Problem Questions

Question 1

Right of Way Easement and marketable title:

Answer 1

There are some types of easements whose existence so materially reduces the value of the fee simple that the easement makes the title unmarketable.

BUT!!! Most “RIGHT OF WAY” easements merely give an adjacent landowner the ability to get to the public road, and in this situation the easement’s existence will generally be visible to anyone who inspects the property when the contract is signed

Virtually all courts hold that in this situation of a visible path to the public road, the buyer will be treated as having agreed in the contract to accept the property subject to the easement.

Question 2

Are vested remainders always devisable by will:

Answer 2

YES!

In the case of “O to A for life then to B” “if B dies before A, the remainder interest passes to B’s heirs or devisees, who will obtain possession when A dies”

Question 3

Modification of Senior Mortgage on Junior Mortgage

Answer 3

When a senior mortgage is modified in a way that is not detrimental to the junior mortgage, the senior mortgage’s priority is not changed.

The senior mortgage maintains its priority as long as the modification was not materially prejudicial to the holders of the junior interest.

There is a strong presumption that a time extension on a senior mortgage or obligation, standing alone, is not materially prejudicial to intervening interest.

Question 4

Adverse Possessors and co-occupy

Answer 4

Adverse possessors who co-occupy a property typically take as tenants in common.

A key feature of tenancy in common is that each co-tenant’s interest is “alienable, inheritable and devisable”

Question 5

Mortgages

Answer 5

Mortgages:

There is no common-law rule against either contractual prepayment prohibitions or contractual prepayment fee provisions.

Question 6

When a contract falls under the statute of frauds, can you orally rescind it?

Answer 6

YES.

All unperformed duties under an enforceable contract may be discharged by an oral agreement of rescission.

Aka When a contract falls under the statute of frauds, you CAN orally rescind it.

Question 7

Shelter Principle

Answer 7

The shelter principle means that even one who has actual knowledge of an adverse conveyance can have the protection of the recording acts.

This makes economic sense because the person having priority should be able to sell.

Question 8

Is a buyer of land entitled to specific performance?

Answer 8

YES, on the theory that each parcel of land is unique.

Question 9

A contractual right can be assigned, UNLESS:

Answer 9

1. The substitution or a right of the assignee for the right of assignor would materially change the duty of obligation or materially increase the burden or risk imposed on him by his contract or materially impair his chance of obtaining return performance or materially reduce its value to him.
2. Assignment is forbidden by statute or is otherwise inoperative on grounds of public policy.
3. Assignment is validly precluded by contract.

Question 10

Deed in Lieu of Foreclosure:

Answer 10

Deeds in lieu of foreclosure are generally enforceable – and not against public policy – since they save both parties the time and expense of foreclosure.

HOWEVER, a deed in lieu of foreclosure by a homeowner/occupant is like any other consumer transaction – if the court later concludes that the transaction was tainted by undue pressure, fraud, unconscionability, duress, or grossly inadequate consideration, the court is likely to exercise its power to set aside the transaction.

Question 11

Waiving a right to foreclosure as a mortgagor:

Answer 11

A mortgager may not waive the right to foreclosure in ADVANCE (or contemporaneously) with the funding of the mortgage loan.

Question 12

Equitable Redemption

Answer 12

The doctrine of equitable redemption allows a junior mortgagee or lienholder to pay off the senior mortgage and thereby succeed to the senior mortgagee’s rights

This gives the holder of the junior interest the right to protect his own position.

Question 13

Covenant of Further Assurance

Answer 13

The covenant of further assurance is a promise by the grantor to execute any additional documents that may be needed in the future to perfect the title which the original deed purported to convey.

QUESTION:
The problem for which the women is seeking recovery against the builder has nothing to do with any imperfection in the title – her problem is that the structure on the land was improperly built.

Question 14

American vs. English Rule

Answer 14

ENGLISH RULE: (majority) landlord has the implied duty to deliver actual possession to the tenant.

AMERICAN RULE: (minority) landlord is merely required to give the tenant legal possession.

Question 15

Life tenants and paying current charges (e.g. taxes):

Answer 15

Assuming that the document creating the life estate does not say otherwise, a life tenant has the obligation to pay all current charges including property tax, mortgage interest and the cost of maintenance.

HOWEVER, the life tenant’s obligation to pay current expenses is limited to the income produced (or could be reasonably produced) by the land.

Question 16

Tenancy in Common:

Answer 16

Each tenant in any form of co-tenancy is entitled to possession of all parts of the land at all times.

Each undivided interest in a tenancy in common may be transferred by its holder to a 3rd party.

QUESTION: The rights held by the man did not include the right to exclusive possession with the sister and the cousin (had to share apartment with them.

Question 17

Death Escrow

Answer 17

A death escrow is an arrangement in which the grantor hands a deed to a custodian for delivery on the grantor’s death. But for a gratuitous death escrow to be valid as a form of delivery, the grantor must place the deed beyond his control, by giving up all power to undo the arrangement in the future.

A gratuitous death escrow can certainly be valid despite the lack of written contract governing the escrow.

Question 18

Class gift closing:

Answer 18

If a gift of either real or personal property is made by deed or will ‘to the children of A, and A is alive when the instrument takes effect, all children of A born thereafter are excluded.

Question 19

Deed Poll

Answer 19

A deed signed only by the grantor, not by the grantee.

Any obligation contained in the deed is binding on the grantee if the latter accepts the deed. (e.g. grantee records the deed).

Question 20

Title Insurance

Answer 20

Title insurance covers the insured’s liability under any warranties of title made when he sold the property.

“So long as the insured shall have liability by reason of warranties in any transfer or conveyance of the Title.

Question 21

Foreclosure:

Answer 21

A senior lender has the right to foreclose on the entire mortgaged property, regardless of the financial damage that this foreclosure might do to a junior mortgage.

Question 22

Valid execution of a deed and CONSIDERATION:

Answer 22

The valid execution of a deed requires several formalities. The presence of consideration is not one of them.

Question 23

Sublessee and privity of estate

Answer 23

With a sublease, there is a relationship between the lessee and the sublessee, but there is no relationship – no privity of estate – between the lessor and sublessee.

Since there is no privity of estate between two, the lessor cannot sue the sublessee for rent.

Question 24

Class gift and rule of perp.

Answer 24

IMPORTANT: Class gifts that take effect when grandchildren turn 21 are valid if the gift is created in a will, but not if the gift is created in an inter vivos conveyance.

Question 25

Easement and location

Answer 25

If an easement is created but not specifically located on the servient tenement, a location of sufficient size to make the intended use reasonably covenient will be implied. The owner of the servient tenement may indeed select the location of the easement so long as her selection is reasonable.

However, once the owner of the servient tenement selects the reasonable route that route becomes fixed, and the dominant holder can’t later be forced to allow the servient owner to change route.

Question 26

Warranty and Meritorious Claims:

Answer 26

Covenant of warranty requires defense only against suits that turn out to be meritorious.

The covenant of warranty includes a promise by the covenantor to defend on behalf of the covenantee any lawful or reasonable claims of title by a third party. So if the grantee had lost the suit, she could have recovered her legal costs from the grantor.

But ironically, by winning against the adjoining owner, the grantee lost her right to recover from the grantor. When she won versus the neighbor, she established that the adjoining owner’s claim was without merit. At that point, the grantor had no obligation to reimburse her for defending this now-known-to-be-valueless claim.

Question 27

Lateral Support

Answer 27

One of the rights incident to land is the right to “lateral support.”

That is, every landowner is entitled to have his land receive the necessary physical support from adjacent and underlying soil. The right to lateral support is absolute – that is, once support has been withdrawn and injury occurs, the responsible person is liable even if he used utmost care. However, the absolute right to later support exists only with respect to land in its natural state. If owner A has constructed a building, and the soil under the building subsides in part due to the acts of adjacent owner B, but also in part because of the weight of A’s building itself, B is not liable without negligence.

Question 28

Rule Against Perpetuities:

Answer 28

An option to purchase “in gross” is subject to the Rule Against Perpetuities.

Question 29

After-acquired Title Doctrine (aka Estoppel by Deed):

Answer 29

The grantor purports to convey an estate larger than the one he has; the grantor subsequently acquires the title he’s already purportedly conveyed; title automatically passes to grantee by estoppel.

Question 30

Marketable Title

Answer 30

The time for a buyer to raise an objection based on failure to convey marketable title is before accepting the deed.

After that stage, any challenge by the buyer must be based on the title covenant contained in the deed.

Question 31

Liquidated Damages:

Answer 31

Liquidated damages are agreed to by both parties at the time of the contract. Such liquidated damages clauses, where enforced by the contract, determine the measure of damages that the court will award.

In order for such a clause to be enforceable, however, it must meet the requirement: The amount fixed must be reasonable relative to either the anticipated loss (viewed as of the time the contract was signed) or the actual loss (as determined by the passage of time).

Question 32

Duty of a Life Tenant

Answer 32

Duty not to commit voluntary or permissive waste relevant to the property during her life tenancy.

Requires to pay interest on mortgage but no obligation to pay the principle.

Question 33

Standard Mortgage Loan Document:

Answer 33

A non-attorney may execute standard mortgage loan documents.

As long as the bank employee does not exercise legal discretion or give legal advice, execution of standard mortgage loan documents is not considered the practice of law.

Question 34

Marketable Title and waiving it:

Answer 34

To be considered marketable, the title must be free of encumbrances such as mortgages, restrictive covenants and easements.

This requirement may be waived by the parties, however, if they explicitly state they are doing so within the sale contract. In this case, the purchaser contracted to purchase land “subject to easements, covenants, and restrictions of record.” That provision, however, will be construed to mean the encumbrances that were recorded at the time of contracting.

Question 35

Tenancy by Entirety vs. Tenancy in Common

Answer 35

A distinguishing feature of a tenancy by the entirety is that it can only be severed by a few ways: (1) divorce (2) death of one spouse (3) creditor of both spouses or (4) mutual agreement between spouses.

A joint tenancy on the other hand can be severed by one of the tenants making an inter vivos conveyance.

Question 36

Deed

Answer 36

A deed must properly identify the grantor and grantee to be effective. A deed that does not identify the grantee is ineffective until the grantee’s name can be added or determined.

Question 37

Licensee vs. Tenant

Answer 37

Licensee does not have property rights while a tenant has limited property rights.

A licensee is a contractual right to use the land that is owned by another party. Because it is a contractual right rather than a property right the owner of the property is free to terminate or revoke that license at any time.

Question 38

Equal-Dignities Rule

Answer 38

When the act performed by an agent is required by law to be in writing, the agent’s authority must also be in writing.

(e.g. The agent’s authority is valid if he signs the deed in the presence of the grantor).

EVERY DEED SHOULD CONTAIN THE FOLLOWING INFORMATION:

1. An indication that it is a deed
2. A description of the property involved
3. Signature of the individual that is transferring the property
4. Data regarding who is taking title to the property

Question 39

Tenant and Government Taking:

Answer 39

When the government exercises its condemnation powers, the taking will affect not only the owner of the land but also any tenants who are leasing that land. The extent of the effect on the tenant’s rights depends upon whether there was a complete or partial taking.

Where there has been a complete taking, the lease is automatically terminated and the tenant has no further obligation to make payments. If however, there was only a partial taking the tenant is still responsible for making payments but only in an amount proportionate to the land that was not taken.

Note that in the case of a partial taking, the tenant will share in the monies paid by the government to the landlord for the taking to the extent of the tenant’s rent liability in the portion of land that was taken.

Question 40

Equitable Conversion

Answer 40

The time period between contracting and closing is governed by the doctrine of equitable conversion.

Once the contract is signed, the risk of loss for any damage to the property that (1) occurs before the closing and (2) is not the seller’s fault, will fall on the buyer.

Question 41

Novation

Answer 41

A novation is an agreement that serves to substitute a new party for an original party to the contract. A novation completely releases the substituted party but requires the assent of all parties.

Question 42

Marketable Title

Answer 42

To be considered “marketable” the title must be free of encumbrances such as mortgages, restrictions, covenants, easements, or other provisions that are not explicitly identified in the contract.

Question 43

Implied Warranty of Habitability:

Answer 43

An implied warranty of habitability or fitness for particular purpose applies only to new construction being sold by a builder or a developer.

Question 44

Latent Defect:

Answer 44

Owners have an obligation to make the investor aware of hidden or “latent” defects.

With regards to defects on a property, sellers are required to disclose all known defects that will not be open and obvious to a buyer, and are prohibited from concealing such defects in any way.

Question 45

Liquidated Damages Clause:

Answer 45

A liquidated damages clause in a real estate contract is a reasonable and agreed upon amount that would be awarded to the seller, should the buyer breach the contract. Liquidated damages clauses are common in real estate contracts.

To be enforceable in a real estate contract, the liquidated damages clause must be a good-faith attempt by both parties to reasonably approximate a fair amount for compensation to the non-breaching party. If there is a valid and enforceable liquidated damages clause contained within a real estate contract, it is controlling in the litigation.

Conversely, a liquidated damages clause will not be enforced if it is deemed to be a penalty or unconscionable.

Question 46

“As is provisions”:

Answer 46

“As is provisions do not provide protection to all a seller in cases of misrepresentation, active concealment or failure to disclose.

Question 47

There is no right to:

Answer 47

There is no right to sunlight, fresh air or view.

Question 48

Failing to disclose to a buyer defects/facts in property that reduce property’s value:

Answer 48

The traditional common law rule is that a seller does not have liability for failing to disclose to a buyer defects in the property or facts that reduce the property’s value. (however there will always be exceptions)

Question 49

Description of land in deed:

Answer 49

Description of land found in deed only needs to be specific enough to allow party to identify/locate property.

Description does not need to be made in “metes and bounds” but if it is, metes and bounds description will be given effect, even if contradicted by other descriptive language or characterizations in deed.

Question 50

Common Interest Communities:

Answer 50

Unless authorized by statute or the government documents, a community may not impose restrictions on the structures or landscape.

Question 51

Deed poll:

Answer 51

A deed poll is a deed that is signed only by the grantor. The grantee of a deed poll need not sign the deed, but if the grantee accepts the deed, he or she accepts all conditions in it.

Question 52

Repairing an easement:

Answer 52

The holder of an easement has the right to enter the land to make repairs to the easement. Where those repairs somehow alter or damage the land, the easement holder must REASONABLY restore the land to the condition that it was in before the repairs were made.

Question 53

Statute of Frauds and Time in land contract:

Answer 53

While the lack of an essential element may sometimes implicate the Statute of Frauds, there is no rule requiring parties to a contract for the sale of real property to agree in writing to the timing of performance.

In such a case, a court will infer that performance within a reasonable time was intended.

Question 54

Equitable Conversion:

Answer 54

if contract is silent regarding the risk of loss, that risk goes to the party with the equitable title.

Question 55

Invalid deed

Answer 55

An invalid deed even if recorded cannot be relied upon.

Question 56

Joint Tenants:

Answer 56

Cannot be severed by a will.

Question 57

Liquidated Damages:

Answer 57

Liquidated damages typically do not exceed 3% of the purchase price, although most courts uphold the retention of a deposit of up to 10% of the sale price without inquiring into its reasonableness.

Question 58

There are three elements that must be met for an equitable servitude to run with the land, including:

Answer 58

1. Intent for it to run with the land
2. Actual, inquiry or record notice and
3. Covenant “touches and concerns” the land.

A covenant not to compete is considered a covenant that “touches and concerns” the land.

Question 59

Dedication of Land for public Use:

Answer 59

Unlike a purchase agreement or other land contract, no consideration is needed to support dedication of land for public use. When the land was dedicated for public purposes the school board became unilaterally entitled to accept the dedication without affording any compensation to the developer.

The dedication of land for public use requires two elements: (1) dedication and (2) acceptance. Under common law, an offer of dedication may be made by (i) a written or oral statement (ii) submission of a map or plat showing the dedication or (iii) the opening of the land to public use. Acceptance can occur by (i) formal resolution (ii) approval of the map or plat or (iii)actual assumption of maintenance or construction of improvements.

Question 60

Life estate and waste:

Answer 60

A life estate holder is obliged not to unreasonably impair the value of the property.

If the life estate holder does so, his estate does not cease; however, he will be liable to the vested remainderman for the diminution in value.

Question 61

Lapse:

Answer 61

When the recipient of a specific bequest in a will predeceases the testator, his gift will lapse, and the bequeathed property will fall into the residuary estate.

An exception is made when states include anti-lapse statute (usually family members)