Property Midterm Flashcards
Landlord Conveys Present Possessory Interest
Tenant has the right to possess, use, exclude and enjoy the property
Landlord retains a future possessory interest at the termination of the leasehold
if landlord retains future interest = “reversion”
If landlord transfers future interest to a 3rd party = “remainder”
Term of years
Common law
Rule: Term must be a fixed period
The was no limit on the number of years permitted
Term of years
Some American Statutes
Statues limit the duration of terms of years
- Don’t have know when the lease begins
Term with beginning and end (even if exact date is known at time of lease singing)
Term of years
Right to terminate?
Common Law
Because it states when it will terminate, no notice of termination is necessary to bring the estate to an end.
Lease terminates on its own terms with the passage of time
-Can be terminable earlier upon the happening of some event or condition.
Lease could provide Tenant or Landlord with the right to terminate during the least term upon _ days
Notice: There are often other conditions
Periodic Tenancy
Common Law
Leasehold for a period of time that continues for succeeding periods until landlord or tenant gives notice of terminationwith required period of time
Notice: equal to the period, but in now vent greater than six months; if proper termiantion notice is not given, the period is automatically extended
Tenancy at Will
Leasehold without a fixed duration; almost never written and lasts only as long so long as both landlord and tenant wish for it to continue
Notice: Under common law, no advance notice was required
Automatically terminates if (1) tenant dies; (2) landlord sells the property; or (3) tenant assigns the lease to a 3rd party
Holdover Tenancy (Tenancy by Sufferance):
Phrase used to describe a party who was in lawful possession under a lease, but remains after lease terminates; possession becomes unlawful
Not really a tenancy or lease at all; holdover tenant has no real property interest
NY RPL 232-c: If LL accepts rent from holdover tenant, month-to-month tenancy is implied
Legal Possession
Landlord has a duty to deliver the legal right of possession to the tenant. If the landlord leases the same property for the same term to two different tenants, the tenant who signed the first lease will have a superior right of possession as compared to the tenant who signed the second lease (first in time is first in right)
Actual Possession
Hannan v. Dusch
Absent an express covenant, does a landlord have a legal duty to deliver [actual] possession to a new tenant, where a former tenant wrongfully holds over and illegally refuses to surrender possession to the new tenant?)
NOTE: The relevant date in Hannan is the commencement date of the lease (the date specified in the lease on which the new tenant is to take actual possession)
US/American Rule: (Delivery of possession) Common Law
Duty to deliver legal possession only; no implied duty to deliver actual possession
UK/English Rule (delivery of Possession) Common law
Implied duty to deliver both legal and actual possession
The English rule is that in the absence of stipulations to the contrary, there is in every lease an implied covenant on the part of the landlord that the premises shall be open to entry by the tenant at the time fixed by the lease for the beginning of his term
Both the UK/English Rule and US/American Rule imply
a covenant to deliver legal right of possession at the beginning of the term (“there shall be no legal obstacle to the tenants right of possession”)
NY RPL 223-a:
: In the absence of an express provision to the contrary, there shall be implied in every lease of real property a condition that the lessor will deliver possession at the beginning of the term. In the event of breach of such implied conditions the lessee shall have the right to rescind the lease and recover the consideration paid. Such right shall not be deemed inconsistent with any right of action he may have to recover damages.
Similar to the UK/English Rule but note the provision of specific remedies (right to rescind and recover consideration paid)!
Privity of Contract:
legal relationship between the parties to a contract
Privity of Estate:
The legal relationship between the holder of the right of possession (tenant) and the holder of the reversionary interest (the landlord)
Real covenants are binding on parties if
there is privity of estate (even if there’s no privity of contract)
Note: If landlord sues tenant the cause of action is still breach of contract (NOT breach of privity of estate)
Assignment definition
a conveyance (transfer) of a leasehold interest
Elements of Assignment
Tenant cannot assign more than what they have by virtue of the lease
Assignment is a conveyance (original tenant conveys/transfers the right of possession), not a contract
Assignments convey all the original tenant’s rights (not less than all; compare to subleases)
Assignment only has to be signed by assignor (A hereby sells, assigns, conveys, transfers, sets over and delivers) unless the assignee assumes and agrees to perform all the terms, covenants and conditions of the clause required to be performed by the tenant under the lease
Assignments and assumptions shall be binding upon and inure to the benefit of the parties and their respective successors and assignees
Sublease definition
a conveyance (transfer) of a portion (less than all) of a leasehold interest
Elements of Sublease
Assumption creates privity of contract; release severs privity of contract
No implied releases; no implied assumptions
Only the landlord can release a tenant from their obligations under the lease
Ernst v. Condit Traditional/Formal Rule
Was the instrument a transfer of ALL tenant’s interest?
If T1 transferred all his interest (no reversion) it is an assignment
If T1 transferred less than all his interest, it is a sublease
Ernst v. Condit
Modern Rule
Was the intention of the parties sublease or assign?
“Ascertain the intent of the parties” using the cannons of construction/contract principles
Use of the word “sublet” is not dispositive of the issue
Note: Subleases do not create privity of estate between a LL and T2 and afford the LL no right to sue T2 for breach
Rowe v. A&P
Property View
Courts generally disfavor restraints on alienation as contrary to the best interest of society to utilize land freely
Rowe v. A&P
Common Law
Where a lease is silent, the general rule is that a tenant is free to transfer/sublease/assign. In limited circumstances, the court may find an implied prohibition, but only if LL would be deprived of the benefit of his bargain based on the special skills of the tenant (Rowe/Nassau Hotel):
Rowe v A&P
Common Law
Special Skill factors
Did the tenant possess a special skill or ability which would have material impact on LL’s expectations?
Would a reasonable person enter into the contract without assurance that tenant could not be replaced?
Is it a regular lease with minimum monthly base rent?
Kendall v. Ernest Pestana, Inc. Traditional/Property Law Approach
LL may refuse consent even if arbitrary or unreasonable
Kendall v. Ernest Pestana, Inc.
If lease explicitly requires consent, but doesn’t set standard for denial of consent, can LL unreasonably withhold consent?)
Kendall v. Ernest Pestana, Inc. Modern/Contract Approach:
If lease is silent as to the standard for consent, LL must be commercially reasonable
Restatement: LL cannot unreasonably withhold consent, unless a freely negotiated provision gives LL such right
Dumpor’s Rule
If a landlord consents to any assignment, it has impliedly consented to all subsequent assignments
Parties can negate the implied rule with an express statement in the lease
NY RPL 226-b (Mandatory Rule):
Unless a greater right is conferred by lease, T cannot assign without written consent (RESIDENTIAL ONLY)
If LL is reasonable, T is not released, and T can’t assign
If LL unreasonable, T is released from lease, but no assignment
When dwelling has 4 or more units, LL may not unreasonably withhold consent
Note that NY RPL 226-b is a mandatory minimum. LL may confer greater rights in the lease, but cannot provide tenant with less
Surety
One who has become legally liable for the debt, default or failure in duty of another
Suretyship elements
When a secondary obligor is bound to pay for the debt or answer for the default of the principal/primary obligor to the obligee (creditor), the secondary obligor is said to have surety status
Rooted in equity, the purpose of the subrogation doctrine is to afford a person who pays a debt that is owed primarily by someone else who “ought to” pay every opportunity to be reimbursed in full
Berg v. Wiley
Is self-help an available remedy to a landlord who believes the tenant has violated the lease?
LL Right to Self-Help Common Law Rule
:1) LL must be legally entitled to possession
(a) holdover tenant; or
(b) breach of lease AND lease contains a re-entry clause; and
(2) re-entry must be peaceable. T may recover damages for wrongful eviction if either
(i) LL not entitled to possession; or
(ii) not peaceable
Note: Even under the common law rule, under the facts in Berg v. Wiley, where tenant was not present when LL changed the locks, reentry was not peaceable. Broadly speaking, self-help is never available
LL Right to Self-Help Modern Rule
Self-help is wrong as a matter of law, and the only lawful means to dispossess a tenant who has not abandoned nor voluntarily surrendered but who claims possession adversely to a landlord’s claim of breach of a written lease is by resort to judicial process (summary dispossession)
Sommer v. Kridel (Residential Lease)
Holy Properties v. Kenneth Cole (Commercial Lease)
(If tenant abandons possession, does LL have a duty to mitigate?)
Duty to Mitigate Traditional Rule
A landlord does not have a duty to mitigate its damages after a tenant’s abandonment of the premises and subsequent eviction. Once a lease is executed, the tenant’s obligation to pay rent is fixed according to the lease’s terms. A landlord has no obligation to the tenant to minimize damages by finding, or even attempting to find, a replacement tenant for abandoned premises. (Holy Properties)
Duty to Mitigate
Modern/Contract Rule:
A landlord has a duty to mitigate damages by making a reasonable effort to re-let the premises when seeking to recover rent from a defaulting tenant. Such a duty is consistent with basic justice and fairness. (Kridel)
Duty To Mitigate
NY RPL 227-e (MANDATORY RULE)
imposes a duty to mitigate for residential leases only
Breach of Covenant of Quiet Enjoyment
Implied in every lease is a covenant that the tenant shall have use of the property. This Covenant of Quiet Enjoyment is breached where:
A Third Party with paramount title, claiming by or through under the landlord, ousts T
The LL wrongfully evicts and/or forces T off premise (e.g., self-help; Berg v. Wiley)
Actual Eviction
Tenant is in possession;
and
Is thereafter dispossessed;
By LL, or third party claiming by, through or under LL with superior title
Constructive Eviction
When LL actions or omissions render premises substantially unsuitable for purpose for which they are leased or which seriously interferes with beneficial enjoyment it is a breach of the covenant of quiet enjoyment and constitutes constructive eviction
Reste Realty Corp v. Cooper
May a tenant avoid payment of rent by claiming constructive eviction and vacating the premises?
Quiet Enjoyment and Constructive eviction
Any wrongful act or omission by LL, third party claiming by, through or under LL with superior title; OR another third party with superior legal title which renders premises
Either:
Substantially unsuitable for the purpose for which they are leased; OR
Seriously interferes with beneficial enjoyment of the premises; AND
Tenant thereafter abandons
Hilder v. St Peter
Should the court adopt an implied covenant of habitability? If yes, is a tenant entitled to a return of rents paid for prevailing on a claim for breach of implied covenant of habitability?)
Implied Warranty of Habitability (residential leases only)
Implied warranty requiring that rental premises be offered and maintained in a physical condition that provides safe, decent, and habitable housing for tenants (safe, clean, and fit for human habitation)
Notes:
(1) Tenant cannot have knowledge of defect and assume risk;
(2) Defect must be substantial violation housing code;
(3) Claimed defect must have impact safety or health;
(4) Tenant must inform LL and allow reasonable time to cure;
(5) Tenant can withhold rent (abandonment not required)
NY RPL 235-b:
All residential leases contain an implied warranty that the leased premises and all areas used in connection therewith are “fit for human habitation and for the uses reasonably intended by the parties”
Statute of Frauds
A contract for the sale of any real property or an interest therein is void unless the contract is in writing subscribed by the party to be charged
Statue of Frauds minimum
(1) be signed by the party to be bound,
(2) describe the real estate, (3) and state the price.
Hickey v. Green
May an oral contract for the sale of land be specifically enforced if the party seeking enforcement detrimentally relied on the agreement?)
Specific performance of an otherwise invalid contract is available
(1) if the party seeking enforcement changed positions based on a reasonable belief that the agreement was valid, and
(2) injustice would result if she were not granted equitable relief
NY GOL 703
An estate or interest in real property, other than a lease for 1 year or less…cannot be created or assigned…unless by operation of law or by a deed or conveyance in writing subscribed by the person creating or assigning the same
Marketable Title
Def
In general, title free from chain of title defects and encumbrances.
Record Title
Who owns the property as a matter of public record (the last recorded title)? (Record title is not dispositive of ownership
Insurance Title:
Insurance company willing to issue a policy insuring the property
Marketable Title
the law assures a buyer a title free from reasonable doubt, but not every doubt…” Title “free of encumbrances and free of any right or interest in a 3rd person which is incompatible with full enjoyment and ownership of the property”
Chain of Title Defects
Fraud & Forgery; Mistakes (incorrect legal description; incorrect notarization); Duress, Minors, Incapacity; Authority of a corporation or trustee (ultra vires)
Encumbrances:
Any right, title, or interest of a 3rd party with respect to a debt (mortgage liens), use (easements and covenants), and/or possession (a lease) affecting the property, and not specifically excluded in the contract of sale or deed
Monetary liens (tax liens, judgment liens, mechanics liens, mortgage liens)
Possession (leases, tenants in common, other co-tenancies)
Use (restrictive covenants, easements)
Encroachments (if B’s garage encroaches on A’s land, A’s land might be unmarketable)
Marketable title default rule
If a contract is silent as to delivery of marketable title, there is an implied covenant to deliver marketable title at closing
Without modifications of the default rule, all encumbrances (recorded and unrecorded), all liens, easements, restrictive covenants, leases, encroachments (unrecorded) and chain of title defects would render title unmarketable
Lohmeyer v. Bower
Do zoning ordinance violations render a property’s title unmerchantable?)
In the absence of a contract provision, the violation of the zoning ordinances and violation of restrictive covenants encumber title and expose the buyer to the hazard of litigation, making title doubtful and unmarketable
Seller covenants to deliver marketable title (Default; BUYER FRIENDLY)
Seller covenants to deliver marketable title, subject to all encumbrances of record
Seller covenants to deliver marketable title, subject to all encumbrances
Seller covenants to deliver marketable title, subject to all encumbrances, even if violated (SELLER FRIENDLY)
Note: Never argue breach of marketable title after the closing; claims after closing are brought under deed warranties!
Common Law Doctrine of Equitable Conversion:
After contract of sale is signed (executory period), equity considers the buyer to be the person with a real property interest in the property. The seller has a personal property interest in the proceeds of sale (right to funds/payment)
Equitable conversion addresses risk of loss and characterization issues
Common Law Doctrine of Merger
When the buyer accepts deed at closing, the buyer is deemed to be satisfied that the seller has complied with all his contractual obligations. The contract promises “merge” into the deed and the deed becomes final act of parties expressing the terms of their agreement. The deed may contain covenants or not.
Minimum Deed Requirements:
To effectuate a transfer of real property there must be a writing signed by the parties, delivery of the writing, and acceptance
Whether there is an enforceable promise depends on what kind of deed was delivered
Notes on Deeds & Recordation:
Acknowledgement is not required to make deed effective between seller and buyer. But, acknowledgement is required to record;
Recordation of deed is not required to make deed effective between seller and buyer;
Recordation is strongly recommended as the grantee will benefit from the protections of the recording statutes vis a vis other third parties (more on this later!)
General Warranty Deed (GWD)
[Deed with Full Covenants; Full Warranty Deed]
Includes the present covenants of seisin and no encumbrances, and the future covenant of quiet enjoyment
Special Warranty Deed (SWD)
[Bargain and Sale with Covenant Against Grantor’s Acts]
Grantor Covenants that:
Grantor has not done or suffered anything whereby the Premises have been encumbered in any whatsoever except as follows…
This warranty/covenant only applies to the acts of the grantor or allowed by the grantor
Even if involuntary or grantor has no knowledge (i.e., tax liens; party in possession)
Does not cover acts of predecessors
Quitclaim Deed (QCD)
Grantor does hereby release and quitclaim unto Grantee
Grantor makes no warranties or promises
Deed is an instrument of conveyance only (“I hereby grant”)
PRESENT COVENANTS Definition
These covenants speak to the moment in time that the seller is delivering the deed to the seller (closing)
Covenant of Seisin (Covenant of Right to Convey Title)
(present covenant)
Seller owns and possesses land in quality/quantity as stated
Seller in possession or has right to possession
Covenant of No Encumbrances (present covenant)
The land is free from encumbrances, except…
Marketable title is a condition precedent to closing; after closing, all promises are deemed performed and the contract of sale is merged into the deed. If buyer discovers a chain of title defect after closing, they must sue under breaches of the deed covenants
Notes on Present Covenants:
If a present covenant is breached, it must be breached at closing
If a present covenant isn’t breached at closing, then it will never be breached
Therefore, the clock for statute of limitations purposes begins when the deed is delivered (i.e., when the promise is made)
FUTURE COVENANTS
Definition
If breached, future covenants are always breached in the future (not at closing)
Covenant of Quiet Enjoyment
(future covenant)
Grantee will not be disturbed in possession and enjoyment of property by another asserting superior title
Requires dispossession (similar to Covenant of Quiet Enjoyment in LL/T Law)
Grantee must first be in possession to be dispossessed
Notes on Future Covenants:
Covenant of Quiet Enjoyment is a Real Covenant (similar to LL/T Law)
Covenant runs with the land (i.e., the covenant benefits “remote grantees”)
Brown v. Lober (Does a conveyor’s failure to disclose the existence of paramount title amount to a constructive eviction?)
Mere existence of paramount title does not constitute a breach of this deed covenant
Rockafellor
Traditional Common Law Rule:
A remote grantee does not benefit from a present covenant made by a remote grantor. Since present covenants, if breached, are breached at closing, upon the remote grantor’s delivery of the deed, the immediate grantee of the remote grantor holds only a chose in action. Under common law, a chose in action was not assignable to a 3rd party
Rockafellor Modern Common Law Rule/Rockafellor Rule
Present covenants run with the land. The moment the deed is delivered, it ripens into a cause of action which is impliedly assigned to a remote grantee
Recording Statutes Common Law Rule
First in Time is First in Right
If O conveys to A and then O conveys the same property to B, both conveyances are valid
At common law, A is first in time and therefore has a superior right to the property
Note: the “loser” might have a potential claim against O under a deed covenant and can seek relief from courts of equity
NY RPL 290. Definition of Conveyance
The term conveyance includes every written instrument by which any estate or interest in real property is created, transferred, mortgaged, or assigned, or by which the title to any real property may be affected; except a will, a lease for a term not exceeding three years, an executory contract for the sale or purchase of lands
Race Statutes
In a race jurisdiction, the first to record wins
The relevant moment is that of the first recordation
Notice Statutes
In a notice jurisdiction, subsequent purchasers for a valuable consideration and without notice of the prior conveyance prevail, unless the prior conveyance was recorded (that would impart record/constructive notice)
A prior conveyance is void against a subsequent, bone fide purchaser without notice unless the prior conveyance was recorded
The relevant moment is the subsequent conveyance (everything afterwards is in the “box of ignorance”)
Race-Notice
In a race-notice jurisdiction, a prior conveyance not recorded is void against a subsequent purchaser in good faith and for a valuable consideration from the same vendor, and whose conveyance is first recorded.
Notice can be Actual Notice or Constructive Notice (Record & Inquiry)
BFP is a purchaser who pays value/consideration (not gifts/donees) and a good guy (innocent, in good faith; without notice)
Shelter Rule:
In a notice jurisdiction ONLY, a party that would otherwise not be entitled to the benefit of a recording statute because of the recordation of a prior conveyance, is sheltered from such record notice, and may avail himself of the same benefit their predecessor grantor enjoyed
Note: There is no reverse shelter rule; there is no imputed actual notice
Exceptions: Not all recorded deeds constitute constructive notice
Luthi v. Evans (Does a recorded deed containing a Mother Hubbard clause constitute notice?)
Mother Hubbard deeds are effective to convey
However, unless there is actual notice, Mother
Hubbard deeds are not valid against bona fide purchasers, as they do not give constructive notice, even if Mother Hubbard deed is recorded
There is only constructive notice if description is recorded
Board of Ed. v. Hughes (Does delivery of a blank deed, with the understanding that the name of the grantee is to be written in, constitute valid delivery of title? May a subsequent purchaser of property who records his deed first take valid title where the previous recipient fails to record the title?)
Wild deeds are not effective to give record notice
All deeds in the chain of title must be recorded
With grantor/grantee index, grantee would search from the “common grantor”; only applies in jurisdictions using a grantor/grantee index
Recording Statutes and Mortgages
Mortgages are treated the same as conveyances
If the mortgage is properly recorded (and not subject to a recording statute) then a subsequent purchaser buys a property subject to the existing mortgage
If the mortgage is not recorded, a subsequent purchaser owns the property free and clear of the mortgage
Recording Statutes and Leases
If a lease is recorded or T is in possession, a buyer owns a property subject to lease (first in time, first in right) and cannot use the recording statute to void the lease; sale does not sever the privity of contract or estate
Leases under 3 years cannot be recorded, but if T is in possession, such possession imparts inquiry notice
Real covenants run with the land; buyer is obligated to perform covenants in original lease
