Property Outline 2nd Half Chapter 5 Tenancy in Common How Created? To A + B Joint Tenancy with Right of survivorship To A + B as Joint Tenants with the right of survivorship The four unities Tenancy by the Entirety To H + W as Tenancy by the Entirety Four unities plus marriage No. No No No. Dead?
Restrictions in creating Convey without consent inter vivos? Devise/descend at co-owner’s death? Probate? Same as above Can one Co-tenant’s creditor reach the property?
Unity of possession, right of possession now. PPI Yes Yes Yes Yes, alive or dead
Yes, it then changes to TC No No Alive, Yes because A can voluntarily convey his half. However, not if one dies.
A. Common Law Concurrent Interests 1. Types, Characteristics, Creation a. Tenants in common i. Have separate but undivided interests in the property ii. The interest of each is descendible and may be conveyed by deed or will. iii. There are no survivorship rights between tenants in common. b. Joint Tenants i. Have the right of survivorship. Are considered a single owner together. ii. In theory when one tenant dies nothing passes to the surviving tenant. Rather it simply continues in survivors freed from the participation of the decedent. iii. Some jurisdictions abolish the requirement of the unities and provide that it may be created just by stating the intent to do so. iv. Four essential unities 1. Time – must be acquired or vest at the same time. 2. Title – must acquire title by the same instrument or by joint adverse possession 3. Interest – must have equal undivided shares and identical interests measured by duration. Must be same percentage 4. Possession – each must have a right of possession to the whole
v. Majority says you can create a JT without a strawman. However, the majority today also says that in order to destroy a JT you have to convey to a third party. In minority you do not, but you may have to record the deed to be effective. c. Tenancy by the entirety i. Only between husband and wife ii. Same as joint tenants with the fifth element of marriage. iii. Are considered to hold as one person, neither husband nor wife can defeat the right of survivorship of the other by a conveyance iv. After divorce they become tenants in common. 2. Severance of Joint Tenancies a. Riddle v. Harmon (Minority Rule) (Majority Says You Still have to use a Straw) i. A joint tenancy may be terminated by the conveyance by one joint tenant of his interest in the joint tenancy property to himself. ii. You don’t need to inform the other tenant when you convey your separate estate. b. Harms v. Sprague i. Title theory (Minority) – The guy with the mortgage actually takes title. ii. Lien Theory (Majority) – Nothing changes, the lien gives the bank first dibs but it doesn’t change title. iii. Illinois is a lien state so it didn’t sever title iv. Creditors in Joint Tenancy 1. Some jurisdictions say that the other JT gets the lien 2. Some jurisdictions say that the lien vanishes v. This means that lenders need all co-owners to sign. 3. Joint Tenancy Bank Accounts a. True Joint Tenancy – O intends to make a present gift to A of one-half the sum deposited in addition to survivorship rights to the whole sum. b. Payable on Death Accounts – O intends to make a gift to A only of survivorship rights. c. Convenience Accounts – O intends that A only have power to draw on the account to pay O’s bills and not have survivorship rights. d. Majority says the surviving tenant takes the sum remaining unless there is clear and convincing evidence that a convenience account was intended. e. During the lifetime of the parties the majority states that the account belongs to the parties in proportion to the net contribution of each party f. Minority says the parties have equal fractional shares of the account. Bank Accounts How Created? Can B withdraw $ while A is alive without having to pay it back? Does B get $ when Joint Tenancy A+B Yes Payable on death A+B No Convenience Accounts A+B Yes, but only as A’s agent and at A’s direction No
Yes
Yes
A dies?
4. Relations Among Concurrent Owners a. Partition – Delfino v. Vealencis i. Two ways to partition: 1. Partition in Kind (preferred method) – physical division of the property. Courts will order a partition in kind unless: a. Physical partition is impossible or extremely impractical, or b. Physical partition is not in the best interests of all parties. Burden is on the party requesting a partition by sale to demonstrate that such sale would better promote the owner’s interests. 2. Partition in Sale (not favored but is most common) – after sale the net proceeds are divided among the co-owners in proportion to their ownership interests. ii. Agreement not to partition is enforceable if: 1. It clearly manifests the parties’ intention not to partition, & 2. Its duration is limited to a reasonable period of time. b. Sharing the Benefits and Burdens of Co-Ownership i. Spiller v. Mackereth 1. Between two co-tenants A + B, if A is in possession does he owe rent to B? a. Majority says no unless there is some sort of agreement between A + B, there is a fiduciary duty, or if A ousts B. i. However, A must pay the mortgage payments, taxes, utilities, and maintenance b. Minority says the tenant in possession always owes rent unless there is an agreement to do otherwise. If cotenant in possession does pay rent he is entitled to make other cotenants contribute on the mortgage and taxes. 2. An Ouster? a. B must make a demand to be let in and A must say no. b. In the event of an ouster A may have to pay B rent. ii. Swartzbaugh v. Sampson 1. One cotenant can lease all the property without the other cotenant’s permission. 2. A cotenant that receives rents on a property from a third party is obligated to account to his cotenants for those rents. 3. If minerals or something else are removed from the land, the cotenant must pay the other cotenant their proportional share of the value. iii. Accounting for Benefits, Recovering for Costs – Each cotenant is liable for his proportionate share of costs of ownership 1. Mortgage – Can get all three remedies: contribution, accounting, and partition 2. Necessary Repairs – Accounting, or a partition, cannot get a contribution 3. Improvements – Only get paid back when there is a partition
a. You don’t get back what you spent on the improvement, you get what value you added to the property. iv. Remedies 1. Right to Contribution – piecemeal, you can ask for one thing back 2. Accounting – you look at everything a. Ex. A pays whole mortgage of $2,000/mo. And B pays for $3,000 for new roof. A can ask for all remedies, but B can only ask for an accounting. 3. Partition. 5. Marital Interests – The community property system Common Law (separate Community Property (10 property) 40 states states) Who owns it? Presumed separate property Everything is presumed to be community property, regardless of how you take title from the moment of marriage. Can 1 spouse convey? Yes Yes to a Bona fide purchaser. Not real property. One spouse cannot give away community property as a gift Can 1 spouse will away his Yes Yes, all to my pilates share? trainer, husband now becomes a TC with the. Registered domestic partners are given same rights.pilates trainer. Half the car, half the house, half of everything Step up on death? a. 40 states are common law i. What husband earns-husband owns ii. What wife earns-wife owns b. About 10 states are community property i. Things brought into the marriage don’t become community property. Neither do gifts, devise, or inheritance during the marriage. ii. During marriage earnings, rents, profits, debts, everything becomes community property in the absence of a pre-nupt. iii. Step up on death rule is that when one dies, all the property steps up to the value at death. 1. In common law state, the ½ of the spouse who dies steps up, but not the ½ of the survivor.
2. In community property state, when one spouse dies, both ½’s of property step up to value on death. iv. Step up on death examples in community property 1. Stock for $10 in 1980. Sell for $110 in 2002. $100 gain for tax purposes 2. $10 in 1980. $100 on death. Wills to A. A’s tax base is $100 3. When you inherit something from someone the base steps up. If it is a gift you take on the other person’s base. v. In Common law state 1. H&W as JT buy stock for $10 in 1980 2. W dies when stock is worth $110 in 2002 3. Wife paid $5 for stock originally. Her part steps up to $55. His base is his $5 plus her $55, which is $60. His gain is therefore $50 c. Mixing Community property with Separate Property i. If sources or commingled property can be identified accurately as separate or community funds, the commingled property will be divided into separate and community portions. ii. If it is not possible, it will be presumed to be community property d. Migrating Couples i. Whether property is characterized in accord with the community system or the common law depends upon the domicile of the spouses when the property is acquired. ii. Once property has been characterized, the ownership does not change when the parties change domicile unless both parties consent to the change in ownership. iii. When a person dies, the law of the decedent’s domicile at death governs the disposition of personal property, and the law where land is located governs the disposition of land. Ch. 6 Leaseholds
rm of years
Language To T for 1 yr. To T from yr to yr or mo. To mo. Or whatever term to whatever term
iodic Tenancy
Key Feature Ending date is fixed It keeps rolling over (if something rolls over, it has to be less than a year; common law 6 months; but usually mo. To mo.
Notice to end? No Yes. Majority rule is 30 days and you must terminate on last day of period. Common law – notice had to be equal to term, but no greater than 6 months Yes
Notes
Ex. If you give notice on April 22nd you would move out on May 31st if period was end of month to end of month.
nancy at will, also know ½ ancy at will.
To T as long as L and T desire
Either party may terminate; ends at death of either landlord or tenant
nancy at sufferance
a. The half tenancy at will (Garner v. Gerrish) i. There is also a ½ tenancy at will category 1. Most courts allow the unilateral termination where it’s the tenant who can end the agreement 2. Majority rule is that it is ok for the tenant to have the unilateral right to terminate but not the landlord a. What if a landlord had the unilateral right to terminate? i. Common law – imply the tenants right to terminate also, and it becomes a tenancy at will ii. Modern – a minority of courts say to enforce it as written b. The tenancy at Sufferance: Holdovers i. Crechale case – Tenant didn’t leave; landlord treated as trespasser; courts said that landlord couldn’t then change their mind from eviction to then holding tenant to new term. ii. Arises when a tenant remains in possession after the termination of tenancy iii. Options for the landlord (Can only choose one) 1. Eviction, treat tenant as a trespasser and evict, you may also collect damages, measured by the reasonable value of the use of the property for the holdover period. 2. Elect to hold tenant to a new term. Courts do not like this second option. a. Majority rule – creates a periodic tenancy with the same unit term as the previous tenancy, not to exceed one year b. Minority rule – one year or less
iv. Holdover must interfere with the landlord’s use 1. If stuff is left in rented property, but landlord can still use property this is not a holdover. v. The tenant must stay on the property voluntarily 1. If mom had to stay because child was sick B. The Lease a. How to determine if it is a lease i. Intent of the parties (did they intend for it to be a lease?) ii. Do you have an exclusive right of possession? 1. Leases transfer a right to possession to a particular space with a right to exclude for a particular amount of time. iii. Does the party pay rent? Is it called rent? (If so it is probably a lease) iv. Restrictions on use and control 1. If there are a lot of restrictions , it is less likely to be a lease v. Are there services provided? 1. If a service is provided (like room service or maid service) then you probably don’t have a lease 2. General rule for license (like a billboard) is it can be terminated at any time 3. A lease can only be terminated with notice 4. Ordinarily leases can be assigned to someone else, unless the lease says otherwise. C. Selection of Tenants (Herein of Unlawful discrimination) a. The General rule is that you can discriminate unless a statute says you cannot. i. Fair Housing Act section 3604 1. Rule: you can’t discriminate on race, color, sex, familial status, religion, national origin, or handicap 2. Exceptions a. You can discriminate when you sell or rent your single family home (as long as you don’t own more than three houses) i. But you cannot advertise your discriminatory intent. b. If landlord is an owner and occupant of the house or apartment building and it consists of four units or less i. Again, you cannot advertise in a manner which reveals your discriminatory intent. ii. The 1866 Civil Rights Act. 1. Prohibits private and public discrimination on the basis of race in the purchase, lease, sale, holding, or conveyance of property. a. Different from FHA in three ways i. Not available for ads ii. You have to prove intent to discriminate iii. Only applies to race claims iii. When deciding whether an ad is discriminatory or not, the test is: what would an ordinary reader construe its meaning as? iv. Burden is on plaintiff to show Prima Facie case; must show: a. Member of protected statuts b. Qualified renter
c. You are denied a rental d. It is still available or it was rented to someone else not in protected class. v. Once P makes out a prima facie case, then D has the right to rebuttal and plaintiff must show that the rebuttal is a pretext. D. Delivery of Possession a. Majority (English rule) – there is an implied covenant of promise by landlord to give the tenant actual possession on the first day in the absence of stipulation to the contrary. A holdover is the landlord’s problem. i. Rationale - this is the expectation of the parties. Also the landlord is in a better position to know if the old tenant is going to holdover. ii. Remedies 1. Tenant can end the lease and sue for damages (cost of renting somewhere else, moving costs, storage costs, etc). 2. Tenant can make the landlord go after the holdover. 3. Tenant can go after the holdover themselves if they want. 4. You do not have to end the lease and you are not liable for the lease money for the time you were dispossessed. b. Minority (American rule) – No covenant is implied, landlord only has obligation to put tenant in legal possession. It is up the new tenant to get the holdover out. i. Rationale - it is unfair to hold the landlord responsible for something he had no control over. ii. Tenant’s only remedy is against the holdover E. The Tenant who Defaults a. Tenant who has Abandoned – Universal that landlord has clear right to retake possession. b. Tenant who defaults but is still in possession i. Majority (Common Law) – The landlord may use self-help if: 1. He is legally entitled to possession, and 2. His means of re-entry are peaceful. ii. Minority (growing trend) – Landlord must resort to judicial process only, even if the lease contained a clause allowing re-entry. 1. Remedies include: Losses profits, loss of chattels c. The tenant who has abandoned Possession – Duty to mitigate damages. i. Sommer v. Kridel – tenant was going to get married, wedding was canceled, tenant backed out of lease he never took possession of it. Landlord didn’t mitigate damages, even though he could have leased it. ii. Riverview Realty v. Perosio – tenant moved in but then vacated apartment. iii. Minority (Common Law rule) – the landlord has no duty to mitigate damages when the tenant breaches iv. Majority (Sommer rule) – Landlord must make a reasonable effort to re-rent the apartment to mitigate damages if the tenant breaches. Reasonable efforts may include: 1. Ads in the newspaper, using realtor, what is normal to do for other apartments. v. Burden of proof that landlord used reasonable diligence to mitigate damages:
1. Majority – Tenant has the burden to show the landlord did not mitigate; landlord is presumed to have mitigated 2. Minority (Sommer case) – the burden of proof is on the landlord; landlord is presumed to not have mitigated. vi. If landlord can re-lease but the new lease is less than the original lease he can recover the difference from the original tenant. vii. If landlord can re-lease for more money than the original lease: 1. Most jurisdictions say landlord keeps the extra money 2. A few jurisdictions say the tenant should get the extra money. viii. What if landlord is unable to re-rent the premises? 1. A landlord that doesn’t mitigate: a. Some courts say he gets no future rent (basically accepting surrender) b. Some court figure out how much abandoning tenant owed, and then subtract out what they would have got had they made a reasonable effort to re-rent. 2. If landlord makes reasonable efforts to mitigate and does not re-rent then the tenant owes the balance. d. Surrender: Tenant offers to end tenancy i. If landlord accepts, lease is terminated ii. Generally doing nothing by the landlord is not acceptance iii. If landlord doesn’t reply and his actions are inconsistent with the continuation of original lease acceptance may be implied 1. The court will look to the intent of the landlord and see if their actions are inconsistent or repugnant to the original lease. iv. After surrender, tenant is no longer liable for future rent but is liable for accrued rent. v. If surrender is not accepted then tenant continues to be liable until the end of the lease e. Landlord’s Remedies i. When tenant in possession fails to pay rent or breaches lease duty, LL may sue for back rent and damages or terminate lease and recover possession ii. Doctrine of Anticipatory Breach – when tenant abandons, LL may recover back rent, other damages, and the present value of amount of unpaid rent which exceeds amount of subsequent lease for balance of term. iii. Security Deposits – most often characterized as advance rent or liquated damage; but if bear no relation to actual damages, court will hold as an illegal penalty. F. Rights, Duties & Remedies a. Quiet Enjoyment and Constructive Eviction - Ensures tenant’s beneficial use and possession of property without interference by landlord; can be waived as to particular defects at time lease is formed. i. History – Early common law: because provisions of lease were independent, LL’s breach gave tenant a cause of action for damages but not right to suspend rent payments or terminate tenancy. 1. Exception: Tenant’s obligation to pay ended when landlord disturbed his possession
ii. Elements 1. Wrongful act or omission by landlord in breach of express promise in lease or covenant of quiet enjoyment = constructive eviction, when conduct: a. Renders the property substantially unsuitable for the purpose it was leased, or b. Seriously interferes with the beneficial enjoyment of premises. 2. Interference need not be permanent but must be regular and serious. 3. Right is waived if tenant does not leave within a reasonable time. iii. Reste Realty Corp. v. Cooper 1. Commercial property floods due to defect in driveway (common area); LL argues that tenant did not leave in reasonable time and defect was not permanent; Rule: condition of road was permanent defect, and tenant left within 10 days of worst flooding. The previous LL promised to fix it and died. Under the circumstances the vacation was within a reasonable time, and the delay was not sufficient to establish a waiver of the constructive eviction. Total Actual Eviction No Duty To Pay Rent Total Constructive Eviction Partial Actual Eviction Majority: No duty to pay rent for any of premises Minority: Tenant has to pay rent for portion that he is still using. Partial Constructive Eviction Tenant still liable for rent and can sue for damages for rent paid for portion not usuable. iv. Tenant’s Remedies 1. If the tenant stays, he can sue for damages equal to difference between value of property with breach and value without breach. a. Tenant cannot stay on the premises and withhold rent under CQE 2. If he leaves, he is relieved of liability for future rent and entitled to recover damages (loss to possessions or costs in finding new facilities) v. Partial Eviction (hypo, someone is renting 1st floor and basement) 1. We have to distinguish between actual v. constructive. a. Actual eviction of part of premises – i. Majority rule: tenant owes no rent for anything. (Why? LL is at fault and cannot apportion his wrong). ii. Minority rule: Restatement says that the tenant owes rent for the part he hasn’t been evicted from. b. Constructive eviction of part of premises (ex. Rain floods basement) i. Tenant can sue for damages and they would subtract out the amount he would have paid for the part he was constructively evicted from. b. The Implied Warranty of Habitability – Ensures that premises are safe, clean, and habitable; cannot be waived – no assumption of the risk on the part of tenant in relation to patent/latent defects.
i. Hilder v. St. Peter: D failed to repair apartment despite repeated requests; sewage in basement, window broken, plaster falling in back room. Rule: violation of IWH, tenant stayed and paid rent, court refunded all rent paid as damages – estimated Fair Market Value to be zero. ii. Steps for asserting IWH: 1. Tenant discovers serious defect which interferes with safety or health, a. Check first to see if there is a code violation. 2. Tenant notifies landlord, and 3. Landlord has reasonable time to fix it iii. Damages if Landlord doesn’t fix it. 1. Rescission of contract and move out a. Tenant is claiming Constructive eviction – he gets to move out plus get a refund on some of what he paid 2. Reformation: Repair and deduct from rent 3. Tenant can withhold rent until the Landlord fixes it. a. Then Landlord would sue and the Tenant would pay reasonable value 4. Tenant can sue for damages for discomfort and annoyances a. T may also get punitive damages. iv. How do you know if there is a violation of IWH? 1. Whether the claimed defect is a safety or health code violation, or 2. Whether the claimed defect has an impact on safety or health a. Basically, defects or problems with a serious impact on safety or health of tenant. v. Does IWH cover latent and patent (obvious, manifest) defects? Yes vi. IWH cannot be waived vii. Three differences between CQE and IWH 1. IWH doesn’t apply to commercial leases. 2. Casual leases by non-merchant landlords do not come with covenant of implied warranty a. So CQE only applies to LL who are in the business to rent 3. IWH cannot be waived viii. Advantages of IWH 1. Measure of damages can be more 2. More remedies 3. Applies throughout the lease to things that come up during lease. 4. Cannot be waived. ix. Disadvantages of IWH 1. Drives cost of housing up 2. Tenants cannot bargain away 3. Applies only to residential and Landlords that are in the business of renting. c. Illegal Lease Doctrine – When landlord violates code provisions, of which he had actual or constructive knowledge that existed before the lease was made, the lease is illegal. Tenant under illegal lease is a tenant at sufferance; landlord entitled to receive reasonable value of premises in their condition. d. Retaliatory Eviction
i. The landlord cannot retaliate against the Tenant for asserting rights under IWH by any of the following: 1. Eviction 2. Raise rent 3. Decrease services a. Damages are let Tenant Stay, possibly lower rent, or provide services b. How could Tenant prove it? There is presumption of retaliation by Landlord if he does any of the above within 90 days or so. So the landlord must rebut this presumption. i. If it happens after this period then the burden will shift to the Tenant. e. Landlord’s Tort Liability i. Majority: Tort liability can be contracted around and is limited to specific exceptions to the common law rule that landlord has no duty to provide suitable premises. General rule is that the landlord is not liable for injury caused to or by third persons. Exceptions: 1. Duty to maintain common areas a. Keep it free from reasonable dangerousness 2. Duty to disclose Latent defects a. Defects that Landlord knew or should have known 3. Public Use Exception: duty to disclose latent defects that are unreasonably dangerous at start of lease, landlord must know or should have known of defect, Tenant must be unaware of defect. Landlord must know that tenant is going to open it up to the public. ii. Minority: Tort liability cannot be contracted around; a general standard of care of negligence liability imposed on landlord. f. Tenant’s Duties; Landlord’s Rights and Remedies i. Waste, duty to repair (commercial), and duty to pay rent. 1. Affirmative waste – Where the Tenant substantially alters for the worse the condition of the premises a. The shorter the tenancy, the greater the expectation by the LL that it will be returned just as he leased it. b. The longer the tenancy, the LL will expect changes i. Fixtures – Tenant is not allowed to remove, even if they paid for it and installed. A fixture is something that was movable but has now been annexed to the land. 2. Permissive Waste – not doing something and the neglect lowering the value. a. A residential does not have the duty to repair, but a commercial tenant does (to make minor repairs) b. What if the lease says the Tenant has to repair and then the building burns down? i. General rule is that a duty to repair does not equal a duty to rebuild.
ii. Does Tenant still have to pay rent if building is destroyed in commercial lease? 1. If tenant caused it – court might hold him to the lease 2. LL caused it – T will not have to pay rent. 3. Third party – The tenant will still have to pay rent. Waste: Repair Residential Common Law: Tenant has duty to repair Majority: Tenant has no duty to repair, but must notify landlord of problem to avoid permissive waste. Commercial Tenant has duty to repair. SPLIT: Some courts require tenant to rebuild, but some only require repair.
Damaged Premises Residential No duty to pay rent for damaged premises; landlord may seek negligence damages, if damage was tenant’s fault Commercial If renting part of premises and that part is destroyed, tenant does not have to pay. Exception: If destruction was tenant’s fault, then tenant must keep paying. If renting the Whole Premises and the whole is destroyed, tenant must still pay rent for the land.