, plus interest & cots 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.) o Statutory Redemption: gives the debtor-mortgagor a statutory right to redeem from some fixed period after the foreclose sale. (typically six months to a year-recognized in half the states). During the statutory redemption period, the mortgagor will have the right to possession of Blackacre during the statutory period. Lateral Support • 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. • If π can show that even if there were no buildings, that the land would have collapsed because of adjacent landowner’s actions, the excavating landowner is strictly liable Water Rights • Riparian Doctrine: water belongs to those who own the land bordering the water course. o Those people are known as Riparians, and share the right of reasonable use of the water. o 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. o Rights are determined by priority of beneficial use. First in Time, First in Right. • Ground Water (aka Percolating Water)= water beneath the earth. Surface owner entitled to make reasonable use of ground water, however, the use must NOT be wasteful. Property 13 • Surface Water= rain, springs, or melting snow. o Common Enemy Rule: a landowner can change drainage to combat surface water. Many courts have modified the Common Enemy Rule to prohibit unnecessary harm to other’s land. Possessor’s Rights • The possessor of land ahs the right to be free from trespass & nuisance. • Trespass: invasion of land by tangible physical object. To remove trespasser, bring an action for Ejectment. • Nuisance: substantial & unreasonable interference with another’s use and enjoyment of land. • there is no nuisance if the problem is the result of π’s hypersensitivity or specialized use. Eminent Domain • =Government’s 5th Amendment Power to private property for public in exchange for just compensation. • Remedy= compensate owner for the taking or terminate the regulation & pay owner for damages that occurred while the regulation was in effect. Zoning • Government may enact statutes to reasonably control land use. • Variance: principal means to achieve flexibility in zoning. Must show o (1) UNDUE HARDSHIP. o (2) VARIANCE WON’T WORK A DETRIMENT TO SURROUNDING PROPERTY VALUES. • Non-Conforming Use: a once lawful existing use now deemed nonconforming by a new zoning ordiance. o Cannot be eliminated all at once unless just compensation is paid. Otherwsie, it could be deemed an unconstitutional taking. • Unconstitutional Exactions: o Exaction= amenities the government seeks in exchange fro granting permission to build. o Inherently suspect-tantamount to government extortion. o To pass constitutional scrutiny, these exactions must be reasonably related in both nature and scope to the impact of the proposed development.