property

Question 1

first rule of property law

Answer 1

we can’t completely prevent other people from “alienating” property.

this just means that we can’t stop people from transferring land altogether.

If our contract says “to the Goat Gang so long as they never attempt to sell the land” … this will not be allowed.

Question 2

what happens if someone TRIES to pull an absolute restraint on alienation?

Answer 2

The law just CUTS OUT that part and you get full rights to the property in fee simple absolute

Question 3

are racist contracts resisting the sale of land to people of certain races, religious groups, or ethnic groups enforceable?

Answer 3

fuck no

Question 4

what is fee simple absolute?

Answer 4

Ever heard of a bundle of sticks in 1L property law?

This is all the fucking sticks thrown together at once.

The fee simple absolute is full ownership of the land.

the duration? infinite

You can sell it, transfer it, put it in a will, and pass it down to your heirs without a will.

In the property game we call this DDA.

It is devisable, descendible and alienable.

You fully own this fucking thing forever, and it is the highest level of property ownership. And nobody has a future interest in it.

Question 5

how is a fee simple absolute created?

Answer 5

“to goat”
“to goat and his heirs”

Question 6

weaker fee simple - defeasible fees

Answer 6

Defeasible fee’s are fee simple estates that can be terminated upon the happening of a stated event.

To create these we need durational language i.e. “so long as”, “during”, “until”

Durational language, not language of hope. Your hope or desire or dreams for this pathetic piece of property will not turn it into a defeasible fee.

These are ALL FEE SIMPLE ABSOLUTES EXAMPLES:
“I give this property to Goat, with the hope that he becomes a kitty”
or
“I give this property to the Law School, for the purpose of constructing a bar exam tutoring center.”
or
“To Nancy Riverfoot, with the expectation that she uses this property as a podiatry surgical center.”

So absolute restraints: i.e. “you can never sell”, and fake ass durational language which is actually language of HOPE will revert your little property transfer to not what you WANTED…. but to a fee simple absolute.

Question 7

how do we properly make our first defeasible fee?

fee simple determinable

Answer 7

the legendary fee simple determinable

ex: “to A so long as”
“to A during”
“to A until”
“to A while”

So we need clear durational language and a condition. If the condition is met, it’s reverting back to Daddy Grantor.

Question 8

to Mr. Meow so long as he uses the land to play with kitties

Answer 8

This is a fee simple determinable.

Now we have a fee simple interest with a potential restriction (not playing with the kitties) that could terminate Mr. Meow’s interest.

Question 9

to Mr. Meow so long as he uses the land to play with kitties.. but what happens if Mr. Meow stops playing with the kitties on his land?

Answer 9

So the property automatically reverts back to the owner if the condition is not met.

He would never be able to play with those kittens again… and the fee simple had sadly become determined once and for all.

The grantor got the barn back.

Question 10

possibility of reverter

Answer 10

there is a possibility that the land will revert some day back to the original owner.

Question 11

can a fee simple determinable be transferred?

Answer 11

Yes!
Mr. Meow can sell the land to whoever he wants, but the new owner will still be subject to the condition that the kitties must be played with.

Question 12

the rule against perpetuities does not apply to…

Answer 12

automatic reverter
if the transfer happens automatically and immediately, rules against perpetuities does not apply.

Question 13

summary of rule against perpetuities

Answer 13

we hate the idea that a motherfucker who has been dead for 600 years would put creepy uncertain conditions into a property conveyance that might not happen

contingent conditions - UNCERTAIN event that could occur BEYOND the 21 year timeline.

If a property interest says “hm… Mr. Meow will have the land. If, at any time in the future, willowy tree grows to over 100 feet… then Mr. Puppy will get the land.”

Problem: How will we know if this tree ever reaches over 100 feet?

Now we have this creepy sex maniac skeleton conductor directing an UNCERTAIN condition from the grave.

RAP only ever carried about interests vesting. But there was one thing you didn’t know: some interests were always vested. And possibilities of reverter was one of them.

Question 14

rule against perpetuities reverter

Answer 14

reverter is an AUTOMATIC VEST from the time it was SEWN into the CONTRACT. it is like a BUTTON in the vest.
RAP only gives a shit about UNCERTAIN CONDITIONS that MAY OR MAY NOT VEST.
THIS REVERSIONARY INTEREST WAS VESTED THE MOMENT IT WAS PUT INTO THE CONTRACT

IT WAS VESTED FROM DAY ONE. Do you see how nothing more needs to happen in the real world for its power to have effect? It has INHERENT PERSONAL vesting power.

I KNOW in my heart, that the reversion has power. It is not uncertain. We DON’T need the wheelbarrow to get out the skeleton guy because we have a VESTED interest subject to ZERO UNCERTAINTY

Question 15

how to tackle rule against perpetuity problems

Answer 15

just look at EVERYONE who was there when the contract was originally made.

Step 1: Kill everyone who was there originally for the contract. These are your so-called “life in beings”… but kill them IN YOUR MIND… don’t touch a hair on their head in reality.

Step 2: Look at the barren landscape of dead bodies and think “is it possible that in 22 years this land may still be waiting uncertainly… like a willowy tree waiting to grow?”

Example: We can have things like “a right of first refusal” for the grantor’s lifetime. When the grantor dies i.e. when we kill him off in our minds, we will know whether the future interest will vest or not.

But a right of first refusal with NO duration violates RAP… because we don’t know if it will vest once everyone who was there originally dies.
We can’t have a great, great, great grandchild possibly exercise a right of first refusal on property (a right of first refusal is just a contractual right to give someone the opportunity to enter into a business deal with you before anyone else… kind of like a “first dibs” situation)

Question 16

rule against perpetuities - “wait and see” and “second look” doctrines

Answer 16

where the courts just actually waits until everyone dies and sees what happens to the land -> whether it vests or not within 90 years -> so they don’t have to guess. (probably because they don’t understand RAP).

Question 17

fee simple subject to condition subsequent versus fee simple determinable

Answer 17

THESE ARE THE SAME EXACT THING AS FEE SIMPLE DETERMINABLES.

The ONLY difference is that if the condition is not fulfilled, it does not AUTOMATICALLY go back to the grantor… the grantor has a CHOICE whether they want to take the land back or not.

If Mr. Meow stops playing with the kitties on the land in a fee simple subject to condition subsequent… the grantor has a CHOICE to take the land back or not. If the grantor wants to, they can just LET Mr. Meow keep his interest in the land even though he violated the condition.

If Mr. Meow stops playing with the kitties on the land in a fee simple determinable… he loses the land IMMEDIATELY.

Question 18

fee simple subject to condition subsequent

Answer 18

durational language + carve out the right to reenter

Example: “To depressed Bar Exam taker, but if depressed Bar Exam taker ever drinks two Celsius drinks in one day on the premises… the grantor reserves the right to re-enter.”

So now the bar exam taker has a fee simple subject to condition subsequent

The grantor has an optional right of re-entry.

But remember… the estate is not automatically terminated when the Bar Exam Taker invariably drinks 14 Celsius drinks on February 15th… the Grantor has to actually re-enter the property and re-take (using legal process obviously, not a shotgun)

Question 19

executory interests

Answer 19

An executory interest is just a future interest in someone other than the grantor that is not a reversion or right of re-entry.

Question 20

springing executory interest

Answer 20

goes from the grantor to the grantee upon a specific condition happening

if the condition is violated .. forfeiture of the land happens automatically.

“to my beautiful goats, but only if they pass the bar.”

so it springs directly from the grantor (me) to the third party (my goats)

Question 21

shifting executory interests

Answer 21

Instead of springing to the grantee, we cut off the grantee’s interest in favor of another grantee.

grantee –> grantee

to goat bar prepians, but if they ever use barbri, to my cat Walter.

SHIFT from one grantor to another.

The Bar exam likes to try and trick you into thinking executory interests DISAPPEAR when people die…. THEY DON’T.

Question 22

are executory interests subject to RAP?

Answer 22

yes - because these things might not vest.

Question 23

“to goat when Saiga becomes fully extinct….”

Answer 23

Well how the fuck are we going to know if that will vest within 21 years?

Literally me and you could die, and Saiga’s could live on for millions of years (and they will, based on my recent work in Kazakhstan).

You get it. Don’t be afraid of RAP -> love it.

“Shit happens instantly” -> No RAP issue.

“Shit could happen in 17 million years” -> We got a RAP issue.

Question 24

life estate

Answer 24

Their creation must be measured in terms of ACTUAL LIVES, not just years

A life tenant has the exclusive right to use and enjoy the property before their death… but they cannot pass it to their heirs.

A life tenant can sell the property… but there’s kind of a problem with this… the actual conveyance can’t exceed the life of the original tenant. So if you sold it to Bob and you died… Bob would lose it lmao. In practice, almost no one actually buys these shitty life estates.

When a life tenant dies, the property reverts to the original grantor or their successors, or it shifts to another grantee named in the deed or will.

This grantee has a future interest that we call a remainder.

Question 25

life estate pur autre vie

Answer 25

that simply means a life estate measured by SOMEONE else’s life other than the person who is getting the land i.e. “to Goat for the life of Rainbow Brown.”

Anyway these life estates are DDA -> devisable, descendible, and alienable

Question 26

determinable life estate

Answer 26

To Goat for life, so long as he doesn’t eat dippin’ dots on the property.

Question 27

remainders

Answer 27

When a life tenant dies, the property reverts to the original grantor or their successors, or it shifts to another grantee named in the deed or will.

This grantee has a future interest that we call a remainder.

Question 28

can remainders and executory interests be transferred to other people?

Answer 28

yes

When in doubt on the test just say to yourself “is this a future interest? Yea, it’s probably able to be given to someone else”

Question 29

life tenants and waste

Answer 29

Imagine I have a future interest remainder in the life estate.

I am going to get this stupid ass life estate after you die.

But guess what? You don’t give a fuck. You are a life tenant. You don’t give a fuck what happens to this property after you die.

You have no economic incentive to plant flowers on my land. You’re like “bitch, I’m about to be DEAD. I can’t even sell this fucking thing. I don’t care what happens to it after I die. I don’t care about a REMAINDERMANS’ economic INTEREST.”

Anyway, so the life tenant has a duty not to commit waste… which just simply means they have a duty not to do any crazy shit that will harm the future interest holders

There are three kinds of waste which allow the future interest holder to sue for damages or injunctions

Question 30

three kinds of waste - voluntary waste

Answer 30

also known as affirmative waste

The life tenant can’t engage in conduct that lowers the economic value of the property.
Yea I’m talking about removing buildings. Yea I’m talking about selling timber. Anything that destroys or damages the property.

You can make reasonable repairs and knock down a few tree’s if they are in danger of falling on the house, but you can’t just start consuming natural resources like you’re some type of fucking tree salesman.

Random Goat Note: Life tenants can annex chattel that THEY put in after they die (usually, by way of their personal representative). This makes sense. I mean, if I put in some glorious antique bird bath stone statute or some shit… and I want to pass it down to my grandchildren after I die… my personal representative can remove it so long as it doesn’t fuck up the whole property.

Question 31

three kinds of waste - permissive waste

Answer 31

Permissive waste happens when the life tenant has FAILED to act in some way, and this has fucked up the economic value of the property.

What is the most common type of permissive waste you ask?

Failing to make repairs to buildings by being a lazy fuck.

But it’s not always failure to repair… failure to pay real estate taxes will also be considered permissive waste because it causes a risk that title to the property could be lost in a tax foreclosure sale.

The life tenant must pay the mortgage interest (the remainderman has to pay the mortgage principal).

The life tenant also has to pay the property taxes and special assessments… at least up until the fair rental value of the premises.

Question 32

a future interest holder who is nice and spends money to satisfy the life tenant’s obligations …

Answer 32

will be entitled to reimbursement.

Question 33

life tenant / remainderman financial responsibilities

Answer 33

Let’s say Goat gets a house where the fair market rental value is $1,000.

He is also responsible for paying taxes, insurance, and maintenance costs… which total $800.

Goat can keep the excess of $200.
If the expenses were $1,200… the remainderman would have to pay the extra $200 over the fair market rental value.

Question 34

three kinds of waste - ameliorative waste

Answer 34

Most courts hold that a life tenant CAN engage in acts which IMPROVE the fair market value of the property, so this is fine in 2024. It’s called ameliorative waste. It used to be banned, but now we like it.

Question 35

cotenancy

Answer 35

all about sharing.

To put it simply, a cotenancy exists when multiple people have the right to use, possess, and enjoy a property together.

This is like me at my mom’s house.

We both use the property together and enjoy it.

three types of co-tenancies: tenancy in common, joint tenancy, tenancy by entirety.

Question 36

tenancy in common

Answer 36

When we have multiple grantee’s, the law assumes it’s a tenancy-in-common unless you show them otherwise.

It is… the default tenancy if nothing more is specified in the instrument.

So what do these little tenants have in common?

Every tenant-in-common can use and possess the entire property

But my Goats… relax for a second.Just because they each have equal rights to use it… doesn’t mean that one tenant can’t still have a greater fractional share in the property than another tenant. You could have a fucking 4% share and just be lounging on the couch all day smoking a bong.

The “smallness” of your share only becomes relevant when the property is partitioned or the rents or profits are divided.

They can also sell it all.

Tenants in common can transfer their interest with some stupid thing called a deed of conveyance.

They can even sell part of it

Ever heard of a lease? They can do this. They can mortgage their side of the property. They can grant a licensee access to it.

Any transfer by one co-tenant really affects the other co-tenants in the sense that they have a new motherfucking roommate now.

Question 37

outster

Answer 37

an ouster is when you kick someone out who is entitled to be in possession of the property

Remember my Goats, an ouster is different from an eviction.

An eviction is when we kick someone out who is not entitled to be in possession of the property.

An ouster is when we kick someone out who is entitled to be in the property (like if we kick out one of our little co-tenant buddies).

The ousted co-tenant can then sue your ass for money or for an injunction.

ex. someone will change the locks

Remember, ouster is not just being in exclusive possession while your roommate is in China. Ouster requires ACTS OF HOSTILITY

Question 38

what happens when a tenant in common dies

Answer 38

it goes to the dead persons heirs
there is no right of survivorship with the other tenants…. bc that is JOINT TENANCY

Question 39

joint tenancy

Answer 39

Just like with tenants-in-common, joint tenants both have an undivided interest in the whole property.

So Goat, what’s the big difference?

The big difference is this: there is a right of survivorship with joint tenants.

If one joint tenant dies, their share passes to the OTHER joint tenant.

DDA = alienable, but they are not descendible or devisable in a will because the moment you die it passes to the other person.

Question 40

joint tenants.. John giving his shit to his son

Answer 40

The bar exam is obsessed with being like “yea John and Carol had a joint tenancy… but John gave his share to his son in his will.”

No he didn’t.

The moment John gets shot down in space by an alien ship, it goes IMMEDIATELY to Carol.

And that, my friends… is the right of survivorship in motion.

Question 41

DDA

Answer 41

devisable, descendible and alienable.

Question 42

how do we create a joint tenancy? T-TIP

Answer 42

1. same TIME
2. same TITLE
3. IDENTICAL INTERESTS
4. same POSSESSORY rights

any disturbance in these four will sever the joint tenancy

So acquiring it at the same time with the same title is simple. We both need to get our interest by the same document (a deed or will) -> someone dies and gives it to us, or sells it to us at the same time.

Unity of interest means we all obtain the same fractional share of the property.

And unity of possession means that each tenant has the same undivided right to possess the property.

So it’s kind of easy to get the four unities when we are in the bar exam’s favorite situation: someone gets a joint tenancy through a will. Because then we have the same title given at the same time, it’s great!

Question 43

say you’re sitting there with a fee simple absolute, and you say to yourself, “i want a joint tenancy with my friends Tinman and Lion, but we will NEVER get title at the same time.” (bc you already have title)

Answer 43

We need a straw man to accomplish this. So you’d give your fee simple to the straw purchaser, then he’d sell it back with the joint tenancy T-TIP UNITIES to TinMan, Lion and Dorothy with RIGHT OF SURVIVORSHIP… at the same damn time.

Question 44

how do we break up a joint tenancy? seek professional mentoring.

Answer 44

Sale
Partition
Mortgage

Question 45

how does a sale destory a joint tenancy?

Answer 45

If you SELL your portion of the joint tenancy during your life time… this will BREAK THE UNITIES

THE NEW BUYER DIDN’T GET THAT SHIT AT THE SAME TIME AS YOUR FELLOW JOINT TENANT

UNITIES = DESTROYED

THE NEW BUYER IS NOW A TENANT IN COMMON

Here’s the craziest part.

And they love this in the MEE’s. One joint tenant can secretly do this transfer and break the joint tenancy… without even telling the other joint tenant.

Joint tenants have no FIDUCIARY duty to one another. They can sneaky sale behind each others backs and just dissolve the joint tenancy no problem.

Question 46

what happens when there are three or more joint tenants and one conveys their interest to a third party?

Answer 46

we are left with one tenant in common and two joint tenants.

Question 47

what happens when co-tenants get into a little fight? How does partition destroy joint tenancy?

Answer 47

Well, they can terminate the cotenancy relationship by using a partition (either tenants-in-common or joint tenants may do this… but not tenants by the entirety which we will learn about in a minute)

you gotta be in possession to partition sorry people with reversion or remainder who want to partition with me.

there are two types of partition - partition in kind and partition by sale.

Question 48

destroying joint tenancy - partition in kind

Answer 48

court has preference for partition in kind if the property can be fairly and equitably divided up.

Basically, the cotenants have a little friction between them and the court just says “hey we’re physically dividing up this property based on your percentage ownership of it. You got 25%? Okay you get the shed. You got 75%? Take the master bedroom and this area over here.”

They chop up the parcel. Everyone becomes neighboring landowners. Simple.

if there is a question mentioning zoning issues, the answer will be partition by sale.

Question 49

destroying joint tenancy - partition by sale

Answer 49

Next up we have a partition by sale. This is when the court just says “okay fuck everyone involved in this. I’m selling this property and each cotenant is taking a share of the net sales proceeds according to their percentage ownership interest.”

Property sells for $100k. Jimmy had 20% ownership. He gets $20,000.

if there is a question mentioning zoning issues, the answer will be partition by sale

Question 50

can you and your cotenants agree to limit the rights of partition?

Answer 50

no - it is similar to a restraint on alienation which you CAN NOT do.

Question 51

how a mortgage can not sever a joint tenancy

Answer 51

when states treat a mortgage as a lien

a joint tenant’s execution of a mortgage on his or her interest will NOT break the joint tenancy and render everyone as tenants in common.

One more small points about joint tenancies: if a single tenant goes rogue and takes out a mortgage or a lien in a joint tenancy in a lien theory state, only THAT tenant’s interest is subject to the mortgage (it will be a mortgage or lien on their 1/2 interest). So when they die and the other joint tenant gets the property, the lien or mortgage will be extinguished

Question 52

how a mortgage can sever a joint tenancy

Answer 52

In states that consider a mortgage a transfer of title, it breaks the stupid ass four unities

some states consider a mortgage like you just walked into the bank and HANDED them the title to your house. So it fucks up our unity of time and possession.

Question 53

can a joint tenants interest be devised by a will?

Answer 53

fuck. no.
it goes to the other joint tenant that is alive.

Question 54

tenancy by the entirety

Answer 54

Which is simply a joint tenancy by a husband and wife with a right of survivorship.

The main difference between this and a joint tenancy is that it’s a lot harder to fuck up.

An individual spouse can’t do a sneaky transfer like they could do in a joint tenancy.

The spouses must act TOGETHER as lovers and friends to sell, lease, or mortgage the property in order to sever a tenancy by the entirety.

Question 55

severing tenancy by the entirety

Answer 55

Severance of the tenancy by the entirety usually requires either
(1) the consent of both spouses or
(2) the ending of the marriage by divorce (god forbid),
(3) death, or
(4) execution on the property by a JOINT creditor…. NOT JUST ONE CREDITOR

IN THE TENANCY BY ENTIRETY, IT IS ALL ABOUT LOVE… SO EVERYTHING HAS TO BE DONE TOGETHER, WITH LOVE.

Question 56

good guy tenant in common pays a mortgage for the other tenant to avoid foreclosure

Answer 56

good guy tenant can recover for this contributable action.

Question 57

leases / leasehold estates / non-freehold estates

Answer 57

we don’t have title to property.

we have a present possessory interset, but the landlord has a future interest.

four leasehold estates - the difference being the duration of each of the four
1. tenancy by years
2. periodic tenancy
3. tenancy at will
4. tenancy at sufferance

Question 58

leasehold estate - tenancy by the years

Answer 58

The basic idea here is that we have possession for a fixed period of time THEN IT TERMINATES.

Doesn’t have to be years. Could be four months. Could be 47 weeks. Could be 157 years. Could even be one day.

“Goat leases to Rainbow Brown from April 20th to April 21st” … tenancy by the years. Easy.

If a tenancy has an UNCERTAIN duration… it is NOT a tenancy for years.

If it’s for greater than one year it has to be in writing.

You know the drill, we talked about this bullshit in contracts (SoF gang hit me up)

creation: written lease
termination: surrender of leaseholder

Question 59

leasehold estates - periodic tenancy

Answer 59

A periodic tenancy is for a fixed period of time which then repeats unless a party TERMINATES the lease by giving notice (usually WRITTEN notice)

creation: expressly or implication
termination: proper notice.

Expressly: “To Goat from year to year or month to month or week to week”

They can select any period. Obviously, they usually don’t select weekly as the period.

Implicitly
1. Nobody says SHIT about the time rent is to be paid, but you just start PAYING it month to month for example. Congratulations, you now have an implied periodic month-to-month tenancy

2. If we have a TERM OF YEARS (THIS WAS THE FIRST ONE) and it VIOLATES the statute of frauds… congratulations, we now have a periodic tenancy.
3. HOLDOVER (crackhead) TENANT + NICEGUYLANDLORD(TM) -> if a tenant stays in their rental unit beyond the stated lease date… they become a HOLDOVER TENANT. If a landlord allows them to stay on, the new rent is measured by the WAY THEY ARE NOW DOING IT.

HOLDOVER TENANT WRONGFULLY THERE -> LANDLORD KEEPS ACCEPTING THE RENT EVERY MONTH -> IT IS NOW A MONTH-TO-MONTH TENANCY

Everyone… if the words “Implied periodic tenancy” shows up in the answer choices just fucking pick it, you know these people have a boner for implied periodic tenancies. Look at how often I’ve been mentioning it.

Question 60

leasehold estates - periodic tenancy - termination

Answer 60

Periodic tenancies are automatically renewed until there is notice of termination.

But these notices are kind of tricky…

Notice must be given at LEAST one period in advance or you have to continue paying. It’s like when they make you cancel your gym membership but you end up paying two more months somehow.

So let’s say Goat leases GoatAcre to Judy Gunderson on January 1st, 2024 in a periodic month-to-month tenancy. On Febuary 15th, 2024, Judy sends a written notice of termination saying “Thanks Goat, but I have to go take the bar for the first time. My last rent payment will be February 28th then I’m going abroad!”

When is Judy bound to pay rent until?

Judy is paying until March 31st. She didn’t give me a months notice… she tried to give me 15 days notice only. So until she hits her 30 days, she’s not getting out of this.

Question 61

leasehold estates - tenancy at will

Answer 61

So the tenancy at will lasts as long as the landlord and tenant WILL that it lasts.

It has NO fixed duration.

Either party can terminate the lease at any time by giving notice to the other party. Wtf. But this is actually real.

creation: express terms
termination: by landlord or tenant at any time

The notice to terminate a tenancy at will is effective IMMEDIATELY upon receipt unless it states a future termination date.

You can create it by saying something like “To Goat for as long as the landlord desires”

But REMEMBER my beautiful Goats, unless the parties SPECIFICALLY AGREE TO THIS WEIRDASS ARRANGEMENT, the payment of regular rent will give rise to an implied periodic tenancy.

Question 62

tenancy at sufferance

Answer 62

This isn’t exactly like a SEPARATE category… but it kind of is. It happens when a tenant has A LEASE OF ANY ONE OF OUR PREVIOUS THREE CATEGORIES… and he just stays after the expiration of it.

creation: by crackhead jimmy when he decides to stay over past his allowed possesion time
termination: creation of a periodic tenancy or eviction

Causing the landlord to suffer = tenancy at sufferance.

So anyway - these are created when the tenant has wrongfully stayed and the landlord does not consent to it.

Usually, the tenant will revert to one of the three other categories very quickly depending on what happens. This is like a HOLDING pattern where the law is saying “what the fuck… this motherfucker is doing something weird.”

So after a holdover we get either (1) tenant leaves, (2) eviction, (3) parties negotiate a NEW tenancy (one of the first three types), or (4) landlord holds the tenant to a NEW lease term even though the tenant may object. There is also (5) where the landlord kills the tenant.

Question 63

lease

Answer 63

a contract that governs the relationship between a landlord and tenant during the TERM of the lease.

one party’s performance is excused if another party fucks something up which is a material breach of the lease contract.

Basically, the tenant doesn’t have to pay if the landlord does some crazy shit like constructively evict them. However, there usually needs to be proper notice and proper time to cure given to the landlord to fix any of their fuck-ups first.

Question 64

tenant duties

Answer 64

1. duty to avoid tortiously injuring 3rd parties the tenant invites
keeping the premises in reasonably good repair

2. duty to repair
tenant must simply maintain the premises nad make ordinary repairs - can’t commit waste.

3. duty to pay rent
if the tenant stops paying rent, the landlord can either
1. evict through the court system or
2. continue the relationship as a tenancy at sufference and suing for the rent due.
landlord cannot engage in self help by locking out the tenant, shooting the tenant, throwing the tenants stuff out, or turning off the utilities.

Question 65

what happens if tenant stops paying rent and abandons the property?

Answer 65

daddy landlord has three options SIR.
1. Surrend to daddy landlord now
when the tenant demonstrates by their words or actions that they don’t give a fuck about the lease.. it is called a surrender. daddy landlord can treat this as a surrender and accept it. if the unexpired term is OVER a year, must be in writing. tenant no longer on the hook for cash money.
2. ignore your tenant slave
you can also ignore your tenant’s abandonment and hold them responsible for the unpaid rent as if they were still there.
3. re-let
you can get a new tenant slave by re-letting the premises ON BEHALF of the wrongdoer tenants. this one is kind of funny. you’re like “i’m HELPING you mitigate after betraying me.” then you hold the tenant liable for the deficiency.
the majority rule is the landlord must make a reasonably good faith effort to re-let the premsies.

Question 66

landlord duty - modern view

Answer 66

you have to put the tenant in ACTUAL physical possession of the premise.

if crackhead jimmy the holdover tenant is still around… the new tenant is getting damages.

Question 67

landlord duty - minor rule

Answer 67

the landlord has no duty to deliver ACTUAL possession when the lease begins, and is NOT in default and therefore owes no money when crackhead Jimmy is wrongfully occupying the property.

All they have to do is hand over the KEYS to the CRIB and give legal possession, not TRUE PHYSICAL POSSESSION.

Question 68

implied covenant of quiet enjoyment

Answer 68

This is between a tenant and their landlord.

And the covenant just means that a tenant has the right to quiet use and enjoyment of their premises without interference from the landlord

Most lease agreements have this covenant in the lease contract but when it is not explicitly stated it is almost always implied (for ALL types of leases, both residential and commercial)

There are two… count them two ways a landlord can violate this covenant of quiet enjoyment:

Question 69

two ways a landlord can violate the covenant of quiet enjoyment

Answer 69

1. Obviously…breach by actual wrongful eviction will violate your covenant of quiet enjoyment

2. Breach by constructive eviction
sING

Substantial
Interference - landlords actions or failure to act is ongoing.
Notice - tenant must give notice of problem and landlord fails to fix in reasonable time.
Goodbye - tenant must vacate in reasonable time after landlord fails to correct issue.

Examples of constructive eviction:

Failure to make necessary repairs. If the landlord doesn’t fix the roof and every time it drizzles the whole apartment gets flooded for example.

Harassment of tenant. Making threats. Entering the premise without permission.

Interference with essential services like water, electricity, the laundry room, parking spaces.

Question 70

landlord duty not to permit a nusiance

Answer 70

The landlord is ALSO not liable for the acts of other TENANTS… except that the landlord has a duty not to permit a NUISANCE (loud noises from other tenants, illegal gambling operation, etc.)

Question 71

landlord duty to control common areas

Answer 71

like the clubhouse, pool, etc.

Question 72

implied warranty of habitability

Answer 72

remember my Goats, this applies ONLY to residential properties, NOT to commercial property leases

This warranty essentially says that the MINIMAL living requirements must be met in all residential leases: plumbing, running water, heat in the winter, etc.) … this standard is set by a local housing code or by a judge just looking at the facts and being like “what the fuck is going on here?”

This is non-waivable. So the tenant can never be like “I agree to live in a sewer raccoon habitat.”

Question 73

if the implied warranty of habitability is breached, the tenant has four remedies
M - R3

Answer 73

1. move out and then terminate the lease
2. repair and reduce rent
3. reduce or withhold until judge figures it out
4. remain in possesion then sue

Question 74

actual eviction

Answer 74

The landlord just kicks your ass out onto the street and you don’t have to pay rent anymore.

Question 75

partial eviction

Answer 75

This is when you are physically excluded from a large portion of the premise. You don’t have to pay rent in this case either, even if you still occupy the other portions.

Question 76

retaliatory eviction

Answer 76

If a tenant asserts their rights and says they want a habitable, non raccoons-nest to live in… the landlord is BARRED from penalizing them by either:

• Ending their lease
• Raising their rent
• Harassing them
• Or just generally fucking with them

In F24 they will probably have a problem where a tenant reports a landlord for a violation of the housing code then the landlord evicts the person.

The presumption in the law is that an eviction is RETALIATORY if it happens within 6 months of a tenant bringing a claim for a non-habitable lease or a withholding of rent by the tenant for a LEGIT reason (not a fence stealing reason)

The burden of proof is on the landlord to show that the eviction was not retaliatory - NOT the tenant.

Question 77

assignments and subleases

Answer 77

absent a prohibition in the lease, a tenant can transfer their interest in WHOLE (assignment) or in part (sublease)

Question 78

landlord prohibiting leases and assignments

Answer 78

1. if a landlord says you can’t assign, you can still sublease / if a landlord says you can’t sublease, you can still assign
2. once a landlord consents to one transfer by a tenant, he waives the right to object to future transfers by that tenant.

Question 79

things to consider when the landlord wants to sue during an assignment or sublease

Answer 79

1. Privity of contract (you can sue someone because they signed a contract with you)

AND

2. Privity of estate (who gets the land kicked back to them once nobody pays)

Question 80

privity of contract and estate between landlord and tenant 2

Answer 80

The landlord can sue the ASSIGNEE (TENANT 2) under privity of estate. They have an estate in common…. I mean… the landlord owns the property… and Tenant #2 has a right to live in it.

So they both have an interest in the estate. If tenant #2 stops paying rent, the property will ultimately REVERT back to Landlord since Tenant 1 signed off his whole interest in it.

Privity of Estate is like WHO GETS THE LAND KICKED BACK TO THEM once nobody pays rent?!

Landlord and Tenant 2 never signed shit, so there’s no priority of contract. Tenant 2 didn’t agree to take over Tenant 1’s contract with Landlord either.
there is no privity of contract unless tenant 2 assumes the contract of tenant 1.

Question 81

privity of contract and estate between landlord and tenant 1

Answer 81

they don’t have privity of estate, but they have privity of contract

So they signed a contract, but Tenant 1 no longer has ANY interest in the land (he assigned it all to Tenant 2) and he will NOT get the land kicked back to him if Tenant 2 doesn’t pay (privity of estate)

YOU EITHER GET A KICK BACK OF THE LAND (ESTATE)

OR YOU SIGN A CONTRACT (CONTRACT)

THOSE ARE YOUR TWO OPTIONS.

Question 82

privity of estate

Answer 82

DO BOTH OF YOU IDIOTS OWN THE LAND AND IS ONE OF YOU GETTING IT BACK FROM THE OTHER IF YOU DON’T PAY RENT?

Question 83

privity of contract

Answer 83

DID YOU TWO IDIOTS SIGN A CONTRACT AT SOME POINT?

Question 84

subleases

Answer 84

we have a new landlord in town, the OG tenant.
you have privity of estate and privity of contract with tenant 1

THE ORIGINAL LANDLORD CANNOT SUE THE SUBLESEE (TENANT 2 WHO GOT THE PLACE SUBLEASED TO THEM)

Question 85

federal fair housing act

Answer 85

NO DISCRIMINATORY ADVERTISING
So the basic idea is that we can have NO discrimination when we are selling or renting a dwelling on the basis of:

Religion;

Race;

Ethnicity;

Gender;

National origin; OR

Disability

You can’t refuse to rent to a blind person or person in a wheelchair.

You can’t refuse to rent to people with service animals even if there is a “no pets” policy.

Disabled tenants can even modify their living space (at their own expense) -> EVEN if the lease bans it

Question 86

excpetions to fair housing act

Answer 86

1. owner occupied building that have 4 or less units
2. A person SELLING or LEASING a SINGLE FAMILY home if
   they do not own more than 3 homes
   they do not use a broker AND
   they do not advertise in a manner that discriminates.
3. Senior citizen community homes can discriminate against kids
4. Religious organizations or private clubs can discriminate on who lives there as well

Question 87

a real covenant

Answer 87

written promise to do or not do something with land

Question 88

remedy for breaking a covenant?

Answer 88

money

Question 89

affirmative covenant

Answer 89

which just means they are a promise to DO something related to the land (i.e. paint an adjoining wall… or maintain a common fence)

Question 90

negative covenants

Answer 90

simply means they are a promise to REFRAIN from doing something related to the land (i.e. don’t build an ice cream shop, don’t block my view, don’t have a tiger petting zoo on your land)

Question 91

5 requirements to see whether covenants run with the land and binds future homeowners or not

Answer 91

1. writing
2. intent - original party must have intended the covenant to run.
3. touch and concern - covenent must have to do with the land, not the individual.
4. privity
5. notice - it would be unfair to impose a burden on someoen who bought land if tehy had no way of knowing about the covenenat.

Question 92

burden / benefit on land

Answer 92

A burden on land is just a restriction placed on the land in favor of another parcel of land. In my earlier example, Rainbow Browns land was burdened by the covenant (he couldn’t graze goats, and this is a restriction in favor of Goat’s land)

Goats land, on the other hand, was benefitted by the covenant (it gave his land an advantage, in this case it was not having to be next to or hear stupid-ass goats on the neighboring land)

Question 93

whether a real covenant transfers in three situations

Answer 93

1. the benefitted party transfers their land
2. the burdened party transfers their land
3. when both the benefitted and burdened party transfers their land

You have to understand covenants transfer FULLY or not -> to see if it transfers when the benefitted party sells their land we have to analyze whether the BENEFIT runs with the land.

Question 94

how will we know if a covenant is still in full force?

Answer 94

analyze whether BOTH the benefit and the burden transfer to see if the WHOLE covenant will hold up.

Question 95

how do we analyze whether a burden runs to a successive landowner? (do this before benefit test)

WITH-N

Answer 95

1. writing - original promist must be in writing
2. intent
3. touch and concern the land - convenant has to do with some shit related to the land
4. privity - vertical applies both when we analyze whether a benefit and burden runs, horizontal privity only when analyzing whether the burden runs.
5. notice actual, record, inquiry

Question 96

vertical privity (burden and benefit analysis)

Answer 96

applies both to analyzing benefit and burden running

vertical privity literally just means you gave the person you sold the parcel to the full estate

what is not vertical privity - giving someone a lease, giving someone a life estate, adverse possession

Question 97

horizontal privity (burden analysis)

Answer 97

It either exists or doesn’t exist the MOMENT the covenant is entered into.

Horizontal privity is some DAY ONE shit… you either got Privitized from the moment you became a young covenant, or you didn’t.

Horizontal privity is all about the relationship between the ORIGINAL parties… and to have horizontal privity the original parties must be in succession of estate.

happens either:
1)instantaneously when a land tranfer includes a covenant - the covenant is in the deed itself.

2) when we have a promise related to a simulataneous interest of two landowners (like for easements) and make a little promise related to that simulataneous interest.

ex. imagine if I have an easement on your land -> a little path with a fence… and we create a covenant which states “You will repair and maintain the easement and fix up the common fence on the easement.”

Boom… we have a promise related to a simultaneous interest in the land

think about whether we have a speciifc legal interst in the property together when the covenant is formed. In the first instance, I’m selling you the property and we make the covenant. We both have an interest in the property when the covenant is formed. In the second instance, we have an easement across the property when the covenant is formed. So we both have an interest in the property when the covenant is formed.

Question 98

notice (burden analysis)

Answer 98

How are you going to try and impose a burden on a party buying land that didn’t even know about it when they bought it?

Question 99

bonafide purchasers

Answer 99

People that pay value for land without
(i) actual notice of the covenant,
straight up told.

(ii) record notice of the covenant, or
if the covenant is recorded in the public records, you are on notice, even if you don’t go look it up.

(iii) inquiry notice of the covenant.
when you look at the land and you see that it is burdened by a covenant.

Question 100

analysis for the benefit to run

WIT - V

Answer 100

1. writing
2. intent
3. touch and concern
4. vertical privity only - full assignment of the parcel

Question 101

how do we terminate covenants?

Answer 101

1. Merger (benefitted and burdened lands join together as ONE)

2. Abandonment or estoppel (if benefited party leads burdened party to believe the covenant was abandoned or no longer needed and the burdened party RELIES on it); OR

3. Eminent domain -> land gets SWIPED by Uncle Sam.

Question 102

does the rules against perpetuities apply to covenants

Answer 102

no

This is because they bind presently… and RAP only gives a fuck about uncertain binding.

Question 103

how to identify equitable servitudes

Answer 103

So the first thing you have to do on the bar exam is think to yourself “is this person seeking an INJUNCTION for the violation of this promise?” if so… it is an EQUITABLE SERVITUDE

money = covenant

Question 104

creation of equitable servitudes
WIT - N

Answer 104

1. writing
2. intent
3. touch and concern the land
4. notice

Question 105

how can equitable servitude be terminated?

Answer 105

Release by a party

Abandonment or estoppel

Merger

The purpose of the servitude no longer existing

or

Condemnation by Uncle Sam

Question 106

implied equitable servitude

Answer 106

If you see with your OWN eyes that is the pattern… it doesn’t matter if that isn’t in YOUR little deed.

If the developer subdivides land and SOME of the deeds contain negative covenants, while others do not… the negative covenants are then binding on ALL of the plots of land (EVEN THE ONES WHERE THE DEED DIDN’T SAY SHIT ABOUT A NEGATIVE COVENANT!)

Suppose you put negative covenants in 8 of the properties (a covenant saying you can’t paint your house blue for example) but forget to put the covenant in plots 2 and 6….

Sorry owners of plots 2 and 6… you can’t paint your fucking house blue.

You just got IMPLIEDLY EQUITABLY SERVITUDED UPON.

So long as the plot owner without the deed had that AIR (actual, inquiry, or record notice)… they are bound by the negative covenant regarding the land… EVEN IF IT WASN’T IN THEIR DEED!!!!!! IT HAS TO BE IN THE OTHER ORIGINAL SUBDIVISION DEEDS THOUGH

Question 107

What kind of equitable defenses to enforcement can one raise saying they should NOT be bound by an equitable servitude!?

Answer 107

1. The world is changing. The character of the subdivision has changed. The buildings surrounding the sub-division have changed. So you can argue that the servitude should not apply to you anymore.

But the change has to be SO pervasive that the ENTIRE area or subdivision has changed (can’t just be limited change and can’t just be change FULLY outside the subdivision)

2. unclean hands
   when the person seeking the enforcement of a covenant is violating a similar restriction on their own land.. “don’t paint your house blue” but THEY are indeed painting thier house blue.
3. if a benefited party acquiesces or agrees to a violation of a servitude by a burdened party, the benefited party will be said to have abandoned the servitude

Question 108

lateral support

Answer 108

Lateral Support is an inherent right to not have a crazy neighboring landowner fuck up your soil. It’s not really a servitude… but it’s kind of considered like an invisible servitude that all property owners have. We need to go over it because sometimes they do test this shit.

We have two basic scenarios:
(1) You fuck up my soil by doing some weird excavation on your land,
(2) you fuck up my buildings by doing some weird excavation on your land.

So if your excavation projects fucks up my SOIL and not my buildings (the bar exam calls buildings “improvements of my land” jfl)… you’re strictly liable. You didn’t put up an underground retaining wall. You fucked up my soil. And that was very rude of you. You’re strictly liable for any damage to my land IN ITS NATURAL CONDITION!

no duty to support structures, so if your excavation project fucks up my house i can only come after you through a negligence theory.

Question 109

common interest groups

Answer 109

correct answer will say “reasonable arbitrary”

Common interest groups are simply property owners associations where a bunch of units get together and agree to subject themselves to certain restrictions.

The basic ones are:

Homeowners associations: an organization that makes and enforces rules for a group of properties and the residents. Everyone subjects themselves to certain restrictions in return for the PROTECTION of knowing other members have the same restrictions.

Condominiums: Apparently none of us knew what condos actually were. So basically every person who owns a condo owns their living unit (but ONLY the interior) while the exterior walls, land, and common areas are owned by ALL unit owners as tenants in common. Wtf?!?!? Property law is actually applicable IRL?!?! (my homie Kyle actually died in a common area of a condo so this is a sensitive subject for me)

Any restrictions within condos are presumptively valid unless they are void for being too arbitrary or void for public policy reasons;

Rules for noise, pets, number of occupants, etc. are ALL allowed

Question 110

cooperatives / co-ops

Answer 110

Title to the land is held by a corporation and each shareholder (cooperator) has a lease to a designated unit.

The cooperator is a tenant of the corporation and the lease is basically the STOCK of the corporation.

The co-op board then has DISCRETION on who can live there. The co-op is basically like “yea we know this is property but we are just actually selling shares of property, so we can discriminate and kick anyone out who we want to… because it is just a “share.”

Question 111

easements

Answer 111

So an easement is just a property interest that entitles its holder to the use or enjoyment of another person’s land.

Remember this: an easement CANNOT be unilaterally expanded. If the bar exam has a situation where a path across your land or a driveway or some shit gets originally set… one side can’t just be like “Good morning Goat! I forgot to tell you… while you slept I made the path 50x wider!”

Question 112

negative easements can only be created..

Answer 112

expressly or by signed parties.

there is no natural resource right to LASS

light
air
support
streamwater

Question 113

two types of easements

Answer 113

1. appurtenent- ( most) An easement appurtenant [to land] is simply when an easement benefits its holder in their physical use or enjoyment of their property.
2. gross -

An easement in gross is owned by an individual person. There’s no dominant estate.

The ONLY relevant estate we look at is the SERVIENT estate (the bitch estate). That is where the easement is located and where the owner of the easement exercises their rights.

Question 114

how do easements transfer?

Answer 114

easements are valuable becauset they are relatively permanent

they are easy to transfer -> they transfer with the sale of the DOMINANT estate.

They pass AUTOMATICALLY when the dominant land is sold. If you benefit from an easement, just sell your land… it will pass to the next owner

And it passes REGARDLESS of whether the easement is mentioned in the new deed

IT PASSES BY IMPLICATION

IT PASSES AUTOMATICALLY

I HAVE A DRIVE WAY THAT RUNS ACROSS YOUR LAND

I SELL MY LAND

THE NEW OWNER STILL HAS USE OF THE DRIVEWAY.

And you can’t do a damn thing about it.

You are my driveway servant who I control and gaslight for the rest of your natural life.

Question 115

what happens if the servient land is transferred… is the new servient owner bound by the easement stuff?

Answer 115

Yes, they are. Unless they have no NOTICE.

How can they get notice?!

(1) Someone tells them;

(2) The easement is recorded in the public records;

(3) Inquiry notice

Easy we already know these three.

STAY BONA-FIDE MY GOATS OR YOU WILL STAY A SERVANT TO DADDY DOM APPURTENANT EASEMENT

Question 116

what happens when the exact location of the easement is not set at outset,

Answer 116

the owner of the servient estate has the right to fix it in a reasonable manner. But ONCE they fix it… it cannot be moved without the consent of the dominant owner.

Actually one more final point: The servient estate is not under a duty to repair the easement either… sometimes they test on this. The costs are split between both the dominant and servient owner for repair.

Question 117

how are easements created?

Answer 117

Prescription

Implication

Necessity

&

Grant - express easement

Question 118

implied by prior use

Answer 118

Let’s say Goat had a big property with a driveway, and he used it to park his beautiful Koenigsegg in his garage on lot 1.

His property was simply called “lot 1”

No easement needed.

You can’t have an easement on your own land.

Then one day he decides to split the land into two lots.

After long and careful deliberation, he named the second lot “lot 2”

But he still used the driveway on lot 2 to benefit lot 1. He had to drive through the driveway on lot 2 to get to his garage on lot 1. The driveway on lot 2 became the servient land which benefitted the dominant land where his actual garage was (lot 1).

So after he sells lot 2 to a new owner… the new owner says “wtf. You can’t use this driveway on my lot anymore!”

And now my Goats… we must analyze and learn the elements of whether there was an implied from prior use easement

Question 119

elements of a prior use easement

Answer 119

1: the use of the easement must have existed before the lot was divided in an OBVIOUS AND OPEN WAY (apparent and continuous are the buzzwords here)

2: The court then must determine whether the easement on the servient land is REASONABLY necessary for the enjoyment of the dominant land.

I mean OBVIOUSLY I need to park my Koenigsegg… so this is simply out of the question it would not be necessary for my personal enjoyment.

When they say “reasonably necessary” the court means it is CONVENIENT… it doesn’t have to be like a water pipe for you to survive or some shit haha.

Mnemonic for easements implied by prior use:
A.C.R. -> Apparent. Continuous. Reasonable.
Always. Carry. Raincoats

Question 120

easement by necessity

Answer 120

Sometimes when a single parcel is divided into two parcels… one parcel becomes a PP - A PRISONER PARCEL

It is completely landlocked.

And thus, the easement by necessity was born.

So to get an easement by necessity…

1) first we need common ownership before severance.

2) Then we need, at the time of severance… one of the plots to be landlocked (grantor OR grantee can be landlocked after the severance, doesn’t just have to be the grantee’s parcel)

3) Finally… right of way easement must be strictly necessary. The traditional view back in the day was that there had to have been NO OTHER ACCESS… nowadays the courts are more chill and they just say “without the easement, the land couldn’t be effectively used.”

The scope of these easements are for access -> so for pedestrian walkways and vehicles basically.

No parking, no building, no crazy shit.

Question 121

easement merger doctrine

Answer 121

And remember my Goats… if the parcels later get united under a single owner, the easement by necessity will be extinguished under the legendary merger doctrine (you can’t have an easement over your own land, so it just disappears)

Question 122

easement by prescription

Answer 122

These easements are non-consensual.

These are essentially adverse possession easements, but not exactly (we don’t need exclusive possession with prescriptive easements like we do in adverse possession… we just need to show regular use. Simultaneous use of the easement by the true owner won’t destroy our prescriptive easement claim)

We need four elements for a prescriptive easement to be created out of thin air: OCAN

Element 1 (OPEN & NOTORIOUS): It’s good to be seen. To get a prescriptive easement, you need to use the land in an OBVIOUS way where other people can see you. Walk across the land obviously and purposefully wearing bright clothing.

Element 2 (CONTINUOUS): The use doesn’t have to be CONSTANT. You don’t have to be walking across the easement 24 hours a day, but definitely on a regular and uninterrupted basis (like using it once a week or some shit).

Element 3 (ACTUAL): You actually have to walk your ass across the easement and use it. It can’t be symbolic like sending a letter saying you intend to use the easement at some point in the future or you consider it yours and throw magical dust on it. Hitch up your cart pulled by two strong goats and get across that easement.

And finally, Element 4 (NON-PERMISSIVE): If you have the owner’s permission to go across their property… you won’t get a prescriptive easement.

Exclusivity isn’t an element because easements THEMSELVES are not exclusive. THAT IS THE WHOLE POINT OF EASEMENTS. THEY ARE MEANT TO BE SHARED.

Question 123

how do we terminate easements?
END CRAMP

Answer 123

Estoppel -> when the dominant estate TELLS the servient estate that the easement will no longer be enforced… so the servient estate changes their position in RELIANCE on this promise… the easement will be terminated

Example: If you tell me you will no longer be using the path across my land, so I build a massive Goat Barn… then you try to sue me. Uh… what?! You just made me change position in reliance of your stupid lies.

Necessity -> If the easement by necessity ENDS. Let’s say I WAS landlocked… but they BUILT 50 ROADS AROUND MY PROPERTY THAT DON’T GO ACROSS YOUR LAND.

NO MORE NEED FOR EASEMENT BY NECESSITY

Destruction -> Servient land gets destroyed… yup… no more easement there.

Condemnation (of the servient estate) -> Daddy government takes it away, no more easement.

Release -> Easement holder releases servient owner with an express written agreement.

Abandonment -> Easement holder demonstrates by physical action that they will NEVER use this easement again.

GOAT-NOTE: SIMPLE NON-USE AND SIMPLE WORDS ARE NOT ENOUGH FOR ABANDONMENT OF AN EASEMENT!

Merger -> we discussed this before, but when the owner of the dominant and servient parcels become… one. I like to imagine for this one an enormous demonic rabbit joining together two lands as one with chopsticks. That imagery really helped me on the bar when I took it.

The easement will NOT be merged if you give someone less than the full interest to the land

You have to fully own BOTH properties for it to merge!

Prescription: Just like an easement can be CREATED by prescription, it can be DESTROYED by prescription as well.

Question 124

licenses

Answer 124

A license is simply a personal privilege to enter into someone’s land for a specific purpose

weakest form of servitude there is

Sometimes you don’t want to give someone a permanent easement… and the license allows you a little more flexibility and control.

We don’t need a writing for a license as they are not subject to the statute of frauds. We only need a writing for land transfers like easements.

AN ORAL EASEMENT CREATES A REVOCABLE LICENSE (bc an easement needs a writing)

Question 125

how to terminate a license

Answer 125

licenses are freely revocable so they can be terminated at any time.

The license also dies if a licensee dies since it is personal to them, and you can’t transfer a license -> any attempt to transfer it will simply result in a revocation of the license.

Question 126

what can get in the way of revoking a license?

Answer 126

equity and fairness
1. When the grantor specifically states that it will be irrevocable;

2. When the licensee has invested a significant amount of money or resources into the license (if I say you can use my private airport for the SuperBowl for example… and you make all these arrangements to land your Falcon 900X jet there… I can’t just be like “sorry… I need to make space for Taylor Swift’s jet”);

RED-ALERT MBE TRICK SPOTTER: This is a common fact pattern on the MBE. They love to have someone orally be like “yea you can use my land” then the person allowed to use the land gets so excited they build a fucking building on it. Then the license grantor is like “haha well… no… you can’t use it anymore.” NOPE. It has now become the equivalent of an EASEMENT.

3. And finally… when the license is coupled with an INTEREST in the land, it can’t be revoked. If I give you timber rights to my land and then couple it with a license saying you can cross my land TO GET THE DAMN TIMBER for example… I can’t just revoke the license randomly.

Question 127

profit a prende

Answer 127

This is French for “come get the gold”

It is simply the right to take something of value from someone’s land. Deer, gold, gravel, minerals, fish, anything.

Question 128

how are profits created

Answer 128

Profits are exactly like easements. They can be created expressly by grant or by implication.

Profits share ALL the rules of easements and can be either appurtenant or in gross.

Remember, appurtenant profits will ONLY transfer with the sale of the dominant land. So the problem may say “I grant a profit for the benefit of Parcel B to take deer off my land (Parcel A)”
This deer profit can ONLY be transferred now with the sale of Parcel B.

Under common law you couldn’t transfer profits, but now under the modern law you can transfer them.

Question 129

fixtures

Answer 129

Fixtures are just formerly personal property (STUFF) that got attached to the real property (LAND) in such a way that they became PART OF THE DAMN LAND.

So basically… fixtures become part of the REAL ESTATE because we glue them on too strong. And now they can’t be removed or treated separately unless the parties agree.

If it’s a CUSTOM designed item that fits into the actual property ITSELF like a built-in bookshelf and shit like that… it will almost certainly be a FIXTURE.

CROPS THAT ARE ANNUALLY CULTIVATED LIKE CORN ARE NOT A FIXTURE, BUT A TREE IS A FIXTURE.

Question 130

what is not a fixture

Answer 130

shit you can easily remove
appliances
fridges
washing machines
screen doors or windows UNLESS they are specifically made for the dwelling.
crops annually cultivated like corn

Question 131

actual fixture test

Answer 131

annexation - chattel must be so attached that it can’t be removed without fucking up the actual property or damaging the chattel itself

adaptation- an item which is usable at other properties is not exactly “adapted” to the land in question

intention - If the facts state that the person DID NOT INTEND it to be a fixture… IT’S NOT A DAMN FIXTURE.

Question 132

tenant installation qualifying as fixtures?

Answer 132

The baseline rule is this: the AGREEMENT controls between the landlord and tenant if the lease agreement states that CERTAIN things are fixtures and certain things are not

IF IT’S IN THE LEASE = THE LEASE CONTROLS

But what happens if we have no mention of fixtures in the lease agreement between the landlord and tenant?

If there is no agreement, we just use our favorite substantial harm test

Question 133

substantial harm test (fixtures)

Answer 133

when there are no mention of fixtures in the lease agreement between the landlord and tenant.

The tenant can remove chattel so long as the removal does not cause substantial harm to the property

However, if leaving the fixture results in a WINDFALL to the landlord or an unfair deprivation to the tenant… the tenant can still remove it even if it does cause harm to the property.

Question 134

trade fixtures

Answer 134

Trade fixtures are just items which are brought onto the property that are devoted to a trade purpose (regardless of what it is, how big it is, etc.) … from a greenhouse to a single shelf used to display merchandise.

A COMMERCIAL TENANT can remove trade fixtures installed for the purpose of CARRYING OUT A DAMN BUSINESS OR TRADE ON THE PREMISE

A COMMERCIAL TENANT CAN REMOVE TRADE FIXTURES EVEN IF THE LEASE DIDN’T ALLOW HIM TO.

EVEN IF THE ITEM IS SPECIALLY ADAPTED TO THE PREMISE AND TIGHTLY ATTACHED TO THE PREMISE… A TRADE FIXTURE CAN BE REMOVED SO LONG AS YOU DON’T MATERIALLY INJURE THE PROPERTY

RULES

rule 1: you must remove the trade fixture before the lease terminates

rule 2: commercial tenants must restore the premises to their original condition.

Question 135

zoning

Answer 135

ruled constitutional as an exercise of police power for the benefit of the community at large, despite negative effects it had on some individual property owners.

Zoning is based on one simple theory: different land uses should not be next to each other. Homes should not be right next to offices. Offices should not be right next to factories. Jellyfish aquariums should not be right next to children’s play areas… or should they?

Question 136

when do courts get hostile over zoning?

Answer 136

spot zoning attempts - when you change the zoning restrictions for just a single piece of land, but not for the surrounding parcels.

Exception: If the spot zoning achieves a beneficial public purpose (like creating jobs for the community), it is OKAY even if it fucks over everyone in the neighborhood

Question 137

when a zoning challenge arises

Answer 137

the burden of proof is on the challenger to show that no rational basis exists for the zoning

Question 138

two types of zoning

Answer 138

1. cumulative zoning - In a cumulative zoning plan, any use permitted in a more highly restricted zone (like residential) is permitted in a lower zone (like industrial)

Residential zoning is always the highest and most restrictive zone. Then it goes down the chain as they loosen up the restrictions (down to commercial zones with Starbucks and shit, all the way down to smog emitting Cobalt facilities with child workers)

Less restrictively zoned properties like factories can’t be built in residential zones.
This isn’t cumulative zoning… this is terrorism of a small neighborhood.

2. conditional use permits
Sometimes property owners want to use their land in a way that is not otherwise permitted within the zoning district. They can do this by obtaining a conditional use zoning permit from the municipality.

The zoning board has the power to give this to you... however… there may be a price

The zoning board can impose CONDITIONS (called exactions) on the property owner that are designed to benefit the community, so long as these EXACTIONS are SUBSTANTIALLY RELATED to a specific need or burden that the property owner is creating with their building

The zoning board might require you to build more roads and shit if you are building a mall in a residential zone for example. This will help deal with the congestion it will cause. The key word here is: SUBSTANTIALLY RELATED

Question 139

variances

Answer 139

special permission which says “you can build your property this way even though it’s not normally allowed”

conditional use permits are about use, variances are about physical aspects of the property.

variances are given to allow property owners to vary from the requirements of a zoning ordinance

TWO PART TEST
(1) undue hardship arising from the unique nature of the land… which means that essentially no effective use of the property can be made if the variance is denied.

regulation = hardship
hardships = more than mere inconvenience and cannot be self-inflicted.

(2) the hardship should be unique when compared to other properties around you

If there is some weird sloping pattern to the land and all houses have to deal with it… you can’t be like “Zoning board… um… my land….. slopes? So I need to break the rules just a lil’ bit”

• front yard setback - the required distance between building and street facing edge
• side setback - the required distance between a building and its lots side property. distance between buildings.

Question 140

prior non-conforming uses

Answer 140

When zoning first became a “thing”…. there were a lot of people who were like “what the fuck?”

People were like “Did you just zone over my property? Because my property is actually already doing something different than your stupid little zone.”

How do we deal with land that was zoned properly before… but when we re-zoned… it became… non-conforming and fucked up?

Basically, the non-conforming use is grandfathered in. So it’s allowed. But we have a few rules related to it:

1. You can’t intensify the use. So let’s say you had a McDonalds and you got zoned residential. Okay, you can keep selling burgers. You can remain non-conforming.
2. If your non-conforming building burns down (like this McDonalds for example), you won’t be able to build a new McDonalds.
3. The non-conforming use can run with the land even if it is inherited or something by a child when the parents die.

Question 141

how are modern courts dealing with non-conforming uses today?

Answer 141

AMORTIZATION
Amortization is just a fancy word meaning “gradual reduction”

All we fucking need to know is amortization and substantial hardship to get 4 points.

So basically the majority rule today is that municipalities can reasonably amortize the non-conforming use to force it to stop at some point.

Let’s say there’s a jack-off movie theater and it gets zoned residential. Reasonable amortization for this movie theater to stop would NOT be 30 days.

It’d be something like two years.

It can be up to 20-40 years for buildings, sometimes less than a year for smaller things like billboards.

courts will ask “how much will this fuck the non-conforming user over and how necessary is it that they stop?”

Question 142

selling homes

Answer 142

when you sell a home there is a contract between the real estate agent and the seller of property.

seller of home = principal

real estate agent = agent

the agent is selling the home for a fee or commission

Question 143

agency relationship between seller and agent for homes

Answer 143

seller of home = principal

real estate agent = agent

Representations by the agent are almost always binding on the seller, remember this.

Agent: “This house doesn’t have any roof problems”

Seller -> Getting sued when the buyer finds the roof got hit by Hurricane Katrina.

If the agent says something… the seller may as well have said it themselves.

We have three types of brokerage contracts you can have with your agent: exclusive agency agreement, exclusive right to sell agreement, non-exclusive right to sell

Question 144

brokerage - exclusive agency agreement

Answer 144

no other agents allowed
the seller cannot sell the property through another agent, but they can sell it themselves.

Question 145

brokerage - exclusive right to sell agreement

Answer 145

sloth mode

the agent is entitled to commission if the property is SOLD, EVEN IF THE AGENT DOESN’T SELL IT THEMSELVES.

THIS IS THE BEST ONE FOR AGENTS.

even if the property owner finds the buyer, the agent still gets paid. agent gets paid if home is sold. period.

Question 146

brokerage - non-exclusive right to sell

Answer 146

nightmare difficulty setting

agent is entitled to commission only when the agent provides the buyer.

agent has to beat the other agents AND the seller of the home is finding the buyer.

Question 147

to be valid, stupid agency agreements need four things

Answer 147

1. identify the agent
2. state their commissions
3. describe the property; and
4. contain the principal’s (homeowners) signature.

if the agreement is silent as to the deadline to sell the property, the court will imply a reasonable deadline.

if the agreement is silent as to the time the agent has to accomplish the sale, the seller can revoke the agency agreement at ANY time before the agent has actually found a buyer.

these are not subject to the state of frauds

Question 148

when does the agent actually get the commission?

Answer 148

unless the agreement says otherwise, the agent is entitled to commission if the agent can establish that they found: a ready, willing, and able buyer who agreed to all the material terms of the sale.

that’s what the right answer will say.

ready, willing, and able means that the homeowner must pay the commission even if they REFUSE to do business with a ready, willing and able buyer that the agent finds.

But the buyer actually has to agree to all the terms the seller wants!

So let’s say Rainbow Brown is Goat’s agent. If Rainbow finds Goat a buyer who offers $200 less than Goat’s minimum price listed in the broker agreement… the agent is not entitled to commission if the seller refuses to sell at this lower price.

And it’s not just about the money -> you need to find a buyer who agrees to all the essential terms. This includes things like the closing date. If you find a buyer who is willing to pay the full price but doesn’t agree on the closing date… no commission for you.

Question 149

agents fiduciary duty

Answer 149

agents have a fiduciary duty to the buyer (a duty of loyalty)

they have to disclose things like whether the prospective purchaser is a family member of theirs for example

they also can’t represent both the buyer and seller without full disclosure of the facts and agreement by everyone involved.

Question 150

real estate contracts

Answer 150

MUST BE IN WRITING - STATUTE OF FRAUDS

Real estate contracts are a little different than normal contracts. In real estate contracts,there’s usually a long ass time between formation and performance (we call performance “closing”)

The time BETWEEN formation and closing we call “the executory period.”

So the seller conveys title to the buyer by execution of a deed. The buyer gives over the purchase price, usually with the help of mortgage financing by the bank.

Question 151

requirements of real estate contracts

Answer 151

1. Identify the parties (their full names);
2. Describe the land (It cannot be a vague description. I need metes. I need bounds. We have to allow the court to identify the land and identify all boundaries of the piece of land)
3. A price is necessary OR a way to FIGURE OUT the price is necessary (such as stating that an APPRAISAL will be done at a later time)
4. The court will NOT supply a “reasonable price term” for real estate
5. The contract also must be signed by the party who is NOT seeking to enforce the agreement (remember how we joked in the earlier modules about someone bringing in a writing to court that they signed themselves to prove their case?) Not allowed.

Question 152

can contracts for the sale of real estate be rescinded orally?

Answer 152

yes.
the statute of frauds only applies in the original agreement.

ex.
Goat (the buyer) and Nancy Riverfoot (the seller) enter into a written contract for the sale of land in thirty days which satisfies the Statute of Frauds.

Fifteen days after signing the contract, Goat and Nancy orally agree to rescind the contract because they just didn’t feel like going through with it anymore.

Nancy then resold the land to someone else. Goat changed his mind and sued her on the contract, saying he was still entitled to it.

Who wins?!?!

The seller (Nancy) wins! People can orally rescind a real estate contract!

Question 153

doctrine of part performance

Answer 153

The idea is simple -> if the buyer takes possession of the property AND either:

1. Pays all or part of the purchase price;
   AND/OR
2. Makes substantial improvements

…the seller can’t say there was no writing.

Question 154

time… and whether it is of the essence or not

Answer 154

A time is of the essence clause is simply a phrase in a contract which says “hey, timing is material. If you don’t complete the sale by this time, I’m not paying you shit.”

These clauses are valid, but there must be an EXPLICIT and CLEAR deadline in the actual contract itself.

Goat-Note: If a real estate contract does not contain a time of the essence clause, but you want to make time of the essence later on… you must give the other side reasonable notice and a reasonable time to perform before you considering them in default. “Reasonableness” will depend on the circumstances of each individual case.

Question 155

is the seller liable for failing to disclose latent defects?

Answer 155

latent: existing in hidden or dormant form

they are LIABLE for this

HOWEVER… the seller (or their agent) are not liable to warn the prospective buyer about conditions that are readily observable by REASONABLE use of their damn senses.

defects need to be hidden to require the seller or their agent to warn

GOAT-NOTE: Language inserted into the real estate contract like “as is” will NOT protect the seller from failing to disclose significant hidden defects.

Question 156

what happens if a buyer wrongfully breaches?

Answer 156

the seller may keep their downpayment or “earnest money” if it is the reasonable amount

Question 157

marketable title

Answer 157

A marketable title is one that is free of encumbrances and free of rights or interests by third parties that will fuck up the buyers full ownership of the property.

They seller is essentially promising it is free from lawsuits and the threat of litigation. If an answer choice uses the words “the threat of litigation” in reference to a title, it is likely the right answer.

Basically, the seller promises that no weird shit is going on with the land.

No marketable title? The buyer can refuse to pay at closing or collect damages.

Question 158

when must we actually provide marketable title?

Answer 158

at the time of closing. not a second before.

oh sorry, it’s not marketable a day before closing? GET OVER IT.

giving marketable title is implied in all real estate contracts.

Question 159

what happens if there is a lien or mortgage for some money on the house?

Answer 159

the seller can actually use the purchase price they get from the buyer to pay off the lien or mortgage as part of the closing process!!! They can even pay off an installment contract for their house with the purchase money on the day of the closing.

Question 160

what qualifies as weird shit that could make title unmarketable?

Answer 160

1. encumberances- we need fee simple absolute at closing, no interests held by third parties.
a helpful easement that is clearly visible and beneficial is NOT an encumberance.
2. adverse possession - duh
3. zoning violations - if the property is currently violating a zoning ordinance

Question 161

does hazardous waste make a title unmarketable?

Answer 161

NO

Finding something like hazardous waste on the property will not make the title unmarketable.

Hazardous waste doesn’t have anything to do with ownership… it is associated with use of the land, not ownership.

Question 162

adverse possession
cookies often are hidden

Answer 162

if there is a wrongful possessor on your land, you should bring a trespass action against them. If you don’t bring a trespass action against them… you’re an idiot and should lose your land.

1. continuous -
has to be uninterrupted for the amount of time the statute says
seasonal use = fine
one year off = clock starts over
The clock does NOT start running against an owner who is insane, in prison, or under 18 WHEN THE ADVERSE POSSESSOR STARTS THEIR POSSESSION

2. open, visible, and notorious
1. showing that the actual owner knew you were there and didn’t agree with it.; or 2. your conduct is outlandishly fucking obvious and the owner should have known.
IF YOU TELL OTHER PEOPLE THE TRUE OWNER ACTUALLY OWNS THE LAND, YOU CANNOT CLAIM THAT IT IS AP.

3. actual and exclusive possession
to start the clock ticking for adverse possession… you need to ACTUALLY physically trespass, and the owner can’t be possessing the property WITH you

4. hostile
you don’t have the owners permission to be there

Question 163

constructive adverse possession

Answer 163

It’s just when a psychopath enters a small portion of land in good faith with a fucked up deed which says they own the whole parcel.

The elements are simple:

1. You enter the land under color of title(with a deed that appears to give title but doesn’t because it’s defective)
2. You enter in good faith thinking your fake title actually gives you full deed to this land;
3. You enter a portion of the land (even if it’s just a small part)
4. The owner is not there.

Question 164

what happens when the adverse possession period ends?

Answer 164

the adverse possessor has superior right over the true owner… but they still have to bring a “”””””"”quiet title””””””””” action... to establish that they are the true owner.
If you don’t “quiet the title” the property will not be marketable, as it will be under the threat of litigation.

Adverse possessors can ONLY take the rights the owner themselves had. If you adversely possess a life estate… you get… a life estate measured by the previous owner’s life. Sorry, your little plan didn’t work. Once they die you lose it.

Question 165

tacking

Answer 165

allows one adverse possessor crackhead to team up with another adverse possessor crackhead and add up their time together to get the property from the hardworking owner.

There needs to be privity between them though, which can be achieved by:

Blood (family members usually but also blood pact where we slash our palms);

Contract;

Deed; OR

Will

The possession still has to be CONTINUOUS though. You can’t abandon it for a year then have Grandma Josephine show up to finish the tack… nope. Clock will restart at 0.

If two or more crackheads adversely possess the land TOGETHER, they acquire the title as tenants-in-common.

Question 166

how to create a deed

Answer 166

1. In writing
2. Signed by the person selling the land (the GRANTOR)
3. And describe the land (doesn’t have to be perfect)

“All of Goat’s land” = good

“All of Goat’s land in Chicago” = good

Some of Goats land = get the fuck out of here, this is not good.

How do we know what “some” of my land is? I have thousands of properties

Question 167

how do we transfer a deed
incredibly delicious apples

Answer 167

1. intent
2. delivery
3. acceptance

you need to convey it NOW. not in the future. NOW.

the bar exam sometimes has these funny problems where a lady writes a letter to her son and is like “you get the house after I die. here’s the deed. take it. it’s delivered. i’m going to live in it until i die though.. don’t record it until i die.”

then someone records it and tries to steal the house from the old lady before her death.

Can you imagine how dumb you’d have to be to think that delivery of a deed was as simple as recording a piece of paper? Delivery is all about the grantor’s intent. This old lady did NOT intend to give it up NOW. So no delivery.

Forged deed? Void.

Stolen deed? Void.

Trick someone into signing some documents that they don’t know are a deed? Void.

Grantor lacked capacity? Void.

Any fuckery with the deed = VOID.

Oh… you have a deed with a power of revocation? Where you reserved yourself the right to take back the deed from me at any time? Nope. Void.

That is not proper present intent and that is not the power of Now.

Question 168

What about a NON-LOYAL escrow agent delivering it for NO reason?!

Answer 168

Oh I gave my deed to an escrow agent and told him to only deliver it if you got married, then he delivers it anyway to you!??!?! No. THIS IS NOT PROPER INTENT

INTENT IS SERIOUS MY GOATS. PAY ATTENTION TO THIS SHIT.

Question 169

transferring a deed - delivery

Answer 169

Physical delivery of the deed works
* Mail
* Giving it to an agent
* Placing it into the grantee’s hand
* cant deliver a deed to a dead person or a corporation that has not been formed or someone that doesn’t exist

if someone rejects it, then not valid delivery

If the grantee wants to deliver it BACK to the grantor… the grantee has to make a NEW fucking deed… and deliver it THEMSELVES.

if there is an oral condition on delivery but it is not in th deed itself, the condition just gets cut out and it’s good delivery.

Sometimes the bar will have one of these scenarios where the Grantor hands it to someone and says “This deed is now officially yours. But please don’t record it until I die.”

Then the stem will be like “Was that valid delivery?”

Okay look… the whole fucking thing is about intent. We know that. Hand delivery of the deed raises a rebuttable presumption of delivery. But also the words “is now officially yours” tells us a lot about the Grantor’s present intent as well.

You don’t need to record it for it to be a valid delivery is what I’m saying.

So this delivery is GOOD even though it looked like it was a future intent delivery.

Sometimes they get sneaky… just ask yourself “IS THIS A PRESENT INTENT DELIVERY!??!?!?!?!”

Question 170

transferring a deed - delivery - through an escrow agent

Answer 170

You can deliver a deed to an escrow agent with instructions to DELIVER it to a grantee if certain conditions are met

Once these conditions are met… title passes AUTOMATICALLY to grantee

MBE GOAT TRICK ALERT: Sometimes the MBE will have these stupid things called death escrows. Yea, I really just said that. Four days from the test and I just introduced you to ““death escrows”” JFL.

Basically you can give a deed to your attorney or escrow agent to deliver to someone else upon your death… but you can’t reserve ANY control over it to be valid. So if you say “Give this deed to my son when I die… but return it to me if I ask” = NOT A VALID DEATH ESCROW = NO PROPER DELIVERY. Death escrows have to be placed FULLY outside your control.

Question 171

estoppel by deed
“after acquired title” doctrine

Answer 171

This one is kind of funny. This is when someone actually executes a deed… but they don’t have the land.

Or they try to give more land than they actually have.

Normally, this is not allowed.

HOWEVER… If they acquire the land later on… it just passes automatically to the person you scammed earlier haha.

Basically, the court doesn’t like you getting out of a sale just because you didn’t technically own it at the time of sale if you get the land shortly after that.

Question 172

types of deeds

Answer 172

1. quitclaim deed
2. general warranty deed
3. special warranty deed

Question 173

what is a deed?

Answer 173

most common way to give someone land, they are just instruments which convey an interest in land.

different deeds have different levels of promises.

Question 174

six possible covenants: three present and three future

Answer 174

Present
1. covenant of seisin
2. covenant of right to convey
3. covenant against encumberances

Future
1. covenant of quiet enjoyment
2. covenant of warranty
3. covenant of further assurances

Question 175

present covenants

Answer 175

Breaches of present covenants occur, IF AT ALL, when the land is conveyed.

And you can only sue the person who ACTUALLY sold you the land when it comes to present covenants… they don’t “run with the land” so people later on can’t sue on a present covenant that was broken when YOU bought the damn land.

1. covenant of seisin
promise that you’re in possession of the land you are trying to sell.
2. covenant of right to convey
promise that you have legal right to sell this land.
3. covenant against encumberances
a promise that there are no rights on the land held by third parties.

Question 176

future covenants

Answer 176

Future covenants protect the grantee from random shit that could happen in… the future.

A future covenant can be breached at the time of delivery… but it can also happen anytime after as well.

Future covenants do run with the land -> so a present owner can sue the person BEFORE the grantor who gave the land to them if the earlier person caused the covenant to be broken!!!!!!!!!!

1. covenant of quiet enjoyment
breached by 1. eviction of grantor; 2. by someone else showing up with superior title.

2. covenant of warranty
this just means the grantor will pay your legal costs if someone shows up with better title than you. he will help you defende against them and shit.

3. covenant of further assurances
this is just a promise to make sure the title is always good. if it’s defective, the grantor will give you a new one. he will take care of the later discovered liens that spring up, etc.

Question 177

quitclaim deed

Answer 177

0 promises, 0 covenants
worst type of deed.

The funniest part about quitclaim deeds is that they don’t even contain a covenant to convey… you aren’t even SAYING you can sell this land… you’re just like “take whatever the fuck I have… maybe it’s nothing, maybe it’s something”

Obviously, just completely making shit up and lying would be fraud.

But you can give a quitclaim even if you have NO interest in the property, but it is POSSIBLE you may get some interest (like if you have a disputed interest or you and your sister are fighting over a will relating to the property)

If the grantee is stupid enough to take a chance on you and it turns out you own nothing… they can’t sue you.

Question 178

the general warranty deed

Answer 178

all 6 covenants.

Even if the encumbrances are UNKNOWN to the grantor… STILL A BREACH.

TRICK:
The covenants of quiet enjoyment and covenants of warranty are NOT breached by a WRONGFUL claim or eviction by a third party.

ONLY BY SOMEONE WITH A REAL SUPERIOR TITLE

The grantor only needs to defend against an ACTUALLY superior title… not a wrongful attack on your deed by someone who DOESN’T have better title than you

Question 179

special warranty deed

Answer 179

The special warranty deed basically says “I own this property, I can give it to you, and when I was living there I didn’t do any weird shit to it like put an easement, mortgage or lien on it.”

It only guarantees two things, and these are ONLY promises on behalf of the grantor THEMSELVES… not anyone before them:

1. The Grantor promises that they have the right to convey (and didn’t convey it to anyone else BUT the grantee); AND
2. The property is free from encumbrances that arose WHEN THE GRANTOR HAD THE LAND or that were created BY THE GRANTOR;

The Grantor will NOT defend title if the encumbrance or claim is about some shit the OLD owner did before them.

Question 180

deeds that are void

Answer 180

Forged;

Not delivered; or

Deeds involving fraud in the factum … this is when the grantor DOESN’T know it’s a deed he’s giving over. There is fraud in the DOCUMENT itself.
If I say “this is a birthday card” and you sign it, and it’s a deed… VOID for fraud in the factum

Question 181

deeds that are voidABLE

Answer 181

Made by minors or incapacitated people;

Made through mistake;

Made through undue influence; OR

Fraud in the INDUCEMENT makes it voidable

This is when NOBODY is trying to hide the fact that this is a deed, but there are fraudulent STATEMENTS that get someone to hand it over.

Question 182

lapse

Answer 182

This is when someone getting a gift in a will… dies… before the testator.

Normally, if someone gives a specific piece of real property to a sibling or child in their will… and the sibling or child dies before the testator… the sibling or child’s heirs do not get the property as it has lapsed (since they died)

Question 183

anti-lapse statute

Answer 183

All states have some form of anti-lapse statute.

These statutes save the gift and allow it to pass to the beneficiary’s living descendants, but generally only if the beneficiary was a sibling or child of the testator.

The whole idea is this. If you give some shit to your sister and your sister dies… you’re kind of okay with having your niece or nephew get it. But if you give some shit to your friend Johnny O, typically…. you only really care about Johnny O getting it. You don’t know Johnny O’s estranged kids.

Question 184

ademption

Answer 184

ademption is when a specific bequest of real property (or personal property) simply isn’t in the estate when you die. You sold it. You lost it.

Remember, the will SPEAKS at the time of death.

If I give you GoatAcre in my will… then before I die I sell GoatAcre… GoatAcre is adeemed by extinction. They’ve tested this recently.

Random Goat-Note: You can’t give a deed that says “to Goat, provided that Goat does not sell the land for 10 years.”

this is restraint on alienation.

Question 185

title assurance systems

Answer 185

Recording acts protect grantee’s by allowing them to record their land deeds and provide public notice to everyone of their rights!

The acts penalize people who FAIL to record and give everyone else notice.

You have to tell everyone about the land you own so if a double dirty dealer sells it to 57 different people, we can figure out who should own it.

These recording acts are to protect people called bona-fide purchasers. This is just someone who purchases a property without notice. An innocent buyer.

Every recording statute differs in the sense that it provides a different time when the second buyer qualifies as a bona-fide purchaser and wins over the first person who bought the land from the double dirty dealer.

Question 186

race statute

Answer 186

In a race statute (only three states have this lol), whoever records the deed first wins. It’s a race to the courthouse. That’s a little joke I make with myself sometimes. I say “it’s a race to the courthouse for race statutes.”

So if Goat conveys GoatAcre to Rainbow Brown FIRST and then Kevin Tipcorn SECOND… then skips town… who wins between Rainbow and Kevin?

So if Rainbow records first… Rainbow wins.

If Kevin records first… Kevin wins.

Race to the courthouse to record.

Question 187

notice statute

Answer 187

the second purchaser wins if they have NO NOTICE

So if Goat conveys GoatAcre to Rainbow Brown FIRST and then Kevin Tipcorn SECOND… then skips town… who wins between Rainbow and Kevin?

So for Kevin to win:

Rainbow would have to not record; AND

Kevin couldn’t have notice that Rainbow bought it before him (doesn’t MATTER if he records or not!!!!!)

notice statue example:
a conveyance of interest in land (from O to A) shall not be valid against any subsequent purchaser for value (B) without notice thereof, unless the conveyance is recorded by A.

A= Rainbow Brown B = Kevin Tipcorn

Question 188

race-notice statute

Answer 188

fucking nightmare for BFP’s. The hardest one for them to win with.

Race-notice encourages the second purchaser to record. But if Kevin gets it without notice then Rainbow goes and records first… Kevin LOSES.

So if Goat conveys GoatAcre to Rainbow Brown FIRST and then Kevin Tipcorn SECOND… then skips town… who wins between Rainbow and Kevin?

So how does Kevin win in a race-notice jurisdiction?

He can only be bona-fide in a race-notice if:

Rainbow doesn’t record; AND

Kevin takes without notice; AND

KEVIN HAS TO NOW FUCKING RECORD BEFORE RAINBOW

NOT ONLY DOES HE HAVE TO BE INNOCENT WITHOUT NOTICE, HE HAS TO GET HIS ASS TO THE COURTHOUSE FIRST

THIS ONE IS HARDER TO WIN THAN NOTICE

race notice statue example:
A conveyance of interest in land (from O to A) shall not be valid against any subsequeent purchaser for value (B), without notice thereof, whose conveyance is first recorded (B)
A = rainbow brown
B = kevin tipcorn

Question 189

what exactly is notice?

Answer 189

can be
1. actual
if prior to closing for example, buyer two finds out about buyer 1.

2. constructive
So buyer #2 is under a duty to INSPECT the land. So if a reasonable inspection WOULD reveal that someone else owned it…. EVEN IF BUYER #2 doesn’t do any inspection… they’re still considered to be on notice.

If someone sells me DRAKES house… and all I needed to do was fucking show up to realize that DRAKE HIMSELF was living there… but I DIDN’T… I’m still on constructive notice.

Question 190

record notice

Answer 190

when it comes to record notice… buyer #2 always has a duty to search the record office. If it’s recorded in the record office… obviously… you’re on notice.

Question 191

what is a bonafide purchaser

Answer 191

You must be a purchaser
Can’t be a donee and get it as a gift

Can’t be an heir

Can’t get it from a will

Can’t be a judgment creditor

Can’t have notice (AIR)

Actual, constructive, or inquiry

And they must pay value

Can’t be love or affection, REAL value (I mean love has sentimental value, but the bar exam is ruthless when it comes to money -> exemplify laptop fee’s going up by $2,000 next year)

But if the property is worth $1,000,000, and you pay $500,000 that is still considered value

Question 192

shelter rule

Answer 192

It’s just when an heir, donee, or devisee gets the land from a bona-fide purchaser and becomes bona-fide themselves.

Even if THEY have notice… they are protected by the BFP’s status.

They get sheltered like a little lost puppy and will prevail against ANY interest the BFP would have prevailed against.

ex: Let’s say Goat conveys to Rainbow Brown, who does not record. Later on, Goat conveys to Kevin Tipcorn, a BFP, who records. Then KEVIN goes and conveys it to Nancy Riverfoot for FREE as a gift, and she has ACTUAL notice of the Goat to Rainbow Brown ORIGINAL transfer.

Nancy wins under BOTH notice and race-notice statutes.
because Kevin beats Rainbow

Question 193

mortgagee for value

Answer 193

they are treated the same as BFP’s and all the same rules apply with the dumb little statutes and the BFP statuses.

Question 194

title insurance

Answer 194

two types
1. owners title insurance
2. lenders title insurance policy

Question 195

owner’s title insurance policy

Answer 195

So an owner’s policy simply insures that buyers will have clear title to the property. They investigate the title for you. If your title ends up being fucked up, they have to reimburse you for losses later on.

The last thing you want when you are buying an enormous mansion is to realize that there is a problem with the title. I hate when that happens.

Maybe someone else is saying they own it, or you find outstanding liens or encumbrances, or even worse… fraud.

I currently have this home under contract. But I got title insurance and realized to my dismay that I actually did not fully own that path to the left of my pickleball court. It is actually a runway for small airplanes that I share with my neighbor.

It’s situations like this that title insurance protects us against.

Trick #1: An owner’s policy of title insurance continues to protect the owner of the property if they are EVER sued by a buyer way down the chain, even one hundred fucking years later. It protects you forever.

Trick #2: owner’s title insurance policies cover BOTH the named owner AND their heirs and devisees so long as the named owner or their heirs OWNS THE DAMN PROPERTY

No, it doesn’t “run with the land” and cover subsequent purchasers (later buyers have to get their own title insurance, they can just mooch off yours)

But it covers YOU AND THE FAM

Ex.
F24 Trick Alert: They’ll probably say Nancy Riverfoot bought an owner’s title insurance policy then conveyed it to her friend Sally Walterson and then Sally discovers the title is fucked up. So Sally tries to come after Riverfoot’s policy…. nope.

SHE IS A FRIEND SHE IS NOT PART OF THE FAMILY

Ex. 2
Goat had an owner’s title insurance policy. They investigated his new property in the Hampton’s and ASSURED him it had good title.

He died and passed the Hampton estate onto his son LiL Goat in his will.

Then someone showed up with superior title.

Can LiL Goat get indemnification from the title insurance company?

Fuck yes. As he is an HEIR within the FAMILIA.

OWNER’S TITLE INSURANCE PROTECTS BOTH YOU AND YOUR FAMILY DOWN THE LINE.

Owner’s policies are indefinite and cover your heirs AND retroactive claims that arise later on with an 82nd buyer (like in the case of Ronald Walterson)… but they do NOT run with the land and cover friends and random subsequent buyers.

Question 196

mortgage

Answer 196

a security interest in property that you give to the bank in exchange for them lending you some money.

a voluntary transfer of a security interest in your land to secure a debt.

Question 197

do mortgages need to be in writing?

Answer 197

yes and signed by the mortgagor (i.e. the person borrowing the money) or someone acting on their behalf.

Question 198

do mortgages require consideration?

Answer 198

No!

The underlying obligation is sufficient consideration =)

you’ve given enough by allowing Mr. Bank to have a security interest

Question 199

what rights does the mortgage give the mortgagee (the bank)?

Answer 199

1. foreclosure
the mortgagee has the right to foreclose if the borrower doesn’t pay (which means they can sell the property and use to pay the debt you owe)

2. right to collect regular payments
both principal and interest

3. right to inspect
make sure you don’t destroy the property with waste.

Question 200

what rights does the mortgage give the mortgagor? (the borrower)

Answer 200

1. redemption

The right of redemption simply means that the mortgagor has the right to pay off the full mortgage at any time during the mortgage and own the property free and clear.

The right of redemption extends into the foreclosure process, and we’ll talk about that in a bit (don’t get too excited)

It also gives the mortgagor the right to use and enjoy the property so long as the mortgage obligations are met.

Question 201

when are mortgages effective against third parties?

Answer 201

when they are filed properly in the public records.

Someone’s “knowledge” of the mortgage is irrelevant. It all depends on when they are filed!

The date of filing determines their priority rank. How easy is that!

So in the event of a foreclosure if the borrower runs out of money and stops paying… the second recorded mortgage doesn’t get paid until the first recorded mortgage has been fully paid off.

Look at Goat Stewart here. He will serve the first pieces of his cake before he even gets to the second layer, just like the first and second mortgage.

Question 202

can you mortgage your land to secure the debt of another person?

Answer 202

Yes - A mortgage to secure the debt of another is valid.

Sometimes the bar exam tries to confuse us with a situation where a scammer gets one of their family members or friends to mortgage their property to secure a loan for the scammer’s property.

One time my gangster friend Ollie who I met at a strip club tried to convince me to get my parents to mortgage their home as security so he could get a $200,000 loan for a nail salon. He said we could make $200,000 a year profit at the nail salon and pay the bank back in a year before we started turning a major profit.

It was an interesting idea, but I didn’t even bring it up to my parents. They are very gentle older people and the mere mention of this plan would terrify them.

But a person can put a mortgage on their property to secure the debt of another. If my parents had done this… and then Ollie wouldn’t have paid back the bank on his nail salon loan… the bank would have foreclosed on my parents house… wtf.

Question 203

what is a purchase money mortgage?

Answer 203

funds used directly to buy the home - THESE HAVE SUPER PRIORITY

priority over everything and everyone to get paid first.

recorded purchase money mortgages have priority over non-purchase money mortgage claims, even ONES that were recorded BEFORE THE PURCHASE MONEY MORTGAGE

Let’s say Goat is looking to move. He wants something simple with a nice view and good amenities for $195 million dollars.

But he only has $100 million.

So he goes to Chase Bank Private Client and they give him the final $95 million he needs to purchase this little fixer upper.

What they gave Goat was a purchase money mortgage. This is just an industry term meaning that funds were used directly to buy a home.

Why are purchase money mortgages important?

Banks are hesitant to lend people money to buy homes. It’s kind of risky and they don’t want to do it. So we wanted to give them incentive.

So the law says “Okay Mr. Bank… if the buyer defaults, you will be the first mortgage to be paid in the foreclosure sale when we sell the house. Above all the other mortgages and liens. Above every other fucking claim… you will prevail… for the risk you took”

And thus, the super-priority of the Purchase Money Mortgage was born.

Question 204

when you use your mortgage to buy a home versus buy a swimming pool

Answer 204

when you use it to buy a home, it is a purchase money mortgage / “first mortgage”

when you take out a second loan on your homes equity to install a swimming pool, that’s a home equity loan / “second mortgage”

Question 205

future advance mortgage

Answer 205

Future advanced mortgages are simply mortgages where the lender distributes the money at different times. So the money is not all distributed at once.

The most important thing our little squirrel brains need to know about future advance mortgages to answer these MBE questions is whether or not the payments are mandatory or optional

Mandatory:
Imagine a construction company is building a hotel. The mortgagor gives the construction company $10 million up front and then another guaranteed $5 million when they are 50% done.

This is a mandatory payment with a mandatory triggering condition (the property being 50% done)

When the payments are mandatory like this… all the new payments have the same priority as the original mortgage.
So let’s say a creditor comes along and puts a lien on the construction company before they get the $5 million second mandatory advance. You can picture that creditor as a little lien stream coming in between the original $10 million payment and the next $5 million payment.

So who gets paid first in the event of foreclosure? The $10 million first, the lien second, then the $5 million third?

NO the $15 million has to be paid off at foreclosure before the dumbass lien gets paid. when payments are mandatory, the junior lien is junior ot both the initial payment and the future payment down the line.

The law is basically like “look you dumbass lien holders, you KNEW damn well this construction company was going to get another $5 million mandatory payment… so why’d you put your stupidass lien on this thing and expect it to be paid second? You are paid LAST after all the mandatory payments.”

Optional
If the payments are optional on the other hand… like if the bank said “we might pay you $5 million if we like how the construction looks halfway through” … then the junior lien has priority over the later payments.

when payments are optional, the junior lien lender has priority over amounts transferred later on after the lien

Question 206

installment contracts

Answer 206

These are simply contracts for the sale of land where the buyer purchases the land by making payments in installments over time and the seller keeps title to the property until the last payment is made.

One of the Goat tricks here is that the seller does not have to convey marketable title until the last payment is made.

Question 207

what if a buyer fails to make an installment payment?

Answer 207

Common Law: Buyer would lose all past payments and have to fuck off.

Nowadays, unless there is a forfeiture clause which states time is of the essence, this doesn’t happen.

Modern View: In most states the seller is only allowed to keep the reasonable value of the rental value at the time the buyer lived there.

Question 208

What if the installment buyer totally defaults and stops even trying to pay or do anything?

Answer 208

The seller can sue them for breach of contract, restitution, foreclosure, quiet title, or try to rescind the contract (it is a contract after all my Goats)

The seller can also use self-help and get them physically thrown off the property since they have the title.

Question 209

what if the seller of an installment land does not give up the title at the last payment?

Answer 209

All the buyer can do is sue for the return of all the payments they’ve made.

Question 210

what is an absolute deed as security (i.e. an equitable mortgage)?

Answer 210

Let’s say Goat opens up a small dodgeball gym

The gym is not doing so well… mainly because Goat has been doing too many trick shots on people.

Goat has poor credit… so he can’t take out a mortgage on the land. He desperately needs money to keep it going.

So Goat asks to borrow money from Rainbow Brown in exchange for a security interest in the dodgeball gym Goat owns.

Rainbow agrees… but instead of executing a note or a mortgage deed… Rainbow simply asked for the deed itself with a writing which said “after the loan is paid back, Goat can get the deed back for the dodgeball gym.”

The moment Goat does not pay, Rainbow Brown can simply avoid foreclosure altogether and take the property back, stripping Goat of any rights he would have under a normal mortgage.

Goat is “selling him the deed” and leasing it… but in reality Goat is a disguised borrower. If Goat defaults on his “rent” payments, which are really loan payments, then Rainbow, who holds legal title, can instantly terminate the tenancy and option rights without having to go through foreclosure and keep the property.

This is a disguised mortgage and it is used to fuck people over who are desperate or unaware of the law.

A disguised mortgage that you may not see… and when you see it, it may be too late.

Courts are hostile to these arrangements and will usually treat these bullshit loans as mortgages if it seems that they were designed to prevent the borrower’s right to redeem. The court will look at extrinsic evidence to figure out what the parties actually were trying to do.

Moral of the story: Once a mortgage, always a mortgage.

Question 211

deed of trust

Answer 211

This is kind of like the legal version of the disguised mortgage.

A deed of trust is when the title is given to a third party (a trustee) to hold as security for a loan between a borrower and a lender.

Basically, if the borrower fucks up and defaults on the loan… the Trustee can sell the property and apply the proceeds to the debt.

There is no judicial supervision for a foreclosure sale when it comes to a deed of trust. You’re on your own. People use deeds of trust because they’re cheaper (judicial foreclosures are expensive as shit), there’s more privacy since they aren’t public, and it’s faster than judicial foreclosure. A neutral third party is also involved (the trustee). You get it my Goats.

Question 212

mortgage theories

Answer 212

1. title theory
2. lien theory

Question 213

title theory (minority of states)

Answer 213

In a title theory state (minority of states), a mortgage granted by one joint tenant severs the joint tenancy and turns it into a tenancy-in-common.

Question 214

lien theory (majority of states)

Answer 214

In a lien-theory state (the majority of states are lien theory states), if one joint tenant takes out a mortgage it is only considered a lien and will not sever the joint tenancy.

So if a joint tenant takes out a mortgage in a lien theory state it will not break up the UNITIES (remember how joint tenancies need those stupid unities of time, title, interest & possession?)

Therefore the joint tenancy will SURVIVE.

Question 215

redemption

Answer 215

How can we rise after we default on our mortgage?

Redemption in equity... or as I call it “the last opportunity”, is a chance for borrowers to save their property from foreclosure.

Almost all states allow it and it simply means that at any time prior to the foreclosure sale, a debtor has the right to redeem the land and save the property.

How exactly do you save your property before a foreclosure?

By paying the missed payments + interest + costs

It’s that simple

Question 216

mortgages containing an acceleration clause

Answer 216

these are valid and allowed

An acceleration clause is just a provision in certain mortgages which says “hey motherfucker, if you default or start missing your payments or doing some weird shit… you owe me the full amount of the original mortgage we agreed to, not just the missing payments.”

Basically after you fuck up the mortgage payments are… well… accelerated.

Then if you want to redeem it you have to pay the full balance plus accrued interests and costs.

EVERYTHING.

Acceleration clauses are typically triggered by nonpayment of the mortgage… but they can also be triggered by things like failing to pay insurance premiums on the house. Your mortgage payments can be accelerated by failure to pay insurance if this is what the acceleration clause says. Stay alert.

Question 217

can the debtor waive the right to redeem when they originally sign up for a mortgage?

Answer 217

hell no

redemption is the most important RIGHT and you cannot bargain yourself out of it.

Sometimes the MBE will mindfuck you and make you think you can give up the right of redemption in the event of default when you’re originally making the mortgage with the other party.

You can’t.

Question 218

is there a mechanism that allows us to save the property after the foreclosure sale?

Answer 218

Half the states out there actually have fucking statutes for this shit.

In these states the borrower has the right to redeem the property for a fixed period (usually 6-12 months) AFTER THE FORECLOSURE SALE HAS HAPPENED

Yes I just said that… AFTER THE FORECLOSURE SALE

But didn’t someone just BUY THE HOUSE… AT THE DAMN FORECLOSURE SALE!??! WHAT HAPPENS TO THEM?!

How can you redeem it after the foreclosure sale?

You face off against the person who just bought it… and literally just take it back from them.

If a state allows for statutory redemption… the mortgagor can simply pay the foreclosure sales price and it nullifies the foreclosure sale.

Pay attention my Goats…the price they have to pay to take back the property is the the foreclosure sale price (PLUS interest)… NOT the amount of the original debt.

So let’s say Rainbow Browns house goes into foreclosure and Kevin Tipcorn pays $100,000 to buy it at the foreclosure sale (the predatory fuck that he is… the house was probably worth way more… but people buy homes at distressed prices at these foreclosure sales)

If we are in a state that allows for statutory redemption… Rainbow Brown can buy back his house WHILE Kevin is actively living in it for $100,000, so long as he does it 6-12 months after the foreclosure sale (depending on what the state law says)

Question 219

who is liable for the mortgage when there are co-owners?

Answer 219

Every co-owner of a property encumbered by a mortgage is liable for 100% of the mortgage

They like to be like “Johnny and Mark were tenants in common. They took out a mortgage on their property. Johnny wanted out of the mortgage so he tried to pay 50% of it and demanded a release from his share of the mortgage.”

Um… no.

You gotta pay all that shit to free the property of the mortgage.

Not just 50%.

They are both jointly and severally liable for that mortgage.

You can’t mortgage only part of a property. That wouldn’t even make sense. Because the bank needs to foreclose if you don’t pay and their remedy is to sell the WHOLE damn property. Who tf ever sold half a house?! Oh… I have HALF A HOUSE for sale… please enjoy. Hell no.

So when that mortgage drops on a house… everyone has to pay. Nobody can get out of it until the whole thing is paid off.

Question 220

can we transfer a mortgage?

Answer 220

yes

Both the creditor (the mortgagee who is lending the money) and the debtor (the mortgagor who is taking out the mortgage) can transfer a mortgage.

Question 221

wtf is a difference between a mortgage and a note?

Answer 221

Mangoes for Nutrition stands for the idea that a Mortgage follows a Note transfer.

When you want a loan, you give the bank two things:

1. a promissory note
A promissory note is just an IOU… it says “hey, I promise to pay Mr. Bank back their money. I won’t let you down Mr. Bank.”

That’s all fine and well… but what happens if we go back on our promise to Mr. Bank?

that’s where the mortgage kicks in

2. mortgage
The mortgage allows for the bank to reach out and grab our land if we break our promise and don’t pay Mr. Bank back. It’s a document that says “if you don’t pay back your IOU… we are seizing your land and selling it”

Question 222

investor foreclosing on buyer

Answer 222

Walter Flannelshirt purchased a home by executing both a mortgage and a note.

The bank then assigns the note to an investor.

Walter stops paying.

The investor (who just had the note assigned to him) then forecloses on Walter.

Walter has never even fucking heard of this investor. He objects to it.

What result my Goats? Can the investor do this?

YES
MANGOS FOR NUTRITION
THE MORTGAGE FOLLOWS THE NOTE

Question 223

what happens if you simply assign the mortgage without promissory note?

Answer 223

not a thing.

you have an imaginary nothing.

Question 224

notice of transfer

what happens if we tell the borrower that we transferred the note?

Answer 224

If the bank or lender (mortgagee) tells the borrower (mortgagor) that they transferred the note… the mortgagor cannot pay the original mortgagee… they gotta pay the third party it got transferred to.

So in our last example… if the bank told Walter they transferred it to the investor… he couldn’t pay the bank anymore.

Question 225

notice of transfer

what happens if we don’t tell the borrower that we transferred the note?

Answer 225

So in our last example… if the bank didn’t tell Walter they transferred the note to the investor… he could still pay the bank and it would be effective.

Question 226

can the debtor - mortgagor transfer their mortgage?

Answer 226

Yes, they can

So the same rules apply to mortgagor-debtors.

The mortgage follows a properly transferred note.

Mortgages, like deeds, must also be recorded.

Let’s say on January 1st, Goat takes out a $100,000 mortgage on the Pasture from Fleece & Funds financial. Fleece & Funds records the mortgage on January 2nd. On January 10th, Goat sells Pasture to Walter Flannelshirt (he recently lost his home). Walter has no knowledge of the Fleece & Funds mortgage. Is he liable to pay it?

Yes. It doesn’t matter if we are in a notice jurisdiction (where Fleece & Funds would win since they recorded) or in a race-notice jurisdiction (where Fleece & Funds would win since they won the race to record AND Walter was on record notice of their mortgage)… Walter now has the fucking mortgage.

Question 227

what happens at closing when someone buys a home with an existing mortgage on it?

Answer 227

Scenario #1: The buyer pays cash and terminates the existing mortgage.

Goat wants to buy a house from Kevin Tipcorn for $300,000. Kevin has a mortgage with a remaining balance of $150,000 on the house. Goat gives the whole $300,000 and half is used to satisfy the mortgage, the other half is given to Kevin. No more mortgage. Simple. Full cash.

Most buyers don’t have the cash to do this though.

So we move to the next scenario

Scenario #2: The buyer pays off the existing mortgage using their own mortgage.

Goat wants to buy a house from Kevin Tipcorn for $300,000. Kevin has a mortgage with a remaining balance of $150,000.

So Goat takes out a $300,000 mortgage and shows up to closing.

Kevins balance is paid off ($150k) and Kevin gets the remaining $150k for himself.

Kevin is out of the picture. Goat has a $300,000 new mortgage to deal with. Easy math.

But what happens if our little buyer can’t get their own mortgage?

I’m glad you asked. They may have to try to assume an existing mortgage

Scenario #3: Assume the position.

the only important thing you need to know for the MBE is that if the problem says the buyer assumed the mortgage, BOTH the original mortgagor and the buyer are liable on it or ANY deficiency judgment after a foreclosure sale

The buyer is primarily liable, and the original mortgagor is SECONDARILY LIABLE

Mortgage interest rates are going up my Goats. The 30 year average fixed interest rate is over 7%. What the fuck.

Sometimes… you can’t qualify for a mortgage yourself. So a lender may allow a new buyer to assume an existing mortgage (assume is just a fancy word for step into the shoes of the original mortgagor and take over their mortgage)

the lender might want continued interest payments, so they will let a new buyer assume the mortgage instead of having it paid off all at once so the new buyer keeps paying interest.

This makes sense. Lenders love interest.

Sometimes a new buyer can qualify for a mortgage of their own… but the interest rate is just way shittier… so they will try and get the lender to agree to let them assume the old mortgage and step into the shoes of the old mortgagor .

Situation #4: The seller finds a willing buyer and says “fuck it, just take my property subject to the mortgage.”

If a new buyer takes subject to a mortgage, they are agreeing to make the mortgage payments without formally transferring the mortgage into their name.

The buyer has NO PERSONAL LIABILITY on the mortgage when they take subject to the mortgage. Literally NONE.

Question 228

most lenders have a due on sale clause

Answer 228

This due on sale clause is like a fucking landmine that can blow up your whole “””””””"”subject-to plan”””””””” of transferring a mortgage.

A due on sale clause allows a creditor to demand FULL payment of a loan if the mortgagor transfers any interest in the property without the lender’s consent.

The creditor can demand everything the moment you try to sell or gift the property encumbered by a mortgage. And the lender can foreclose on your stupid ass immediately.

I know what you’re thinking “yea right Goat…. that’s a restraint on alienation. Impossible. You told us in the first module restraints on alienation were not valid.”

Due on sale clauses are both valid and enforceable and they are NOT a restraint on alienation.

Question 229

discharging a mortgage

Answer 229

So full payment of a mortgage loan discharges a mortgage… this is simple.

Sometimes pre-payment is allowed, sometimes it isn’t.

Goat-Note: If the note or mortgage does not specifically allow prepayment… a prohibition on prepayment is implied.

Most banks are greedy as fuck and they want a bunch of interest… so sometimes they just outright don’t allow prepayment of mortgage loans.

But there’s really only one thing the NCBE tests when it comes to discharge of a mortgage: the deed in lieu of foreclosure

Question 230

deed in lieu of foreclosure

Answer 230

Sometimes the bank doesn’t want to go through the costly process of foreclosure, so when you stop paying they say “just give us the damn deed and we’ll be done with your stupid ass.”

It is an alternative option to being foreclosed on.

Basically, the borrower transfers the title to the lender, satisfies their debt, avoids a deficiency judgment and doesn’t have to go through the process of foreclosure (which is long, and potentially publicly embarrassing… nobody wants to be the guy that got foreclosed on)

No more equity of redemption. You lost the home. It’s kind of a good deal for the borrower honestly. They avoid having to pay anymore money. The bank gets to sell the property quick and try to make some cash money and avoid a long ass foreclosure.

RULES

Rule #1: the transaction must be fair and equitable
If the lender takes the deed then demands some more money afterwards… the court will set aside the whole thing. Nope. Not fair and equitable. That is a scam. After giving up the deed… the borrower should be free.

Rule #2: the deed must be effective immediately.
you cannot say “yeah take the deed, but you can’t sell the house right away mr. lender
The shit has to kick in right away for it to be a true deed in lieu of foreclosure. Stop playing. The transfer must be effective immediately.

Rule #3: junior lienholders are NOT cut off, only the big dog main mortgage. the borrower is STILL liable to junior lienholders after giving over the deed.

Sometimes the bar exam will have a question where the borrower in default gives a deed in lieu of foreclosure… and they try to walk away thinking they are debt free of all claims on the property.

Nope.

You still gotta pay off those liens. You still gotta pay off that second mortgage. The only thing you are free from is the main mortgage loan, NOT the junior liens.

Question 231

what exactly is foreclosure?

Answer 231

Foreclosure is when property is sold to satisfy a debt.

So basically when we stop paying our mortgage… the lender takes our property and sells it to satisfy our debt, then we have to pay the remaining balance.

There are two different types of foreclosure sales to sell the property:

1. judicial foreclosure
using the court system

2. non-judicial foreclosure
in states where “power of sale” clause is allwoed in the mortgage.. the lender can sell the property without the courts!

The ‘power-of-sale’ clause is just a line in the original loan document that says “we can sell this home at a private sale (not judicially supervised) without the courts if you stop paying us”

Self-help is never allowed my Goats - you need to either use the courts or have a power-of-sale clause if you want a private foreclosure sale.

Question 232

inadequacy of the sale price in foreclosure sale

Answer 232

what if the lender accepts a bid that is extremely fucking low at the foreclosure sale? Wouldn’t that mean we would have to pay more out of pocket?

Inadequacy of the sale price alone is not a reason to void the foreclosure sale.

Let’s say my mortgage is for $250,000 and my house is appraised at $300,000.

I stop paying the mortgage.

The bank sells my house at the foreclosure sale for $150,000… then comes after me for the remaining $100,000.

I can’t challenge this shit.

The lender just fucked me over. Now I owe these idiots $100,000.

There has to be gross inadequacy (i.e. they sold it for $3,700)

OR

Procedural irregularities in the sale itself(i.e. they didn’t advertise the foreclosure sale at all so only a single person showed up to bid on it)

Question 232

the one time self-help is allowed in foreclosure

Answer 232

the full raccoon

Sometimes, prior to foreclosure, the mortgagee goes full raccoon and literally abandons the property or starts fucking it up on another level.

In this scenario, the banks can move in before foreclosure to protect their security interest (so it doesn’t get vandalized or there isn’t a garbage fire that is started)

Question 233

deficiency judgment

Answer 233

All this means is that if the lender SELLS your house in foreclosure… and the sale price is NOT enough to cover the mortgage balance that YOU didn’t pay… they can get a judgment for the rest of the money against you personally.

Question 234

what if there is a surplus in a foreclosure sale?

Answer 234

when we have one mortgage and the sale results in extra money to the homeowner!

If there are multiple claims on the property at one time… we have to figure out who gets the extra money and in what order. And there are levels to this shit when we have extra money left-over.

There are often many things standing in between the mortgagor and that sweet surplus money: interest on the foreclosed loan, second mortgages, expenses of the foreclosure sale, attorneys fees, court costs, and junior liens.

There is an order of payment that must be followed anytime there is surplus money available after the foreclosure sale.

I made this mnemonic for the situation:

Elephants (Expenses first: the sale, attorneys fees & court costs)

Munch (the foreclosed mortgage principal & interest is paid next)

Large (Then junior lienholders like weird credit card companies that have attached judgments on your house and second mortgages - first one to record gets paid first)

Melons (then finally… the mortgagor gets it. This almost never happens on the MBE and likely won’t on J24. Look at all these people who have to get paid before the mortgagor)

each level has to be paid off in full before the money trickles down to the next level

Question 235

senior mortgages / lienholders at foreclosure

Answer 235

Let’s go back to our last example. What if Goat had been paying his mortgage for Bank A (the $30,000 first mortgage) totally fine… but he hadn’t been paying his second mortgage loan for Bank B (the $15,000 second mortgage to build the marijuana shed)?

Bank B gets pissed then forecloses. The property is sold at auction.

THE SECOND IN LINE OF PRIORITY JUST FORECLOSED MY GOATS. WE TRICKLE DOWN THE MONEY. WHAT HAPPENS TO THE ORIGINAL MORTGAGE?!? YOOOOOOOO. THIS IS A BIG ISSUE.

I’ll tell you what happens: absolutely nothing. The first mortgage from Bank A stays on the land just waiting to fuck over the new buyer like a snake in the grass.

IF I BUY THIS PIECE OF SHIT HOUSE AT THE FORECLOSURE AUCTION… I’M STILL GOING TO HAVE TO PAY OFF THE $30K BECAUSE SENIOR INTERESTS DON’T GET TOUCHED BY A FORECLOSURE.

I NEVER SAID TRICKLE UP… I SAID TRICKLE DOWN. FORECLOSURE DOESN’T DESTROY SENIOR INTERESTS.

Follow me on this one Goats: If the FAIR MARKET VALUE of this house is $50,000, I will ONLY bid $20,000 at auction… because I’ll have to PAY OFF the $30,000 senior mortgage from Bank A in addition to the sale price. ($20,000 + $30,000) = $50,000 (FMV)

If I paid the Fair Market Value of $50,000… I’d actually be paying $80,000…. since a junior mortgage foreclosure DOESN’T EXTINGUISH the senior mortgage.

I’D STILL HAVE TO PAY THE $30,000 IF THE SECOND IN LINE MORTGAGE FORECLOSED, IT WOULD ONLY WIPE OUT BANK C’S CREDIT CARD LIEN.

Question 236

mortgage priority

Answer 236

two things to know about mortgage priority

First: Priority among mortgages is determined by the time they were recorded.

The first recorded mortgage has the highest priority (they get paid first)

The second recorded mortgage has the second highest priority (they get paid second)

The third recorded mortgage has a lower priority than the first and second mortgages (they get paid last)

Second: exception to above, recorded purchase money mortgage

When you loan a buyer money to buy a house (you don’t even have to be an ‘official lender’ by the way, it can be a loan between two family members)… that purchase-money loan gets super-priority over all other non-purchase money mortgages and claims, EVEN if the non-purchase money mortgage or liens were recorded first.

An unrecorded purchase-money mortgage still wins against prior recorded mortgages and liens… but loses against subsequently recorded mortgages and liens that come after it.

If the seller of the house lends you money to buy THEIR house… this is called a seller’s PMM or vendor’s PMM… if you take out a loan from the seller AND the bank to get two Frankenstein PMM loans… the seller’s purchase money mortgage has priority over the bank’s purchase money mortgage. Just a little trivia for you to remember.

Question 237

what happens when we modify a senior mortgage and fuck over a junior mortgage without their consent?

Answer 237

Let’s say Bank A has a first mortgage on a property for $20,000 at a 3% interest rate, secured on January 1st, 2024.

Bank B gets a second mortgage for $10,000 on January 3rd, 2024. Bank B sees the first mortgage before they give their second mortgage and they’re like “oh yea… we’ll definitely get paid if some shit goes down. It’s only $20,000 at a favorable interest rate haha… we will get paid even though we’re second in line.”

On January 5th… Bank A modifies the terms of their loan - it’s now a $100,000 loan at a 5% interest rate.

Bank B realizes all at once that they have been totally screwed over and lied to. They realize in an instant we live in a world of power. A world where one Boeing whistleblower “commits suicide” and then three weeks later another whistleblower dies of a mysterious illness that only affects 1 out of 60 million people. They realize their loan is now fucked.

Before the modification only $20,000 were “ahead of them” in the trickle down foreclosure payment structure. Now there is $100,000 ahead of them and way more interest. It isn’t fair. They never had notice of this, and if they did they might not have offered their second mortgage. Their chance of getting paid in foreclosure just plummeted.

So the rule is this: if the principal is changed or the interest rate is raised without the junior lienholders consent, the junior lienholder has priority over the raised amount. So the payment structure in foreclosure would be like this

Foreclosure -> $20,000 paid to Bank A –> $10,000 to Bank B –> $80,000 to Bank A.

Question 238

priority of advances

Answer 238

So junior mortgages and liens have priority over optional payments the senior mortgagee is not obligated (optional advance payments) to make. So a credit card lien could wedge themselves in between optional future payments and steal priority over the later optional payments.

if a mandatory payment, they can’t wedge themselves as it attaches to the original mortgage.

Question 239

equitable subrogation

Answer 239

Equitable subrogation is a principal which allows a mortgagee to acquire the rights and priority of an earlier lien or mortgage if the new mortgagee’s funds are used to pay off the prior mortgage. Pretty simple if you think about it.

Let’s say Gertie Hoofstein (this is a new character I’ve invented) gets a first mortgage to buy a home, then a Second Mortgage to repair her home. But Gertie’s interest rate on the first mortgage are just way too high.

Gertie is sad.

So Third Mortgage, Inc. calls her and says “Gertie please, don’t cry. Here’s what we’ll do. Let’s refinance your home. We’ll get you a third mortgage… it will be enough to pay off the full first mortgage and the interest on it… and you can refinance at a much lower interest rate with our mortgage.”

So the third mortgage then pays off the first mortgage. But wait… is the second mortgage still ahead of the third mortgage if foreclosure occurs? That wouldn’t really be fair, right? I mean… Third Mortgage just paid off First Mortgage and saved the day… it should have higher priority than second mortgage.

And it does. The third mortgage steps into the shoes of First Mortgage once it pays it off.

If this wasn’t the case, no one would ever offer money to help people pay off a mortgage and get a better interest rate if there were other claims ahead of them.

Question 240

marshaling / “the two funds rule”

Answer 240

know it to eliminate it in the answer choices lol.

Let’s say Goat has a primary residence worth $100,000, and a vacation home worth $100,000

Lender A has a $90,000 mortgage on Goat’s primary residence.

Lender A has a $90,000 mortgage on Goat’s vacation home.

Lender B has a $10,000 mortgage on Goat’s primary residence.

Let’s say Goat stops paying and Lender A forecloses.

Lender A now has a choice… do they foreclose first on the vacation home where only they have a mortgage, or on the primary residence where both lenders have a mortgage?

Let’s say Lender A forecloses on the primary home and they are owed their $90,000 mortgage principal + $10,000 in interest. They sell the home for $100,000 and recoup their full investment.

All the money is gone. None left over.

This little fucker Lender A could have just SOLD THE DAMN VACATION HOME THAT ONLY THEY HAD THE MORTGAGE ON without messing with Lender B’s ONLY source to get paid.

THEY DRAINED THE HOME AND TOOK AWAY ANY CHANCE OF LENDER B GETTING THEIR MONEY

LENDER B ONLY HAD ONE CHANCE TO GET PAID - THROUGH THE PRIMARY RESIDENCE. LENDER A HAD TWO OPTIONS TO GET PAID: THROUGH EITHER THE VACATION HOME OR THE PRIMARY HOME!!!!

THERE WAS MONEY ENOUGH FOR EVERYONE

LENDER A BETRAYED LENDER B

Anyway, the two funds rule says that a senior creditor, having two or more options to satisfy their debt, has to FIRST dispose of the option not available to the junior creditor (THE DAMN VACATION HOME)

Does this make sense?

There was more than enough money for everyone to get paid, so why allow the first lender to destroy it for everyone by taking away the asset that the junior lender needed to get paid WHEN THEY HAD ANOTHER PERFECTLY GOOD HOME TO FORECLOSE ON that would have paid their full amount due and wouldn’t have extinguished little Lender B

When there’s a choice… do the right thing my Goats.

Question 241

lenders title insurance

Answer 241

The lender’s title insurance policy is basically required to get a mortgage. It protects the lender if there is anything fucked up with the property, but it does NOT protect the buyer.

The lender makes YOU buy insurance… to protect THEM.

If Goat purchases a property with a mortgage and a lender’s title insurance policy… and there is an unknown easement on it which is discovered later on… this is a big problem.

It’s a problem for the mortgage lender because if Goat defaults, the lender would normally have the right to foreclose. But now they have to deal with this idiotic easement which will lower the value of their property, affecting their ability to recover their loan amount.

So the insurance company would give the lender money directly for the loss in value of the easement. If the property could be foreclosed on for $200,000 without the easement, and only $180,000 with the easement… the lender gets $20,000.

But the buyer is still stuck with this huge ass easement across his pickle ball courts. He would need owners title insurance to get money for this himself. So it doesn’t protect the buyer, only the lender.

Also, lender’s policies expire with the final payment of the mortgage. They do survive assignment of the mortgage to other people though. But once the mortgage is over, they disappear.