Property Flashcards
present estates overview & restraint on alienation
- fee simple absolute
- fee simple determinable
- fee simple subject to condition subsequent
- fee simple subject to executory interest
- life estate
*restraint on alienation: a grantor can place a reasonable restraint on the grantee’s ability to feely transfer, but a restraint on alienation is generally void when it purports to prohibit alienation of the estate and render any conveyance by the grantee void
*When the terms of a conveyance are ambiguous, courts typically adopt a preference for a fee simple subject to condition subsequent.
- fee simple absolute
absolute ownership
largest possessory state, capable of lasting forever
if ambiguous grant, creates fee simple
“O to A” means same thing as “O to A and his heirs”
- fee simple determinable
ownership terminates if a condition occurs and passes automatically to grantor
look for durational words: “as long as,” “until”
possibility of reverter is a future interest automatically retained by the grantor that becomes possessory upon the occurrence of the stated condition in a FSD
*“for the purpose of” is an FSA, not FSD
- fee simple subject to condition subsequent
when the condition occurs, the grantor can exercise a right of reentry (not automatic)
look for conditional words (“but if” “on condition” “provided that”) and words such as “right to reenter”
freely alienable by owner during his life, and upon his death is devisable and descendible
*The grantor must explicitly retain the right to terminate the fee simple subject to condition subsequent in the conveyance. Owner may or may not have a right to terminate, depending on whether the court would be willing to imply a forfeiture provision when none was expressly set forth in the deed.
- fee simple subject to executory interest
will end upon the happening of an event and the future interest will vest in a third party
held by the another transferee, not the grantor
“to A, but if liquor is served, then to B” –> B has an executory interest
springing executory interest: divests the grantor
shifting executory interest: divests a prior grantee
- life estate
ownership terminates upon the end of the measuring life
“for life”
can’t pass by will or intestate succession
future interest:
- if land goes back to grantor, he has a reversion
- if land goes to third party, third party takes a remainder
*required to pay property taxes but limited to financial benefit from property (if living there, measured by reasonable rental value of property)
concurrent estates overview
- tenants in common
- joint tenancy
- tenancy by the entirety
- rights & obligations of co-tenants
- tenancy in common
*the default concurrent interest
each tenant owns a separate but undivided interest in the entire property (can possess the whole)
this interest is freely devisable or transferable
- joint tenancy
right of survivorship: when one joint tenant ides, the interest goes to the other joint tenants
must have express language creating a joint tenancy along with survivorship language
must have 4 unities (PITT): possession, interest, time, title
-each joint tenant has equal right to possess the whole property, interest equal to others, at the same time, and in the same instrument
severance of joint tenancy:
- if one joint tenant conveys his interest, it severs the JT
- creates a tenancy in common
- mortgages:
- majority: lien theory: mortgage treated as lien, doesn’t destroy JT
- minority: title theory: severs title, converted to TIC
- leases:
- some jurisdictions hold the lease severs the JT
- others treat lease as temporary suspension of JT
- tenancy by the entirety
joint tenancy btw spouses (marriage is 5th unity)
- has right of survivorship
- can’t alienate/encumber shares without consent of spouse
- “as tenants by the entirety, with a right of survivorship”
- possession
-ouster
each co-tenant has the right to possess the entire property
ouster: a co-tenant who is being denied access can bring a court action to regain access to the property
adverse possession: if one co-tenant ousted the other, he can make a claim for AP if he meets the requirements
- rent
a co-tenant does not owe rent for his use of the property
a co-tenant must share rents received from 3rd parties (divided based on ownership interest)
- operating expenses
necessary charges, such as taxes or mortgage interest payment
a co-tenant can collect contribution for other co-tenants for payments in excess of her share of operating expenses
*however, a co-tenant in sole possession can collect only for the amount that exceeds the rental value of the property
- repairs, improvements, & partition
repairs:
- no right to reimbursement from co-tenants even for necessary repairs
- but co-tenant who made repairs can get credit in partition action
- when a 3rd party is occupying the property, a co-tenant who collects rent from the 3rd party can subtract expenses for necessary repairs from the rent received before sharing the rent with other co-tenants
improvements:
- no right to reimbursement for improvements
- but co-tenant who makes repairs can get credit in partition action
partition:
- equitable remedy for TIC or JT
- court divides property into distinct portion, preference for physical partition (partition in kind), but partition by sale if physical isn’t practical or not fair
- proceeds from partition by sale are divided among co-tenants based on ownership interests
- agreements not to partition are enforceable if it’s clear & time limitation is reasonable
types of leaseholds
- tenancy for years: created by express agreement for fixed period of time
- SoF applies if longer than 1 year
- termination automatic upon expiration of term (or before by agreement or material breach)
- Termination of a tenancy for years may occur before the expiration of the term, such as when the tenant surrenders the leasehold. A tenant surrenders a lease by offering to return the lease to the landlord and the landlord accepting the return. - periodic tenancy: repetitive, ongoing estate measured by set periods that automatically renew (month-to-month)
- can be created by express agreement, implication, or operation of law
- SoF does not apply
- valid notice of termination is required (in writing, given before beginning of intended last period) - tenancy at will: no fixed period of time, may be terminated by either party at any time
- if agreement only gives landlord right to terminate at will, tenant also gets right to terminate by implication (not other way around)
- if landlord or tenant dies, tenancy at will is terminated
-Termination rights in at-will tenancies can be limited if they are not unconscionable - tenancy at sufferance: a tenant wrongfully holds over past the expiration of the lease, lasts until eviction or landlord re-rents to tenant
tenant’s duties
pay rent, avoid waste, and make reasonable repairs
withholding/deduction of rent
-if landlord breaches covenant of quiet enjoyment or implied warranty of habitability
waste: tenant cannot damage the property and must repair damage he causes
- can’t commit affirmative or permissive waste, but can make ameliorative waste (improve, usually require permission, and can be prohibited in lease)
failure to pay rent: landlord can sue for damages & eviction
abandonment: if tenant abandons the property, landlord can accept as an offer of surrender
landlord duties overview
- duty to repair
- implied warranty of habitability
- covenant of quiet enjoyment
- duty to mitigate damages
- duty to deliver possession:
- majority: must deliver actual possession of property
- minority: only required to deliver legal possession
- tort liability:
- common law: responsible for latent (hidden) defects about which tenant not warned, faulty repairs by landlord, and negligence causing injuries in common areas
- modern trend: landlords have duty of reasonable care
- duty to repair
landlord must repair damages under residential leases, unless the tenant caused the damages
- implied warranty of habitability
- only applies to residential leases
- cannot be waived
landlord must maintain the property such that it is reasonably suited for residence
-e.g. failure to provide heat, electricity, running water, or plumbing
failing to comply with housing codes is a breach, especially violations related to health or safety
tenant must give notice to landlord and reasonable opportunity to repair
if landlord fails to make repairs, tenant may:
- stay in property & refuse to pay rent
- stay in property, pay for repairs, and deduct cost from rent, or
- terminate the lease and move out
- covenant of quiet enjoyment
*applies to residential & commercial leases
the landlord must not disrupt the tenant’s possession or enjoyment of the property
-controls common areas & nuisance of other tenants
actual eviction: landlord must remove tenant from premises
partial eviction: tenant prevented from possessing/using portion of leased premises
-excused from paying rent for entire premises if landlord responsible for partial eviction
constructive eviction:
- landlord substantially interferes with tenant’s use & enjoyment of the land
- tenant gives notice of the problem & reasonable time for landlord to repair, but landlord does not repair, and
- tenant vacates premises in reasonable amount of time
assignment/sublease
assignment:
- a transfer of the tenant’s remaining lease to a new party
- generally allowed, unless prohibited by lease
- landlord can collect rent from tenant or subsequent tenant
sublease:
- a transfer of a portion of the tenant’s lease (rather than remainder)
- landlord can collect rent from tenant
prohibition clauses: a clause in the lease prohibiting assignment or sublease
- if the lease prohibits only assignments, the tenant may still sublease
- if tenant violates prohibition, landlord can terminate the lease
- -> waiver: if landlord accepts payment from new tenant, he waives the right to enforce the prohibition clause
- consent: some clauses allow assignment or sublease only with landlord’s consent
- -> landlord can only withhold consent on a commercially reasonable ground
duty to mitigate damages
landlord has duty to make reasonable efforts to re-rent the property to mitigate the damages from tenant leaving early/evicted
(doesn’t under minority rule, more common in commercial leases)
adverse possession
allows person in unlawful possession (trespasser) to acquire good title
- new title relates back to date of person’s entry onto property
- property owned by government can’t be adversely possessed
- continuous:
- seasonal/infrequent use suffices if use is consistent with type of property being possessed
- can tack on her predecessor’s time on property if current possessor in privity with prior one
- SOL doesn’t run against true owner who has disability at time AP begins
- true owner can interrupt by ejecting AP, stops the clock - open & notorious: such that reasonable true owner would become aware of the claim
- hostile: possess without owner’s permission
- majority: ignores AP’s state of mind
- minority:
- -> good faith: AP’s claim is hostile if truly thinks land is unowned or that she’s rightful owner
- -> bad faith: AP knows land isn’t hers and tries to acquire title by AP - actual & exclusive: actual, physical possession of property, not shared with true owner
ECHO: exclusive, continuous, hostile, open & notorious
valid deed requirements
must identify the property and the parties, must be signed, and must include words of transfer
rule: to transfer a real property interest, the grantor must demonstrate the intent to make a present transfer of the interest and the grantee must accept the interest. in addition, pursuant to the SoF, the transfer of real property must be evidenced by a writing. must include all necessary terms such as grantor’s signature, named grantee, words of transfer, and a description of property. consideration is not required
intent to transfer a valid deed
- transfer to grantee: creates presumption of intent to transfer
* parol evidence is admissible to show that the grantor lacks such intent. but when grantor transfers deed to grantee subject to a condition that does not appear in the deed (oral condition), parol evidence is not admissible and the condition is not enforceable
*Delivery is presumed when the deed has been recorded - transfer to third party agents:
a. if grantor gives deed to independent third party for delivery to grantee upon a condition, the deed will not be deemed delivered if the grantor reserves the right to take the deed back
b. if the grantor does not reserve the right to take the deed back, the grantor’s intent to presently transfer the property is determined by the facts
- if grantor intended to presently transfer, he cannot void the gift later
- if grantor did not intend to presently transfer, transfer is not valid - testamentary transfer: if the grantor gives the deed to an independent third party for delivery upon the grantor’s death, the grantor’s intent to make a present transfer is determined by the facts
- if the grantor intended to transfer only upon his death, it is not a present intent to transfer
- such a transfer is a testamentary transfer and must meet the requirements of a will (written, signed, witnesses)
recording acts overview
a valid deed does not need to be recorded to convey good title, but it’s a good idea to record bc it establishes priorities among conflicting claims
*although recording the deed raises the presumption of delivery, that presumption is rebuttable by facts indicating the grantor’s contrary intent
recording acts also apply to easements, covenants, servitudes; mortgages for priority purposes; deeds
protects subsequent purchasers
not protected: grantees who acquire title by gift, intestacy, or devise
types of recording statutes & bona fide purchaser (BFP) & shelter rule & estoppel by deed
notice statute: if a person purchases land without notice of a prior interest, the person will prevail in an ownership dispute against the prior interest
- “in good faith” “without notice”
- actual notice
- inquiry notice: reasonable investigation would’ve disclosed prior claim (dude on land or mentioned interest)
- constructive notice: grantees are on notice of anything recorded in the chain of title
race statute: the first person to record their deed will prevail in an ownership dispute, regardless of knowledge
-“first to record”
race-notice jurisdiction: if a person purchases land without notice of the prior interest, and records first, the person will prevail in an ownership dispute against the prior interest
*just has to purchase as BFP, can record after finds out about prior interest though
bona fide purchaser:
- someone who pays value for the property and takes it without notice of prior claims (actual, inquiry, constructive)
- notice and race-notice statutes protect BFPs
shelter rule: allows grantors who are protected by the recording act to shelter their grantees who would otherwise be unprotected
estoppel by deed: grantor conveys land he doesn’t own, estopped from trying to repossess if later acquires title
rights in land overview
- easements
- covenants
- equitable servitudes
easement overview
an easement is the right to use land:
- the dominant estate benefits from the easement
- the servient estate is being burdened by the easement
classification of easement:
- appurtenant: attached to the land
- -> will usually continue after land is transferred
- in gross: specific to the person
types of easements
express easement: must be in writing & satisfy SoF
easement by necessity:
- only when property is virtually useless (landlocked)
- dominant and servient estates must have been owned in common by one person and necessity at severance
- ends when no longer necessary
easement by implication:
- common ownership, before severance owner uses land as if is easement on it
- after severance, use must be continuous and apparent
- use must be reasonably necessary to dominant estate’s use & enjoyment
easement by prescription:
-like adverse possession, same elements except for exclusivity
easement by estoppel:
- starts with permissive use (license), reliance, permission withdrawn
- if reliance was detrimental then estopped from withdrawing permission
scope, duty to maintain, & termination of easement
scope of express easement:
- determined by terms when created
- changes in use must be reasonably foreseeable
- if use exceeds scope, then trespass
- but an increase in the scope of an easement for the benefit of property other than the dominant estate is not permitted.
scope of implied easement:
-determined by nature of prior use or necessity
owner of easement has duty to maintain property subject to easement
*if the easement is shared, owner who maintains/repairs it may seek contribution from other easement owners o after adequate notice & opportunity to participate in repair decisions (owner of servient estate also has obligation to contribute to repair/maintenance of easement if servient estate owner uses the easement)
can be terminated in a number of ways:
-release, abandonment, agreement, merger, end of necessity, if the purchaser of the burdened land can show he is a BFP (no notice of easement)
covenant
covenants usually involve a promise to do or not do something in relation to land
-determine who is the benefited party and who is the burdened party
requirements for covenant to run with the land:
- writing
- intent
- touch & concern (benefit or burden must affect both parties)
- notice (actual, constructive, inquiry)
- horizontal privity: only required for burden to run
- estate & covenant contained in same instrument - vertical privity:
- concerns the relationship btw the original party & the successor party
- burden: for burden to run with the land, the owner must transfer the entire interest (strict vertical privity)
- benefit: the benefit will run if the successor takes any portion of the original estate
*A covenant can be terminated in the same manner as an easement, including by abandonment. Abandonment occurs when an affirmative act—something more than neglect or nonuse—shows a clear intent to relinquish the covenant.
equitable servitude
requirements for equitable servitude to run with the land:
- writing
- intent
- touch & concern
- notice
* no privity requirement
implied reciprocal servitude:
- implied, no need for writing
- usually in planned communities
- developer must intend to create covenant, promises must be benefit/burden each parcel equally, must be negative rather than positive, successor must be on notice, and must be common plan/scheme
terminates as easement does
changed circumstances doctrine:
-where restriction no longer makes sense due to drastic change in surrounding area
enforcement of covenants & equitable servitudes
if a covenant is violated, the injured party can sue for money damages
an equitable servitude is enforced by an injunction
mortgage
document that conveys a property interest in real property as security for an obligation
if the homeowner defaults on the loan, the house could be sold at public auction
*the note is the borrower’s promise to repay the loan, and the mortgage is the instrument that provides security for the note
*A mortgage is generally enforceable only to the extent that the underlying obligation is enforceable. Therefore, a mortgage is subject to the same defenses as the underlying obligation secured by the mortgage—e.g., mistake, duress, lack of capacity, statute of limitations.
alternatives to mortgages: deed of trust, installment land contract, absolute deed, and conditional sale & repurchase
deed of trust:
- a writing grants an interest in property as security for an obligation, but the deed goes to a third party as trustee
- if the homeowner defaults, the deed of trust can be privately sold
installment land contract:
-seller finances purchase and retains title until buyer makes final payment on installment plan
absolute deed:
- mortgagor (borrower) transfers deed to property instead of conveying a security interest in exchange for the loan
- if mortgage disguised as sale, borrower must prove a mortgage-like agreement by clear and convincing evidence
conditional sale & repurchase:
- owner sells property to lender who leases property back to owner in exchange for loan
- lender gives owner option to repurchase after loan paid off
kinds of mortgages
- purchase money mortgage:
- the borrower uses the loan in order to purchase the mortgaged property
- a purchase money mortgage has priority upon foreclosure - future advance mortgage:
- a line of credit used for home equity, construction, business, and commercial loans
- a “second mortgage”
*If there is more than one interest in the property, the basic “first in time, first in right” rule is applied to determine the priority of interests. However, this rule is subject to an exception for future-advances mortgages. If the advances under a future-advances mortgage are optional, then a subsequent mortgage has priority over amounts that are actually loaned after the future-advances mortgagee has notice of the subsequent mortgage. The jurisdictions are split as to whether actual notice is required or whether constructive notice is sufficient. In a majority of states, the mortgagee must have actual notice of a subsequent interest in order for later loan disbursements to lose priority. The minority rule, on the other hand, requires only constructive notice of a subsequent interest.
foreclosure
when a borrower fails to repay the loan, the lender can foreclose upon the property
priority of interests:
- generally, the first mortgage gets priority over later mortgages
- exception 1: a purchase money mortgage will take priority over non-purchase money mortgages
- exception 2: if a state recording act applies
land sale contract: marketable title
in every land sale contract, there is an implied promise to convey marketable title. title is marketable if it’s free of an unreasonable risk of litigation at the time of closing (seller not required to deliver marketable title until closing)
-e.g. AP not quieted, private encumbrance like easement, violation of zoning ordinance
(rescission is remedy but not if time isn’t of the essence)
*this is true regardless of the type of deed
doctrine of merger
under the doctrine of merger, obligations contained in the contract of sale, such as the seller’s duty to deliver marketable title, are merged into the deed and cannot thereafter be enforced unless the deed contains the obligation. in other words, the right to sue for breach of the land sale contract merges with the deed at closing
waste
*applies where multiple parties have simultaneous interests (life tenant, remainder, future interests, landlord v. tenant)
affirmative waste: caused by voluntary conduct which causes a decrease in value
permissive waste: caused by neglect toward property, which causes decrease in value
ameliorative waste: person in possession changes the use of the property and actually increases the value of the property
remainders
vested: given to an ascertained grantee, and not subject to a condition precedent
contingent: all other remainders
vested subject to open: vested remainder in a class gift and full class membership is unknown
- at least one person in class must be vested for it to be vested subject to open (otherwise contingent)
- when all members of class are identified, class is closed
- rule of convenience: class-closing mechanism to avoid RAP –> closes the class when any member becomes entitled to immediate possession
special cases of remainders
doctrine of worthier title:
-prevents against remainders in a grantor’s heirs
-creates a presumption of reversion to the grantor
“to A for life, then to my heirs” (O has reversion)
rule in shelley’s case:
-prevents against remainders in a grantee’s heirs
uses doctrine of merger to create fee simple
“to A for life, then to A’s heirs” (A has FSA)
RAP
applies to contingent remainders, vested subject to open (if not closed by rule of convenience) ownership terminates upon the end of the measuring life, and executory interests
21 years after validating life (person alive at time of transfer)
*if violates RAP, strike out that portion, changes interests
wait and see approach: statutory reform, wait and see if interest subject to RAP vests within perpetuities period (some states changed vesting period to 90 years)
cy pres: equitable doctrine, allows court to reform transfer to avoid RAP
exceptions to RAP
charity:
- doesn’t apply to a gift from one charity to another
- gift to alternate charity isn’t subject to RAP
options:
- RAP doesn’t apply to an option held by a current tenant to purchase a fee interest in the leasehold property
- doesn’t apply to right of first refusal in commercial transaction (unless given in conjunction with lease)
discrimination
Fair Housing Act (FHA): prohibits discrimination in the sale, rental, and financing of dwellings. also prohibits advertising that states discriminatory preference
focus on multi-family residential housing
doesn’t cover
- single-family housing sold without broker,
- owner-occupied with 4 or fewer units (Ms. Murphy),
- religious organizations/private clubs
protected traits: race, color, religion, national origin, sex, disability, and family status (not sexual orientation, not employment)
prohibited:
- refusing to rent/sell/finance dwelling
- requiring different rents
- falsely denying unit is available
- discriminatory preference in advertising
allows both intent and effect cases
causation: prohibited behavior must be linked to the protected basis
*One of the prohibited actions in the Fair Housing Act is the advertising of or making any statement that indicates a limitation or preference based on protected characteristics. The exemption for an owner-occupied building with four or fewer living units does not apply in regard to these advertising restrictions. This restriction applies to both the owner placing the advertisement and the newspaper who publishes the advertisement.
conflict of laws
in cases about property, the controlling law is based upon where the property is located (law of the situs)
delays in land sale K
unless contract otherwise, time is not of the essence
failure to close on date set may be breach of K but not grounds for rescission, can do specific performance
implied warranty of fitness or suitability
applies to defects in new construction
must be brought within reasonable time after discovery of defect
majority: both initial homeowner-purchaser and subsequent purchasers can recover damages
minority: only original buyer can enforce this warranty
duty to disclose defects
duty on seller to disclose to buyer all known physical and material defects
- concerned with latent/hidden defects
- material defect must substantially affect value of home, health & safety, or desirability
- general disclaimers “as is” won’t satisfy duty to disclose
risk of loss
majority (equitable conversion):
- buyer holds equitable title during period btw execution of K and delivery of deed, so responsible for damage
- seller holds legal title & has right to possess property
*Due to the doctrine of equitable conversion, a judgment obtained against a seller after the execution of a land-sale contract is not enforceable against the real property—even if the claim arose before the contract was executed.
minority ( the Uniform Vendor and Purchaser Risk Act):
-risk of loss on seller until closing and delivery of deed
*equitable conversion has another meaning: Under the doctrine of equitable conversion, when one of the contracting parties dies prior to the performance date of the contract, the seller’s interest may be treated as personal property and the buyer’s interest may be treated as a real property interest for purposes of distributing in the property pursuant to either’s will.
exceptions to SoF in land sale K
- part performance:
- payment of part or all of purchase price,
- possession by purchaser, or
- improvements by purchaser
* at least 2 of these
- can be used by either party to enforce specific performance (bc of mutuality of remedies)
2. detrimental reliance
types of deeds & covenants
- general warranty deed
- special warranty deed
- quitclaim deed
- general warranty deed
greatest title protection, grantor warrants title against all defects, even if he didn’t cause them
present covenants:
- covenant of seisin: deed describes land in question
- covenant of the right to convey: grantor has right to convey property
- covenant against encumbrances: no undisclosed encumbrances on property that could limit its value
future covenants:
- covenant of quiet enjoyment: grantee’s possession won’t be disturbed by 3rd party claim
- covenant of warranty: grantor will defend against future claims of title by third party
- covenant of further assurances: grantor will fix future title problems
- special warranty deed
grantor warrants against defects only caused by grantor
includes same 6 covenants as general warranty deed
- quitclaim deed
grantor makes no warranties as to health of title, least amount of protection
wills: escheat, ademption, lapse, anti-lapse
guiding principal of will is testator’s intent (if die without will, estate distributed by intestate succession to heirs)
escheat: if decedent dies without will or heirs, property goes to the state
ademption: devise of property fails bc not in testator’s estate at death so intended recipient gets nothing
- ademption by satisfaction: if testator gives intended beneficiary the promised gift during life, then beneficiary keeps gift
lapse: intended beneficiary predeceases the testator. traditionally, the gift fails
anti-lapse: every state has anti-lapse statute to prevent gift from failing
- in most states, predeceasing beneficiary must be a relative of testator who dies leaving issue
- children of beneficiary takes gift on behalf
- more consistent with testator’s intent
trusts
device for managing property with bifurcated ownership
trustee owns property (legal title) for benefit of another person (beneficiary) who holds equitable title
transfers by mortgagor & liability of subsequent transferee
can transfer property by deed, will, or intestate succession
mortgagor remains personally liable after transfer
-unless mortgagee releases mortgagor or lender modifies new owner’s obligation
due-on-sale clause: lender can demand immediate full payment upon transfer (acceleration clause)
-(federal law exempts certain transfers of residential real property from enforcing acceleration clause. Among the exempt transfers is a transfer by the mortgagor-borrower to her living trust, transfer of property to a spouse or child, and a transfer of property to an ex-spouse due to a divorce)
due-on-encumbrance clause: acceleration clause when the mortgagor obtains a second mortgage or otherwise encumbers the property
liability of subsequent transferee:
- “assumes” the mortgage:
- transferee personally liable for mortgage (can’t assert defenses of the mortgagor-seller against the mortgage)
- both original mortgagor and transferee are liable upon default - takes “subject to” the mortgage:
- transferee not personally liable upon default
- applies when deed is silent as to liability
*donee who takes property that has been mortgaged is entitled to assert the donor’s defenses against the mortgagee (in contrast to purchaser who assumes mortgage)
- mortgagee can freely assign note & mortgage to another bank
- if transfer note but not mortgage, mortgage follows the note
- if transfers mortgage but not note, transfer is either void or mortgage follows
*In either instance (assumes or takes subject to), the lender can foreclose on the mortgage if the debtor defaults on the loan. However, the grantee will only be liable for any deficiency resulting from a foreclosure sale if the grantee assumed the mortgage.
lien/title theory
lien theory:
- mortgagee/lender cannot take possession prior to foreclosure bc lender has a lien until foreclosure is complete
- mortgagor is owner up until foreclosure
title theory:
-lender technically has the right, as holder of title, to possess the property at any time
intermediate title theory:
-mortgagor retains title until default, at which point the lender can take possession
equity of redemption
common law right held by mortgagor to reclaim title and prevent foreclosure upon the full payment of the debt
-must exercise this right before the foreclosure sale
deed in lieu of foreclosure: rather than face foreclosure, mortgagor can convey property to lender in exchange for releasing her from any outstanding debt
-However, the mortgagee takes the property along with (“subject to”) any junior interests attached to the property.
clogging the equity of redemption:
-creates terms that make it harder for a borrower to exercise her equity of redemption, courts intervene to prevent clogging
*statutory right of redemption arises after foreclosure sale (if state adopts statute)
foreclosure methods
foreclosure is forced sale of asset to pay off debt
mortgagee must give notice before foreclosing
2 methods:
- judicial sale: under supervision of court
- power of sale: private sale held by mortgagee
if sale produces less than mortgagor owes, court can issue a deficiency judgment for remaining balance from mortgagor
foreclosure priorities
The money from a foreclosure sale is applied first to the costs associated with the foreclosure sale itself (which would include attorney’s fees), second to the mortgage obligation being foreclosed, and finally to the mortgage obligations owed to all junior interest holders.
general rule:
- senior interests (interests acquired before interest being foreclosed) survive the foreclosure
- junior interests (acquired after interest being foreclosed) are extinguished by foreclosure
- when a junior mortgagee is not given notice of the foreclosure proceedings, the junior mortgage is not eliminated
- first in time rule: surviving debts satisfied chronologically
exceptions to first in time rule:
- purchase money mortgage has priority over mortgages created prior to mortgagor’s acquisition of the property
- recording act exception: senior mortgage not recorded but junior mortgage is so if meets requirements of recording act takes priority
mortgage modifications:
- if modify mortgage to make it more burdensome, that interest is subordinated (only as to the modification)
- if senior mortgagee releases a mortgage and replaces it with new mortgage, new mortgage retains same priority as former one (unless materially prejudicial to junior mortgage holder)
after-acquired property:
- mortgage must state clearly that it applies to after-acquired property
- upon foreclosure, an interest in after-acquired property is junior to a purchase-money mortgage
*if an original mortgagee loans an additional amount to a mortgagor that is optional rather than obligatory such amount may not enjoy priority over a second mortgage if the original mortgagee has notice of the second mortgage. This is true even though the mortgage by its terms serves as security for future advances.
statutory redemption
usually, foreclosure eliminates the mortgagor’s interest in the property
but some states allow the mortgagor to redeem the property even after the foreclosure sale; enables homeowner to nullify the foreclosure
absent statutory redemption, purchaser of property at foreclosure sale takes it free and clear of any junior mortgages but subject to senior mortgages
fixtures
tangible property that’s attached to real property in manner that’s treated as part of the real property
fee simple owner can make improvements, including fixtures
holders of life estate & tenants are limited by doctrine of waste
buyer of real property is entitled to the chattel unless seller reserves right to keep in contract.
The attached personal property would not be considered a fixture if a reasonable person would conclude, based upon the facts surrounding that specific item, that the item was not attached to the real property with the intent to make it a permanent part of the real property. examines such factors as (i) the importance of the personal property to the real property, (ii) whether it was specifically designed for use on the real property, and (iii) the amount of damage to the real property that removal of it would cause.
life tenants & tenants can remove fixtures unless would permanently damage property
trespassers:
- old rule: can’t remove fixtures installed
- new rule: can remove improvement or recover value added to property as long as acted in good faith
zoning
state/local govs can regulate use of land through zoning laws
cumulative zoning: traditional approach, residential use permitted everywhere, commercial restricted to some, industrial in fewest
mutually exclusive zoning: only one type of use permitted per zone
nonconforming use:
- existing nonconforming uses are grandfathered in
- if project in process when change happens, developer must have proper building permits by time ordinance takes effect & demonstrate project was in good faith
- if post-ordinance, need variance
- *Generally, a property owner whose nonconforming use has been grandfathered is not entitled to subsequently increase the nonconforming use, such as by enlarging a building that houses a nonconforming use or acquiring and developing adjacent property in accord with the nonconforming use. However, the owner may be permitted to increase the frequency of the nonconforming use to upgrade the means to accomplish the nonconforming use, so long as the nature and character of the use does not constitute a substantial change.
variance:
-compliance would create unnecessary hardship, arises from circumstances unique to property, owner didn’t create the hardship, variance is in keeping with overall purpose of ordinance, and won’t cause substantial harm to general welfare
nuisance
private nuisance:
- substantial & unreasonable interference with another individual’s use or enjoyment of his property
- substantial: offensive/annoying to average person in community
- unreasonable: injury outweighs usefulness of D’s actions
public nuisance:
- unreasonable interference with the health, safety, or property rights of the community
- private party must show she suffered different kind of harm than rest of community
water rights
two approaches:
- riparian rights:
- landowners who border waterway own the rights to it
- riparians share right to reasonable use of water (liable to another for interference of use) - prior appropriation:
- first in time, first in right: first person to use, regardless of where land located, as rights to water
- beneficial use: user must put water to beneficial use
support rights
- lateral support rights:
- neighboring landowner can’t excavate so as to cause a cave in on adjacent owner’s land
- if neighbor’s buildings contributed to cave in, standard for one excavating is negligence
- if neighbor’s buildings didn’t contribute, strict liability - subjacent support:
- surface landowners have right not to have their land subside from activities of owners of underground rights
*the owner of mineral rights is not liable for damage done to structures built on the surface of the land after the mineral rights were transferred unless the owner fails to exercise reasonable care in removing the minerals
doctrine of attornment
the tenant is bound to honor any covenant in his lease that has been assigned by the landlord to a third party, if the covenant touches and concerns the land
exoneration of liens doctrine
permits the devisee of real property that is subject to a lien (e.g., a mortgage) to demand that the lien be paid off (i.e., “exonerated”) using other assets in the decedent’s estate
condemnation of property
If the condemnation of a leased property is partial, meaning that only a portion of the leased property is condemned or the property is temporarily condemned, then the tenant must continue to make his rent payments. The tenant is entitled to compensation for the portion of the property that was condemned or the time that he was dispossessed from the leased property
the doctrine of marshaling of assets
Under this doctrine, the holder of a senior security interest must first proceed against the property on which there are not any junior security interests, and then against the property on which the junior interest was more recently created, before proceeding against property on which the junior interest was more remotely created
subrogation
Under the doctrine of subrogation, a third party (subrogee) who pays another’s mortgage loan in full becomes the owner of the loan and the mortgage. The subrogee may therefore seek reimbursement from the debtor or enforce the mortgage.
Equal dignities rule
If the agent is required to sign (e.g., execute a deed), then the agency relationship must be created in writing
vested remainder subject to complete divestment
A vested remainder is subject to complete divestment if the occurrence of a subsequent condition will eliminate the remainder interest (e.g., “then to my heirs; but if none survive my friend, then to my lawyer”
plants
Wild, uncultivated crops (i.e., fructus naturales) are considered part of the real property on which they grow, so they pass automatically with the land. Crops that are purposely planted and cultivated (i.e., fructus industriales) are considered the landowner’s personal property and, similarly, are generally conveyed with the land.
However, the prior owner has the right to reenter to remove these crops if they were:
-harvested and therefore severed from the land
-ripe (i.e., mature) and therefore deemed constructively severed from the land (in some courts) or
-planted by a tenant with a lease of uncertain duration or an adverse possessor under a claim of right.*
*Under the doctrine of emblements, a tenant has a right to reenter the land to remove, harvest, and cultivate crops planted prior to the termination of his/her tenancy (if termination is not the tenant’s fault). Adverse possessors have the same rights as a tenant.
equitable mortgage
An absolute deed transferring unrestricted title to property with the intent to secure a debt is usually enforceable as an equitable mortgage unless competing equities (e.g., good-faith purchaser) take precedence
Due on sale clause exceptions
-Devise, descent, or transfer to joint tenant upon death
-Transfer to spouse or child
-Transfer to ex-spouse in divorce
-Transfer to borrower’s living trust
-Creation of subordinate lien without occupancy rights
-Granting leasehold interest of less than 3 years without option to purchase
Condo & maintenance fees
A member of a common-interest ownership community, such as a condominium, is not entitled to withhold payment of assessments to set off against a default by the association in fulfilling its duties to the member. Consequently, although the member in question has a right to recover damages from the association due to its failure to fix the leak as required by the declaration, her refusal to pay the monthly maintenance fee may not be based on that failure
implied easement
(1) both the dominant and servient estates must have been owned by the same person at the time of the prior use; (2) the prior use of one parcel must have benefited the other portion of the land; (3) the prior use must have been apparent; (4) the prior use must have been continuous; and (5) the prior use must have been reasonably necessary for the use and enjoyment of the benefited property.
surrending lease
If the constructive eviction defense fails, then the doctor has an alternative defense available. When a tenant unjustifiably abandons the leasehold, the tenant is treated as having made an offer to surrender under the lease. If the landlord accepts this offer, the lease is terminated, and the tenant is not liable for any future rent. A landlord’s retaking possession of the premises along with the landlord’s re-renting to a third party for a longer term or higher rent, or making alterations to the premises, may be treated as acceptance of the tenant’s offer unless the landlord notifies the tenant otherwise. If the landlord does not accept the tenant’s offer and notifies the tenant of such, then the landlord can continue to enforce the lease and is entitled to rent.
