MBE Property Flashcards
Defeasible Fees
(R) A fee simple estate of potentially infinite duration that can be terminated upon the occurrence of some specified event. Three Types: 1. Fee Simple Determinable (FSD) 2. Fee Simple subject to Condition Subsequent (FSCS) 3. Fee Simple subject to an Executory Interest (FSEI)
Defeasible Fees - FSD
(R) Property automatically terminates and reverts back to the grantor upon the happening of a given event or condition. Grantor retains a possibility of reverter. Absolute restraints on alienation are void. Hint: Phrases such as 1. “For so long as” 2. “While” 3. “During” 4. “Until” Example: If A stops practicing law property automatically reverts back to grantor
Defeasible Fees - FSCS
(R) Grantor retains the power to terminate grantee’s estate upon the happening of some given event or condition. The Grantor retains a right of reentry. Absolute restrains on alienation are void. Example: To A, but if he wins the lottery, grantor reserves the right to reenter and retake.
Defeasible Fees - FSEI
(R) Property automatically transfers to a third party upon the happening of a given event or condition. The third party holds the shifting executory interest. Absolute restraints on alienation are void. Example: “To A, but if A is ever arrested, then to B”
Life Estate
(R) An interest that lasts only for the life of the interest holder. If the life estate is measured by the life of another person, however, that life estate will be pur autre vie. Duties and rights of life tenants include that a life tenant cannot injure interests of remainder or reversion holder, which can be present through the mechanics of waste.
Life Estate - Doctrine of Waste
(R) The doctrine of waste holds that a life tenant cannot injure the interests of a remainder or the reversion holder. There are three forms of waste: (1) affirmative, (2) permissive, and (3) ameliorative.
Life Estate - Doctrine of Waste (Affirmative)
(R)The life tenant cannot consume or exploit natural resources, except: (a) where necessary for repairs or maintenance of land, (b) when grant expressly gives the right to exploit, or (c) if land was used for exploitation prior to the grant - open mines doctrine; if extraction of materials was done on land before life estate began, life tenant may only extract from mines already open.
Life Estate - Doctrine of Waste (Permissive)
(R) Life tenant has a duty to repair and maintain property up to extent of income and profits derived from land or rental value of land.
Failure to do so constitutes permissive waste.
Life Estate - Doctrine of Waste (Ameliorative)
(R) Acts that economically benefit land’s value; usually permitted under modern authorities.
Future Interest - Grantor
(R) A grantor may have a future interest in three ways:
(1) possibility of reverter, which accompanies a FSD,
(2) a right of reentry and power of termination, which accompanies a FSCS, or
(3) a reversion, which defaults future interest for grants of an estate smaller than a fee simple - life estate or leasehold.
Future Interest - Grantees/Third Person
(R) A grantee or a third person may have a future interest in three ways:
- (1) vested remainder,
- (2) contingent remainder, or
- (3) an executory interest.
There are three types of vested remainders:
- (a) indefeasibly vested remainder,
- (b) vested remainder subject to total divestment, and
- (c) vested remainder subject to open.
Remainders
(R) A future interest in a third person that arises immediately upon the termination of the preceding estate. There are two types of remainders; vested and contingent.
A vested remainder can take the form of either:
- (1) indefeasibly vested remainder,
- (2) vested remainder subject to total divestment/executory limitation, or
- (3) vested remainder subject to open.
A contingent remainder arises, however, if:
- (a) there is a condition precedent to the future interest becoming possessory,
- (b) the future interest vests in an unascertained taker, or
- (c) both a and b.
Remainder - Vested
(R) A vested remainder automatically becomes possessory upon the natural expiration of the preceding estate, but is subject to two limitations, in that, it cannot be subjected to any condition precedent or vest in an unknown or unascertained person.
There are three types of vested remainders:
- (1) indefeasibly vested remainder,
- (2) vested remainder subject to total divestment, and
- (3) vested remainder subject to open.
Remainder - Vested (indefeasibly vested remainder)
(R) An indefeasibly vested remainder becomes possessory immediately upon termination of the prior estate.
Remainder - Vested (Subject to total divestment)
(R) A vested remainder subject to total divestment is subject to some condition subsequent, such that the remainderman could be divested after taking possession.
Example: “To A for life, remainder to B; but if B weds, to C”
Remainder - Vested (subject to open; class gift)
(R) A vested remainder subject to open vests in a described class of takers, at least one of whom is capable of taking possession - by virtue of being alive - and not subject to any condition precedent.
A class may be either open or closed.
A class remains open to allow for future class members and closes when additional class members are impossible.
RULE OF CONVENIENCE - Class closes whenever any class member can call for distribution of her share; does not apply if it conflicts with the grantor’s expressed intent.
Remainder - Contingent
(R) A contingent remainder will be contingent if it is either:
(a) subject to a condition precedent, or
(b) created in favor of an unascertained or unborn person.
Remainder - Contingent (condition precedent)
(R) A contingent remainder subject to condition precedent exists where the remainder’s taking is subject to a condition precedent, i.e., contingent as to an event. Once the grantee satisfies the contingency, the interest automatically becomes an indefeasibly vested remainder.
Example: “To A for life, then to B and his heirs when B gets married.” If B is unmarried: A - life estate B - Contingent Remainder Grantor - reversion
Remainder - Contingent (unascertained persons)
(R) A contingent remainder subject to unborn or unascertained persons exists where a remainder is contingent, if created, in favor of unborn or unascertained persons. The remainder is contingent on the grantee becoming born or ascertained.
Example: “To A for life, then to B’s heirs.” If B is alive upon conveyance, remainder is contingent because heirs of B cannot be ascertained until B dies.
Rule of Destructibility
(R) At COMMON LAW, a contingent remainder is destroyed if it remains contingent - i.e. the condition is not satisfied - when the preceding estate ends.
Under MODERN LAW, however, gives a reversion to grantor or grantor’s heirs until grantee satisfies the condition.
Merger (Shelley’s Rule)
(R) At COMMON LAW, the remainder merges and A has a fee simple absolute.
Under MODERN LAW, however, A has a life estate and A’s heirs have contingent remainders.
Example: “O grants to ‘A for life, then to A’s heirs’ and A is alive” Note: O - Has a reversion because A could die without heirs.
Doctrine of Worthier Title
(R) The contingent remainder in O’s heir is void; A instead has a life estate and O has a reversion.
Example: “O conveys ‘to A for life, then to O’s heirs’”
Executory Interest
(R) An executory interest is a future interest in a third party that takes effect by cutting short some interest - two types: shifting and springing.
Hint: Phrases such as 1. “But if” 2. “Then to” 3. “For so long as” Note: EI holders lack standing to sue for waste **
Executory Interest - Shifting
(R) A shifting EI always follows a defeasible fee, which serves to cut short someone other than the grantor.
Example: “To A and his heirs, so long as the property is used for storage. But if used for any other purpose, to B and his heirs”
Note: A - FSEI B - Shifting EI
Executory Interest - Springing
(R) A springing executory interest cuts short the interest of the grantor or his heir.
Example: “To A, if and when he gets married” Note: A - EI Grantor - FSEI
Rule Against Perpetuities (RAP)
(R) No property interest is valid unless it must vest, if at all, no later than 21 years after the death of a life in being at the time the interest was created.
That is, a future interest is void if there is any possibility, no matter how remote, that it will vest more than 21 years after the death of the measuring life.
RAP Applies To:
- Contingent Remainders
- EI
- Vested remainder subject to open
- Option and rights of first refusal
- Powers of appointment
RAP - Special Considerations (Right of first refusal/Class gift)
(R) With respect to rights of first refusal and RAP, a contingent interest in property violates RAP if they could possibly be exercised outside the time period allowed by RAP.
As for class gifts and RAP, for a class gift to satisfy RAP, the class must be closed with all conditions precedent satisfied for every member - the rule of convenience for class gifts may save a class that would otherwise violate RAP.
RAP - Special Considerations (Fertile Octogenarian)
(R) The presumption that any woman is capable of giving birth, regardless of her age or condition.
RAP - Special Considerations (Charity- to-Charity)
(R) RAP does not apply to conveyances from one charity to another.
Tenancy in Common - (Presumption under modern law)
(R) A TIC is an estate with multiple tenants in which each co-tenant owns an individual part and each has a right to possess the whole.
TIC are
- freely transferable,
- co-tenants share the right to possession,
- there is no survivorship rights, and
- a co-tenant may force a partition at any time and take sole ownership of her share in the estate.
Joint Tenancy
(R) In order for a JT to be created, four conditions must concurrently exists when the tenants take their interest:
- (1) time - JT’s must take their interest at the same time,
- (2) Title - JTs must receive their conveyance through the same instrument,
- (3) Interest - JTs must take equal and identical interests, and
- (4) Possession - JTs must have equal right to possessory rights.
The grantor must expressly intend to create a JT; otherwise, a TIC is presumed.
JT’s are transferable, but not devisable or descenbile.
JT, further, provides a right of survivorship.
Joint Tenancy - Severance/Transfer
(R) Severance by any JT creates a TIC with respect to the severed interest.
Moreover, a JT interest becomes a TIC upon transfer; this does not destroy the entire JT if two or more JT’s remain.
Joint Tenancy - Mortgage
(R) The MAJORITY (lien theory), holding that a JT can take a mortgage on her interest without severing JT because no title passes to mortgagee.
The MINORITY (title theory) holds, however, JT is severed if any JT takes a mortgage on her interest because title passes to the mortgagee.
Tenancy by the Entirety
(R) While only recognized is certain COMMON LAW jurisdictions, TBE is similar to JT, but it is a marital estate between a husband and wife. A TBE requires the same four unities as a JT. While there is a right to surviviorhship, unlike JT, there is no right of partition.
Tenancy by the Entirety - Severance
(R) There are four ways in which a tenancy by the entirety can be severed, which created a TIC: (1) death of one co-tenant, (2) mutual agreement of the parties in writing, (3) issuance of a divorce decree, or (4) execution by a joint creditor, e.g., foreclosure.
Co-Tenants Rights and Duties
(R) The following rules generally apply to concurrent estate tenants: 1. Possession - each co-tenant (CT) has rights to possess the whole 2. Rent from a CT in exclusive possession - a CT in exclusive possession is not liable to CT for rent. 3. Rent from third parties - a CT leasing premises out must account to CT for their share of rental income. 4. Adverse Possession - Tenants may not acquire title to the exclusion of CT through adverse possession. 5. Carrying Costs - each tenant is responsible for his fair share of taxes, interests, etc. 6. Repairs - CT may seek contribution for reasonable repairs, but must inform CT before making repairs. 7. Improvements - no right to contribution for improvements; but CT are entitled to credit for an increase in value attributable to the improvement (and also liable for any resulting loss) 8. Waste - a CT can bring an action for waste against another CT during the life of the tenancy. 9. Partition/Forced sale - JT’s and TIC may bring an action for partition, or seek a forced sale and apportion the proceeds.
Leasehold - Periodic Tenancy
(R) A periodic tenancy is a leasehold that is continuous for successive intervals until either party gives notice of termination.
A periodic tenancy can be created either expressly, impliedly, or by operation of law. An express agreement is conveyed to a tenant for agreed interval.
A creation by implication is a lease that does not specify duration, but provides for rent to be paid at set intervals.
Lastly, by an operation of law, occurs in two situations: (1) invalid lease, or (2) holdover tenant.
- Invalid lease - (R) Occurs if a tenant takes possession despite an invalid lease, that is it violates SOF, a periodic tenancy arises upon the landlord’s acceptance of payment.
- Holdover tenant - (R) Occurs if a landlord accepts rent from a holdover tenant, a periodic tenancy arises for the period the payment overs
Leasehold - Periodic Tenancy (Termination)
(R) When a tenant gives proper notice, a leasehold may be terminated. Effective notice is given when there is (1) sufficient time - tenant must give notice one full period in advance; year-to-year tenancies require six-month notice, and (2) effective date - must be at the end of the period of the tenancy. **Note: Parties can agree to modify these requirements.
Tenancy at Will
(R) A tenancy at will is a tenancy with no fixed duration, terminable by either party at any time without notice. It may be created via an express agreement. Without an express agreement, courts will treat the lease as an implied periodic tenancy.
Tenancy at Will - Termination
(R) A tenancy at will may be terminated by will or operation of law. Termination by will occurs when either party can terminate the lease at any time without notice, but a reasonable demand to vacate the premises is usually required. On the other hand, termination by operation of law occurs upon: death of either party, waste by the tenant, assignment by the tenant, transfer of title by the landlord, or lease by the landlord to a third party.
Tenancy at Sufferance
(R) A tenancy at sufferance is a default tenancy that arises when a tenant continues to possess property after the lease expires (i.e. a holdover tenant). A tenancy at sufferance is created when the tenant holds possession beyond lease expiration. The expired lease’s terms and conditions automatically carry over to the tenancy at sufferance.
Tenancy at Sufferance - Landlord Options
(R) Once a lease expires and the tenant is still in possession of the property giving rise to a tenancy at sufferance, a landlord may either: (1) sue to evict, or (2) impose a new periodic tenancy. If the landlord choses option 2, the landlord can demand higher rent for both the holdover period and any new periodic tenancy if he gave notice of the increase before the lease expired or in commercial leases, if the expired lease was for one year or longer, the new periodic tenancy can be year-to-year. EXCEPTION: (R) Imposing a new periodic tenancy must be reasonable. A new periodic tenancy is unreasonable if: (a) the tenant only remains in possession for a few hours, (b) the tenant is not at fault for delay in vacating - i.e. illness, or (c) seasonal leases.
Tenant’s Duties at COMMON LAW
(R) At COMMON LAW, a tenant has a duty to:
(1) repair,
(2) pay rent,
(3) not use the property for illegal purposes, and
(3) owes a duty to third parties.
Tenant’s Duties at COMMON LAW - Repairs
(R) A tenant’s duty to repair can be largely modified by lease terms: (a) tenant must maintain premises and make ordinary repairs - mitigated by implied warranty of habitability, (b) tenant must not commit waste, and (c) with respect to destruction of premies without fault of landlord or tenant - CL holds the tenant liable for any loss, and ML holds tenant can terminate lease.
Tenant’s Duties at COMMON LAW - Rent
(R) A tenant has a duty to pay rent, and a tenancy at sufferance arises upon breach.
Tenant’s Duties at COMMON LAW - Duty to not use property for illegal purposes
(R) If tenant uses premises for an illegal purpose, landlord may terminate lease or obtain damages and injunctive relief. Occasional, minor illegal activities do not constitute a breach.
Tenant’s Duties at COMMON LAW - Liability to third parties (in tort)
(R) Tenant is liable for injuries sustained by third parties invited by tenant EVEN IF landlord promised to make repairs.
Fixtures
(R) Once-moveable chattel that is annexed (attached) to real property, indicating an intent to permanently improve property it becomes a fixture. If a tenant removes fixtures he commits voluntary waste. Fixtures pass with ownership of the land. Tenant installation qualifies as a fixture if there is an express agreement between the landlord and tenant - if no agreement, tenant may remove the chattel that tenant installed as long as removal does not cause substantial harm to the property.
Landlord’s Remedies for Tenant Breach
(R) If a tenant breaches his leasehold duties, the landlord’s options depend on whether tenant retains possession, i.e. remains on premises.
If the tenant retains possession, the landlord may: file for notice of eviction or continue the lease and sure for rent due.
On the other hand, if the tenant abandons the premises, the landlord may:
- surrender - release the tenant from the lease,
- ignore (MINORITY RULE) - hold tenant liable for unpaid rent, or
- re-let (MAJORITY RULE) - lease premises to new tenants and hold the breaching tenant liable for any losses.
- Note: A landlord may not engage in self-help upon the tenant’s breach, that is, they cannot forcibly remove the tenant or tenant’s belongings, etc.
Security Deposit: (R) A landlord must return deposit to tenant once lease terminates, however, a landlord may subtract damages she has suffered.
Landlord’s Duties and Warranties
(R) Landlord’s have the following duties to tenant:
(1) duty to deliver possession,
(2) implied covenant of quiet enjoyment,
(3) implied warranty of habitability, and
(4) tort liability.
Landlord’s Duties and Warranties - Deliver Possession
(R) Under the MAJORITY RULE, a landlord must deliver actual possession.
Under the MINORITY RULE, however, the landlord must only deliver legal possession, and thereby the tenant is responsible for any holdovers on property.
If the landlord breaches this duty owed to the tenant, the tenant may seek monetary damages.
Landlord’s Duties and Warranties - Implied Warranty of habitability
(R) Under the doctrine of IWH, a residential property must be fit for basic human dwelling. IWH is not applicable to commercial leases, and it cannot be modified by lease terms.
If a landlord breaches his duty of IWH to a tenant, a tenant may:
- (1) move - vacate/terminate the lease,
- (2) repair - make reasonable repairs and deduct the costs from future rent,
- (3) reduce or withhold rent - tenant can reduce rent or stop payment until a court determines the fair rental value given the breach; tenant must place withheld rent in escrow, or
- (4) remain - tenant can remain in possession and seek money damages.
Assignment and Subleases - Assignment
(R) An assignment occurs where the tenant transfers the entire leasehold to the assignee.
An assignee then is in privity of estate with landlord - the two are bound by all covenants that run with the land.
The assignor, however, remains in privity of contract with the landlord.
While the assignee owes rent directly to landlord, the assignor may be held liable for unpaid rent.
Assignment and Subleases - Subleases
(R) A sublease occurs where the tenant transfers part of the leasehold to a sublessee.
Unlike assignments, however, A sublessor remains is in privity of estate and contract with the landlord.
The sublessee then pays rent to sublessor as her tenant and is not liable to landlord for rent and is not bound by any covenants unless expressly assumed.
Implied promises in land sale contracts - Marketable title
(R) Marketable title in implied in every land sale contracts and provides that the title is free from risk of litigation.
That is, the title is free from being acquired by adverse possession, encumbrances, and zoning ordinance violations.
Implied promises in land sale contracts - Promise to disclose and make no material false statements
(R) The seller must not materially misrepresent facts or make false statements concerning the property.
The seller must disclose latent material defects.
The seller cannot limit liability through disclaimers.
With respect to NEW property, the seller/builder is subject to an implied warranty of fitness/quality in construction.
Deeds
(R) A deed passes legal title from seller to buyer. In order for a deed to be effective, it must meet the following requirements:
- (1) lawfully executed - signed by grantor and reasonably identify parties and land, and
- (2) delivered. With respect to deliver, physical transfer is not required, but rather present intent controls.
Title passes upon effective delivery.
Acceptance is presumed upon valid delivery.
Deed - Types
(R) There are three types of deeds: (1) general warranty, (2) special warranty, and (3) quitclaim.
Deed - General warranty
(R) General warranty deeds include six covenants for title:
(1) present covenants - only breached at time of delivery, and
- Present covenants include seisin, right to convey, and against encumbrances
- Seisin - (R) Grantor covenants that he is the rightful owner and that deed covers described land.
- Right to convey - (R) Grantor covenants that he has the right to convey Against encumbrances -
(2) future covenants - only breached after delivery.
* Future covenants include quiet enjoyment, warranty, and further assurances.
Transferability of Mortgage Interests & Holder in Due Course Status
(R) A mortgagee can transfer his interest by:
- (1) endorsing the mortgage note and delivering it to transferee, or
- (2) executing a separate assignment of the mortgage interest.
(R) A holder in due course takes a mortgage note free of any personal defenses the mortgagor could have raised against the original mortgagee, but still remains subject to real defenses. Requirements for holder in due course status are as follows:
- (1) negotiable title - note must be negotiable, made payable to the named mortgagee,
- (2) endorsed and signed - note must be endorsed or signed by the named mortgagee,
- (3) delivered - note must be delivered to the transferee, and (4) good faith and value paid - transferee must take the note in good faith and pay value.
