Property

Question 1

covenant of warranty: reimbursement for defending claim

Answer 1

The covenant of warranty is a future covenant that guarantees that the grantor will defend against a third party’s lawful (i.e., valid) claim for title. This covenant, however, does not require the grantor to defend against a third party’s wrongful claim. In essence, this covenant does not require the grantor to defend against all title claims brought by a third party against the grantee, but to be responsible for the litigation costs if the third party’s claim is successful. Here, because the buyer was successful in defending against the third party’s claim, the grantor was not required to defend the buyer against this action.

Question 2

Easement by implication

Answer 2

in order for an easement by implication to exist, there must be a prior existing use (i.e., a quasi-easement). Here, the path across the daughter’s lot only came into existence after the lot was deeded to his daughter.

Question 3

implied reciprocal servitude

Answer 3

must meet the following requirements to be enforceable: (i) there must be intent to create a servitude on all real property interests (i.e., a common scheme); (ii) the servitude must be negative (i.e., a promise to refrain from doing something); and (iii) the party against whom enforcement of the servitude is sought must have actual, record, or inquiry notice. Reciprocal negative servitudes are implied from the common scheme.

Question 4

(implied) warranty of habitability - residential

Answer 4

in most residential leases, particularly when the dwelling is multi-family. The landlord must maintain the property such that it is reasonably suited for residential use. The landlord’s failure to comply with housing code requirements may serve as evidence of a breach of this warranty,

If the premises are not habitable, then the tenant may choose to (i) refuse to pay rent, (ii) remedy the defect and offset the cost against the rent, or (iii) defend against eviction. Generally, before the tenant can withhold the rent or remedy the defect, she must first notify the landlord of the problem and give him a reasonable opportunity to correct it. The tenant is not required to vacate the premises.

Question 5

(implied) warranty of habitability - commercial

Answer 5

implied warranty of habitability does not apply in commercial leases. Therefore, absent some statutory or contractual obligation, a landlord only has a duty to make a repair if (i) the repair is so substantial that it would not ordinarily fall within the tenant’s common law repair duty, or (ii) the value of the repair would primarily inure to the landlord’s reversionary interest.

Question 6

covenant of quiet enjoyment

Answer 6

Every lease (both COMMERCIAL and RESIDENTIAL) contains an implied covenant of quiet enjoyment. This covenant is a promise by the landlord not to interfere with the tenant’s possession of the leased premises. It is breached only when the conduct of the landlord or someone with superior title prevents the tenant from possessing the leased premises.

Question 7

Constructive eviction

Answer 7

If the landlord breaches a duty to the tenant, such as failing to make a repair, that substantially interferes with the tenant’s use and enjoyment of the leasehold (e.g., fails to provide heat or water), then the tenant’s obligation to pay rent is excused due to constructive eviction only if the tenant gives notice and adequate time to permit the landlord to fulfill his duty and vacates the property within a reasonable amount of time.

Not every interference with the use and enjoyment of the premises amounts to a constructive eviction. Temporary or de minimis acts not intended to amount to a permanent expulsion do not amount to constructive eviction.

Question 8

Partial eviction

Answer 8

a) Landlord

The tenant is completely excused from paying rent for the entire premises if the landlord is responsible for partial eviction.

b) Third parties

The tenant must pay the reasonable rental value of the premises occupied if the partial eviction is by a third party with a superior claim to the property.

The tenant is not excused from paying rent if a third-party adverse possessor/trespasser partially evicts the tenant.

Question 9

Constructive eviction

Answer 9

If the landlord breaches a duty to the tenant, such as failing to make a repair, that substantially interferes with the tenant’s use and enjoyment of the leasehold (e.g., fails to provide heat or water), then the tenant’s obligation to pay rent is excused due to constructive eviction ONLY if the tenant gives notice and adequate time to permit the landlord to fulfill his duty AND vacates the property within a reasonable amount of time.

Question 10

forged deed or forged mortgage release

Answer 10

A forged instrument, such as a deed or release from a mortgage, is void and has no effect on property rights, even if relied upon by a bona fide purchaser. Consequently, the forged release is not effective to terminate the mortgagee’s rights, even though the release was properly recorded and relied on by the buyer.

Question 11

subsequent purchaser of property who does not have notice of a burdening covenant

as buyer

as inheritor

Answer 11

The promise contained in the deed created a real covenant that runs with the land because it specifically bound the buyer’s “heirs and assignees.” As such, it applies to the buyer’s daughter as well. A subsequent purchaser of property who does not have notice of a burdening covenant is not bound by it if protected by the recording act. However, the daughter gained ownership of the lot through her father’s will, not by purchase. Consequently, the notice-type recording act that would have protected her had she been a bona fide purchaser will not protect her as a gratuitous donee.

Question 12

how much of property taxes do life tenants pay?

Answer 12

Life tenants have the obligation to pay all ordinary taxes on the land and interest on the mortgage TO THE EXTENT he receives a financial benefit from the property. When the life tenant occupies the property, his financial benefit is measured by the fair market rental value of the property. When the holder of a future interest pays the taxes because the life tenant fails to do so, the holder can bring an action against the life tenant personally to recover these payments from the life tenant, up to the value of the financial benefit the life tenant received from the property. Because the property in question is not producing income but has a reasonable rental value of $48,000 per year ($4,000 per month), the life tenant is liable to the holder of the remainder interest for the full amount of the taxes paid by the holder of the remainder interest, $10,000, as that amount does not exceed the reasonable rental value.

Question 13

“provided that,” “on condition that,” “but if”

Answer 13

A fee simple subject to an executory interest (sometimes referred to as a “fee simple subject to an executory limitation”) is a present fee simple estate that is limited in duration by specific conditional language (e.g., “provided that,” “on condition that,” “but if”) such that, upon the occurrence of the specified condition, title will automatically pass to a third party (i.e., someone other than the grantor or the holder of the present fee). The future interest held by the third party is an executory interest. Unlike the corresponding future interest in the grantor (right of entry), the executory interest automatically comes into existence; there is no need for the third party to take any action (e.g., an eviction action).

Question 14

tenancy for years

Answer 14

A tenancy for years is an estate measured by a fixed and ascertainable amount of time. Termination occurs automatically upon the expiration of the term; no notice is required. Any right to renew the agreement must be explicitly set out in the lease.

Question 15

assignment

Answer 15

An assignment is a complete transfer of the tenant’s remaining lease term.

Assignee tenants are in privity of estate with the landlord, and thus they are liable to the landlord for the rent and any other covenants in the lease that run with the lease.

constituted an assignment rather than a sublease because the transfer was for the FULL REMAINING TERM of the lease (i.e., the eight months from January through August), and the student retained no interest in the property. Consequently, the employee, as an assignee tenant, was in privity of estate with the professor-landlord

Because the professor-landlord was unable to mitigate damages by renting out the unit for the remaining three months of the lease, the employee is liable

Question 16

merger doctrine

Answer 16

Absent contrary language, an implied covenant of marketable title (i.e., a title free from defects) is part of a contract to sell real property. However, under the doctrine of merger, obligations contained in the contract of sale, including the seller’s duty to deliver marketable title, are merged into the deed and cannot thereafter be enforced through a breach of contract action. Consequently, the speculator cannot sue the original owner for a breach of the covenant to deliver marketable title.

Question 17

doctrine of equitable title

Answer 17

Under the doctrine of equitable conversion, equitable title to real property passes to the buyer upon entering the contract, even though the seller retains legal title. Most jurisdictions place the risk of loss between the contract and the closing on the buyer.

However, if the SELLER HAS CASUALTY INSURANCE on the property, the seller MUST GIVE the buyer CREDIT in the amount of insurance proceeds against the purchase price.

Question 18

race-notice

Answer 18

subsequent purchaser to take the interest WITHOUT NOTICE of a prior conflicting interest and be the FIRST TO RECORD

Question 19

shelter

Answer 19

Although grantees who acquire title to property by gift, intestacy, or devise are not protected by the recording act against prior claims, grantors who ARE protected by the recording act PROTECT (or “shelter”) THEIR GRANTEES who would otherwise be unprotected.

Question 20

“estoppel by deed” doctrine

Answer 20

Under the “estoppel by deed” doctrine, a grantor who conveys a real property interest by warranty deed before actually owning it is estopped from later denying the effectiveness of his deed.

Consequently, when the grantor does acquire ownership of the land, the after-acquired title is transferred automatically to the prior grantee.

In this case, because the widow’s son purported to transfer the residence to the couple by warranty deed prior to owning the residence, his acquisition of ownership of the residence upon the death of his mother results in the automatic transfer of his after-acquired title to the couple.

Question 21

takes title “subject to” an existing mortgage

Answer 21

If the transferee-buyer takes title “subject to” an existing mortgage obligation, then the transferee-buyer is not personally liable upon default.

Question 22

equity of redemption

Answer 22

After default on a mortgage obligation, but before a foreclosure sale, the mortgagor may regain clear title to the property under the doctrine of equity of redemption. The mortgagor must pay the amount of the loan obligation currently owed, which, if there is an acceleration clause, can be the full amount of the unpaid loan obligation, plus any accrued interest.

Question 23

A married couple bought a house to use as a residence. Their bank loan was secured by a mortgage on the house. The following year, the couple granted a second mortgage to a savings and loan association in exchange for a loan. The proceeds from this loan were used in the couple’s business. Several years later, the couple defaulted on both loans. The couple offered their interest in the house to the bank by deed in lieu of foreclosure and the bank accepted; the bank did not reserve the right to foreclose. What effect does this transaction have on the savings and loan association’s mortgage?

Answer 23

Correct Answer: The house remains subject to the savings and loan association’s mortgage.

When the bank accepted the couple’s deed in lieu of foreclosure without reserving the right to foreclose, it extinguished the bank’s mortgage on the house. However, this transaction did not affect the savings and loan association’s mortgage on the house. The bank took title to the house subject to the savings and loan association’s mortgage.

Question 24

rule of convenience

Answer 24

Absent a closing date, the rule of convenience CLOSES the class when ANY MEMBER of the class becomes entitled to immediate possession of the property.

e.g. 
class may close, but a person may still mature into receiving, such as the other child was alive when the class closed, but is merely waiting to turn 21.

The owner of a parcel of land validly devises the parcel “to my wife for life, but if she remarries, then to my son for his life; then to my son’s children who attain the age of 21.” At the time of the conveyance, the son has one child, a daughter. Subsequently, the son is killed in an automobile crash. At the time of the crash, the son also has a second daughter. A year after the son’s funeral, the owner’s wife remarries. The oldest daughter, who is now 21, contacts a lawyer about ownership of the parcel of land. Her sister is currently 18 years old. The jurisdiction follows the common law Rule Against Perpetuities, has abolished the common law rule regarding the destructibility of contingent remainders, and follows the rule of convenience with regard to class gifts. Which of the following prevents the oldest daughter from owning the entire parcel in fee simple absolute?

Correct Answer: Her sister’s interest in the parcel.

Question 25

shifting executory

Answer 25

A shifting executory interest divests the interest of the grantee by cutting short a prior estate created in the same conveyance. The estate “shifts” from one grantee to another on the happening of the condition.

Example: A conveys “to B and his heirs, but if C returns from Paris, then to C.” This conveyance creates a fee simple subject to an executory limitation in B and a shifting executory interest in C.

Question 26

Springing executory interest

Answer 26

A springing executory interest divests the interest of the grantor or fills a gap in possession in which the estate reverts to the grantor.

Example: A conveys “to B for life, and one year after B’s death to C and his heirs.” This conveyance creates a life estate in B, a one-year reversion in A (in fee simple subject to an executory limitation), and a springing executory interest in C.

Question 27

Upon her death, the owner of six acres of undeveloped land devised her property to her brother and sister as “joint tenants with the right of survivorship” with a 1/3 interest in the land allocated to the owner’s brother and a 2/3 interest in the land allocated to the owner’s sister. Neither the brother nor the sister transferred their interest in the land during their lifetime. The brother, upon his death, willed his interest in the land to a friend. The sister later died intestate. Her sole heir inherited all of her property. Who owns the undeveloped land?

Answer 27

Correct Answer: The sister’s sole heir owns a 2/3 interest and the brother’s friend owns a 1/3 interest in the land as tenants in common.

Although the owner used the term “joint tenants with the right of survivorship” in devising the undeveloped land to her brother and sister, each held their interest in the property as tenants in common with one another. They did not own equal shares of the land because the sister was devised a 2/3 interest, while the brother was devised a 1/3 interest. Thus, they did not satisfy the unity of interest requirement to holding the property as joint tenants with the right of survivorship. However, because the owner did indicate by use of the term “joint tenants with the right of survivorship” that she wanted her brother and sister to own the land jointly, they took their respective interests as tenants in common. A tenancy in common is not subject to the right of survivorship. Consequently, upon the brother’s death, his 1/3 interest in the land passed pursuant to the terms of his will to his friend. Upon the sister’s death, her 2/3 interest in the land passed in accord with the intestacy laws to her sole heir.

Question 28

differ between race or notice as victor

Answer 28

Correct Answer: No, because the daughter recorded her deed first.
Wrong Answer: No, because the buyer learned of the prior transfer before recording his deed.

• Because the jurisdiction follows a race-notice recording statute, the buyer cannot prevail if the daughter records her deed first.
• ALTHOUGH KNOWLEDGE OBTAINED “AFTER” A CONVEYANCE DOES NOT CONSTITUTE NOTICE, THE BUYER LOST THE RACE TO NOTICE.

Question 29

delivery of deed (recored for daughter, but waited to tell her. daughter died and willed to friend. who owns?)

Answer 29

friend takes.

Although it is often stated that a deed must be delivered in order for a real property interest to pass (i.e., a delivery requirement), the term “delivery” is used as shorthand for the existence of the necessary grantor intent.

Physical transfer of a deed is not required and is not conclusive evidence of the grantor’s intent. The execution and recording of a deed creates a rebuttable presumption that the deed is to be presently operative.

Question 30

common-law doctrine of exoneration of liens

Answer 30

The devisee of real property is entitled under the common-law doctrine of exoneration of liens to have any outstanding balance of a mortgage or other encumbrance on the property to be paid from the remaining assets of the testator’s estate. Note that today, most jurisdictions have abolished this doctrine and property passes subject to any encumbrance.

Question 31

Ademption

Answer 31

A devise of real property may fail (or be “adeemed”) because the testator no longer owns the property upon death (i.e., because the property was sold, destroyed, or given away before death). If the testator gives the property to the intended beneficiary while the testator is still alive, then the devise is adeemed by satisfaction. Once a devise is adeemed, the beneficiary named in the will takes nothing.

EXAM NOTE: Remember that ademption can occur only with a specific devise, such as real property, and not with a general devise, such as money.

Example: A executes a will under which Blackacre is devised to B, but then he sells Blackacre to C. When A dies, the gift is adeemed, and B takes nothing.

Seller’s death:
When the seller-decedent has devised his real property interests, the proceeds from the sale of the property under contract are treated as personal property that passes to the devisee of the seller-decedent’s personal property. The devise of the real property itself is treated as having been adeemed. In jurisdictions that have adopted an anti-ademption statute, the devisee of the seller-decedent’s real property is ENTITLED to the sale PROCEEDS.

Question 32

original mortgagor was under duress, then sold. price reflected assumption of unpaid balance.

Answer 32

If the purchase price reflects the assumption of the mortgage, the purchaser of a mortgaged property who assumes the mortgage CANNOT assert the defenses of the mortgagor-seller against the enforcement of the mortgage.

as a DONEE, one could enforce. ;-)

Question 33

covenant to buy animal feed only from farmer who sold the land. enforceable on heirs?

Answer 33

No, The covenant does not touch and concern the land.

To run with the land, a covenant must touch and concern the land, which means that the benefit or burden must affect both the promisee and the promisor as owners of the land, and not merely as individuals.

Question 34

can covenant be abandoned?

Answer 34

A covenant may be terminated in the same ways as an easement, including by abandonment. A covenant can be terminated by abandonment if the parties to the covenant act in an affirmative way that shows a clear intent to relinquish the covenant right; mere nonuse, however, or statements of intent without affirmative conduct, will not constitute abandonment.

Question 35

removing minerals from property

Answer 35

A landowner enjoys the right to subjacent support when the landowner transfers the rights to access and remove oil or minerals from the property. The transferee of such rights is STRICTLY LIABLE for any damage that occurs to EXISTING structures on the land as a consequence of subsidence caused by the removal of the oil or minerals.

However, The owner of mineral rights is not liable for damage done to structures built on the surface of the land AFTER the mineral rights were TRANSFERRED, UNLESS the owner fails to exercise reasonable care in removing the minerals.

Question 36

liens after the house in under contract

Answer 36

Upon execution of the land sales contract, the couple became the equitable owners of the house; the owner merely held legal title which he was required to convey at closing to the couple. Consequently, the creditor’s judgment lien, which was obtained after the contract was executed, was not enforceable against the house because the house no longer belonged to the owner.

Question 37

right of first refusal subject to what?

Answer 37

Rights of first refusal are subject to the Rule Against Perpetuities. For the grandmother to prevail, she must prove that the right of first refusal clause was valid. Under the Rule Against Perpetuities, specific future interests are valid only if they must vest or fail by the end of a life in being, plus 21 years. If this requirement is not met, then the clause is invalid, and the grandmother loses

Question 38

buyer wants to take as tenants in common and brings roommate to sign on brother’s behalf.

Answer 38

A deed to a nonexistent grantee is void as to the nonexistent grantee. Therefore, the purported conveyance of a one-half interest in the real property to the buyer’s brother failed, and the original owner retains this one-half interest. The conveyance of a one-half interest in the property to the buyer is unaffected. (Note: The buyer should be successful in an unjust enrichment action to recoup one-half of the purchase price from the original owner.)

Question 39

is junior lien entitled to foreclosure sale notice?

Answer 39

Because the finance company took a mortgage in the home after the bank took and recorded its mortgage in the home, the finance company’s mortgage is a junior mortgage over which the bank’s mortgage has priority. Generally, the foreclosure of a senior mortgage by a sale eliminates any junior mortgages. However, when a junior mortgagee is not given notice of the foreclosure proceedings, the junior mortgage is not eliminated.

Question 40

joint tenants

Answer 40

A joint tenancy exists when two or more persons own property with the right of survivorship (i.e., upon the death of a joint tenant, the interest terminates and automatically goes to the surviving joint tenants). Modern law calls for a clear expression of intent along with survivorship language.

Question 41

Tenancy in Common

Answer 41

A tenancy in common exists when two or more co-owners have an equal right to possess property (unity of possession) but do not have a right of survivorship.

rebuttable presumption as the default

Question 42

marketable title requirement

Answer 42

The title must be free of an unreasonable risk of litigation at the time of closing.

sometimes characterized as one that protects the purchaser of real estate from buying a lawsuit

Question 43

Uniform Vendor and Purchaser Risk Act

Answer 43

A minority of jurisdictions have adopted the Uniform Vendor and Purchaser Risk Act. Under this act, the risk of loss falls upon the owner because the buyer did not have possession of the warehouse at the time of the destruction of the warehouse.

MOST STATES following the logic of the doctrine of equitable conversion, place the risk of loss during the time between the execution of the contract and the closing on the buyer, regardless of whether the buyer takes possession of the property.

Question 44

contribution to repair access road (easement)

Answer 44

The owner of an easement has the right as well as the duty to maintain the easement for its purpose unless the parties otherwise agree. If the easement is shared, the owner who maintains or repairs the easement may seek contribution from the other owners of the easement after adequate notice and an opportunity to participate in repair decisions. The owner of the servient estate also has an obligation to contribute to the repair or maintenance of an easement if the servient estate owner uses the easement.

e.g.
A man owned a tract of land, and a woman owned an adjoining tract. A dirt road ran through the man’s property from the adjoining public highway, but the man never used it because he had direct access to the highway. Without the man’s permission and with no initial right, the woman traveled, for more than 10 years, over the dirt road from her property to the public highway, even though her property abutted another public road. Occasionally, the woman made repairs to the old road. Subsequently, the man conveyed a portion of his property to a friend. The deed specifically granted the friend the right to use the dirt road. The friend built a house fronting on the old road. Shortly thereafter, the road was severely damaged by a minor mudslide. The friend, acting on his own initiative, made substantial and necessary repairs to the road. He then asked the man and the woman to each contribute one-third of the cost of repairing the damage. When each refused, the friend brought an appropriate action to recover the one-third costs from the man and the woman. The period of time to acquire rights by prescription in the jurisdiction is seven years. Will the friend succeed in his action?

Correct Answer: No as to both defendants.

Question 45

may clause in the deed that limited the time to redeem?

Answer 45

Until property that is subject to a mortgage or a deed of trust is foreclosed upon by sale, the borrower has a right to redeem the property by satisfying the obligation for which the property serves as security.

While this right may be waived AFTER the borrower has defaulted, the terms of the mortgage or deed of trust cannot waive this right as a matter of course.

Consequently, because the clause in the deed of trust in question is invalid and the court should permit the auto mechanic to regain title to the garage by paying the loan obligation in full.

Question 46

doctrine of marshaling of assets

Answer 46

Under this doctrine, the holder of a senior security interest must first proceed against the property on which there are not any junior security interests, and then against the property on which the junior interest was more recently created, before proceeding against property on which the junior interest was more remotely created.

e.g.
A bank provided a loan to the purchaser of a parcel of undeveloped land. As security for the loan, the purchaser granted the bank a mortgage with respect to the parcel of land. Subsequently, the purchaser subdivided the land into three lots. The purchaser sold two of the three lots, each to a different buyer at a different time. Each buyer obtained a loan to finance the purchase from a different bank, neither of which was the bank that provided the original loan to the purchaser. Each buyer gave his lender a mortgage on his lot. The purchaser later defaulted on his bank loan. The bank filed an action to foreclose on all three parcels of land. The buyers of the two lots each filed an appropriate motion to protect their interests to the maximum extent possible. Which of the following best describes the likely outcome of the bank’s attempt to proceed against the three lots?

Correct Answer: The bank must proceed first against the lot retained by the purchaser and then against the lots in the inverse order in which the mortgages on them were created.

Question 47

fixtures and accensions

Answer 47

A fixture is tangible personal property (i.e., chattel) that is attached to real property in such a manner that it is treated as part of the real property when determining its ownership. (Note: By contrast, accessions are goods that are attached to other goods rather than real property, such as a radio installed in a car. Accessions are governed by Article 9 of the Uniform Commercial Code.)

Question 48

implied reciprocal servitude

Answer 48

Each of the speculator’s lots is subject to an implied reciprocal servitude. Although normally an equitable servitude must be in writing, the existence of a common scheme is evidenced by the developer’s advertising and the insertion of the character and size provision into the deeds for the other 75% of lots. In addition, although the speculator had neither actual nor record notice of the size restrictions, the speculator had inquiry notice based on the uniformity in size of each of the other lots that had been sold.

Question 49

part performance doctrine

Answer 49

a. Part performance

Under the doctrine of part performance, either party may seek specific performance when the acts of performance constitute persuasive evidence of the existence of a contract. Among the acts that may constitute such evidence are:

i) Payment of all or part of the purchase price;
ii) Possession by the purchaser; or
iii) Substantial improvement of the property by the purchaser.

Most jurisdictions require at least two of the above three acts to establish sufficient part performance.

Question 50

may one inspect for waste?

Answer 50

The holder of a future interest, such as a remainder interest, has a LICENSE to inspect the property for waste

Question 51

subject to

assume the mortgage

Answer 51

subject to = buyer not personally liable, BUT foreclosure still allowed

assume the mortgage = buyer personally liable, seller is secondarily liable