Property Rule statements

Question 1

What are the three present covenants.

Answer 1

The three present covenants are the covenant of seisin (is a promise that the grantor owns the property and has legal possession of it.), the covenant of the right to convey, and the covenant against encumbrances. The covenant against encumbrances, which applies to this situation, guarantees that the deed contains no undisclosed encumbrances. A breach of the covenant against encumbrances occurs when a property is encumbered by a mortgage, lease, easement, or covenant not specified in the deed.

Question 2

What are the three future covenants of a general warranty deed.

Answer 2

These are (1) the covenant of quiet enjoyment, (2) the covenant of warranty, and (3) the covenant of further assurances.

The covenant of quiet enjoyment guarantees that the grantee’s possession will not be interfered with by a third party’s lawful claim for title. The covenant of warranty guarantees that the grantor will defend against a third party’s lawful claim for title. The covenant for further assurances guarantees that the grantor will do whatever is necessary to perfect title should it turn out to be defective, though this covenant is not recognized in all states.

Question 3

What is the merger doctrine as it relates to contracts regarding land and a deed.

Answer 3

Under the doctrine of merger, the obligations contained in the contract of sale merge into the deed.

Example:
The contract provided that the developer would convey the home and lot to the man by warranty deed excepting all easements and covenants of record. However, the deed contained no exceptions to the six covenants. Under the doctrine of merger, the obligations contained in the contract of sale merge into the deed. Since the deed contained no exceptions, the developer is in breach of the covenant against encumbrances because the utility easements were not disclosed.

Question 4

Can you get damages for breach of warranty against encumbrances

Answer 4

A breach of the covenant against encumbrances occurs when a property is encumbered by a mortgage, lease, easement, or covenant not specified in the deed. In most states, a breach occurs even if the grantee is aware of the encumbrance. However, some states do not recognize a breach if the grantee had knowledge of the encumbrance, if it was visible, or if it benefitted the land.

In some states A buyer can recover for breach of the covenant against encumbrances the lesser of the difference in value between title with and without the defect, or the cost of removing the encumbrance (IF reasonable but removing utilities would likely not be).

In other states a buyer can not recover if he had notice, including constructive notice of the easement, if the easement was visible or if it benefited the land.

Therefore, whether the man will be able to recover damages from the developer depends on whether the jurisdiction follows the majority approach (finding a breach and awarding recovery) or minority approach (finding no breach due to constructive notice and therefore no recovery).

Question 5

Can you force someone to remove utilities on a validly granted easement after you have purchased the land.

Answer 5

An easement is in gross if it was granted to benefit a particular person (as opposed to the land). An express easement by grant arises when it is affirmatively created by the parties in a writing that satisfies the requirements for a deed. If a written easement is granted but not recorded against the servient estate, then the easement is not enforceable against a bona fide purchaser. Otherwise, the burden of an easement in gross is transferred automatically with the transfer of the servient estate.

IF it is recorded there is constructive notice and you are not a bona fide purchaser.

Question 6

A warranty of fitness or suitability is implied when?

Answer 6

In a contract for the sale of a newly constructed residence. Under this type of warranty, the seller warrants that he used adequate materials and good workmanship in working on the residence. The implied warranty generally covers latent construction defects, such as a defective electrical, plumbing, or mechanical system, or a leaky roof or drainage problem that does not manifest itself until after the sale.

Flooding basement from lack of sump pump example:

Damages are generally based on the cost of repairs to bring the residence into compliance with the warranty. In order to bring the man’s home into compliance with the warranty, the man spent $750 on a sump pump. However, the location of the sewer lines coming into the home raised the installation cost to $1,500. Finally, repair to the floors and carpeting in the basement cost an additional $2,750. Thus, the man was entitled to recover a total of $5,000 in damages from the developer.

Question 7

Present Estates

Answer 7

Fee Simple Absolute (absolute ownership)

Fee Simple Determinable: Ownership automatically terminates and goes to grantor (possibility of reverter) upon a durational condition. “long as,” “Until”

Fee Simple Subject to Condition Subsequent: When the condition occurs, the grantor can exercise a right of reentry. Uses “but if” language.

Life Estate: Ownership terminates upon the end of the measuring life

Question 8

Restraints on alienation by grantor

Answer 8

A grantor can place a reasonable restraint on the grantee’s ability to free transfer but if it is unreasonable a court will strike it down.

Question 9

Tenants in Common

Joint Tenants

Answer 9

TIC: Have unified possession of the estate so that each owns an undivided interest in the entire property; no right of survivorship and the interest is freely transferable. Most states presume that a conveyance to two or more people is a TIC and not a joint tenancy.

Joint tenancy require express language and the four unities of possession, interest, time, and title. Creates a right of survivorship. If one JT severs his interest a TIC is created. Other JT remain in joint tenancy if there are more than 2 and one severs.

A, B, C, are JT and A sells his portion to D. B then dies. C owns 2/3 and D owns 1/3 and the two are tenants in common.

Question 10

Mortgage as a severance during joint tenancy

Answer 10

In most states a joint tenant granting a mortgage creates a lien in the property and does not sever the JT.

A minority of states considers a mortgage a transfer of title that does sever the JT.

Question 11

Rights and Obligations of Co-Tenants
Possession

Answer 11

Possession: Each cotenant has the right to possess the entire property.

If a cotenant is ousted he can bring court action to regain entry.

Adverse possession: If one cotenant has ousted the other he can make an AP claim if they other doesn’t bring a court action.

Question 12

Cotenants rights regarding rent, operating expenses, and repairs

Answer 12

Rent: Cotenants do not owe rent for their use of the property but must share rent.

A cotenant can generally collect expenses if he paid more than his share (mortgage, taxes)

A co-tenant does not have a right to be reimbursed for repairs, even if necessary. But may seek contribution during a partition or accounting for necessary repairs. A co-tenant may, in some jurisdictions, maintain a separate action for contribution if the other co-tenants were notified of the need for the repair.

Question 13

Landlord and Tenant Lease Types

Answer 13

Tenancy in years: express agreement for a fixed amount of time

Periodic Tenancy: repetitive, ongoing estate set by periods that renew automatically (month to month)

Tenancy at will: Expressly agreed to but for no fixed amount of time, either party can terminate at any time

Tenancy at sufferance: When a tenant wrongfully holds over past the expiration of the lease, this lasts until eviction or L agrees to convert to a periodic tenancy

Question 14

Tenant’s duties

Answer 14

Pay rent, avoid waste, and make reasonable repairs.

Avoid waste: Tenant can not damage the property and must repair if he does.

Question 15

When can tenant withhold rent and what happens if tenant doesn’t pay rent when he should

Answer 15

T can withhold rent if L breaches the covenant of quiet enjoyment OR
If L violates the implied warrant of habitability (residential only), T can terminate lease and stop paying or deduct from rent that is owed.

If T fails to pay and surrenders the property by transferring it back to L, T is no longer obligated to pay rent if L accepts the surrender.

L can treat and abandonment as an offer of surrender.

Question 16

Landlord’s duty to repair

Answer 16

Landlord must make repairs in a residential lease, unless tenant caused the damage.
A residential lease provision that places the burden of repair on the tenant is generally void, but the tenant may be required to notify the landlord of the need for such repairs.

Implied Warranty of Habitability: Applies only to residential leases; L must maintain the property so that it is suited for residence.
If T gives notice and time to repairs but L does not, then T may: Stay in property and deduct rent, pay for repairs and deduct rent, or terminate lease and move out.

Question 17

Covenant of quiet enjoyment

Answer 17

Applies to residential and commercial leases. L cannot disrupt T’s possession.

Constructive eviction: 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 18

Assignment vs sublease

Answer 18

An assignment is a transfer of T’s entire remaining lease to a new party. A sublease transfers only a portion (less than remainder of lease).

Original T is liable to landlord under privity of contract

Assignee is liable to L under privity of estate; subtenant is not liable to L b/c no privity of estate or contract

Prohibition clauses: These are allowed by L but if he only prohibits one then the other is allowed (prohibits assignment then T can still sublease). L may waive a prohibition if he accepts rent from a new tenant. If T violates then L can terminate the lease.

Some prohibition clauses allow assignment or sublease with L’s consent. L can only withhold consent for a commercially reasonable ground.

Question 19

L’s duty to mitigate

Answer 19

L had duty to make reasonable effort to re-rent the property even if T improperly breaches the lease.

If T moves out and L has multiple units then L is not obligated to prioritize T’s vacant unit.

Question 20

Adverse Possession elements

Answer 20

Continuous: Possession must be continuous and interrupted through the statutory period.
Tacking: allows subsequent possessors to “tack on prior possession period. Requires privity.

Hostile: Must be without owner’s permission

Actual: AP must have actual possession of the land.

Open and notorious: must make use of land as reasonable owner would.

Exclusive: must not share land with true owner

b. Disability of an owner

The statute of limitations will not run against a true owner who is afflicted with a disability (e.g., insanity, infancy, imprisonment) at the inception of the adverse possession.

Question 21

Valid Deed Requirments

Answer 21

Must identify the land, the parties, be signed by the grantor, and include words of transfer.

Grantor must intend to make a present transfer of the property interest to the grantee.

Question 22

Deed transfer to grantee vs third party vs testamentary tranfser

Answer 22

A transfer to a grantee creates a presumption of an intent to transfer.

If given to a third party for delivery to the grantee the deed is not delivered if the grantor reserves the right to take it back if this right is not reserved then the transfer is valid if there is a present intent to transfer (grantor cannot then later void the gift), if the grantor did not intend to transfer it presently then the transfer is not valid.

Testamentary transfer
IF given to a third party the facts must support an intent to make a present transfer. If the deed is intended to transfer ONLY upon the death of the grantor then there is no present intent to transfer and it is a testamentary transfer governed by wills requirements

Question 23

Generally Warranty deed vs quitclaim

Answer 23

General warranty deed has six covenants quitclaim contains none and the grantee receives whatever interest the grantor possessed.

Question 24

Warranty for new homes

Answer 24

Implied warranty of fitness or suitability

Seller warrants he used adequate materials and workmanship and covers hidden (latent) defects and obvious (patent) defects.

Buyer has duty to reasonably inspect and may sue for breach against the builder, developer, contractors within a reasonable time of discovery of the defect.

Question 25

Recording Acts

Answer 25

A valid deed does not need to be recorded to convey good title; common law rule is first in time first in right; modern recording statutes establish who has priority over land when there are conflicting claims

Question 26

Race Statute vs Notice statute vs Race-Notice

Answer 26

Notice Statute—If a person purchases land without notice of a prior interest, the person will prevail in an ownership dispute against the prior interest Race —The first person to record their deed will prevail in an ownership dispute, regardless of knowledge. Race-Notice Jurisdiction—If a person purchases land without notice of the prior interest, and records first, the person will prevail in an ownership dispute against the prior interest. *Recording acts apply to all property interests, including easements, covenants, leases, mortgages, etc.

Question 27

Bona Fide Purchaser

Answer 27

A bona fide purchaser is someone who pays value for the property and takes it without notice of prior claims; protected by notice and race-notice statutes. A BFP must pay value; doesn't include those who take by gift.

Question 28

Shelter Rule and Adverse Possession regarding BFP

Answer 28

A BFP who is protected will shelter their grantee from prior claims who would otherwise be unprotected; applies when a subsequent grantee cannot qualify as a BFP in their own right. Recording acts do not protect BFPs from adverse possession

Question 29

Notice of property interest

Answer 29

Actual: you have actual knowledge Inquiry: Reasonable investigation would have disclosed prior claims Constructive: Grantees are on notice of all prior interests that were properly recorded. Wild Deeds: A deed recorded outside the grantor's chain of title; will not provide constructive notice to a grantee

Question 30

Easement

Answer 30

The right to use another's property for a limited purpose; the servient estate is burdened by the easement; the dominate estate is benefitted by the easement Appurtenant: attached to the land In gross: specific to that property

Question 31

Types of easement

Answer 31

Express easement: Created by parties in a writing that complies with the statute of frauds Easement by necessity: created when the dominant property is useless without the benefit of an easement across the neighboring servient property. In addition, for an easement by necessity to be created, both the dominant and servient estates must have been under common ownership in the past. Also, the necessity must have arisen at the time that the property was severed, and the two estates were created. Easement by implication: If the owner of two parcels of land previously used one parcel to benefit the other, then the court may find that, upon the transfer of one parcel, the parties intended the use to continue if that use was continuous, apparent or known, and reasonably necessary to the dominant land’s use and enjoyment (as distinguished from an easement by necessity, which requires strict necessity). Because an owner cannot have an easement on his own land, the prior use is considered a “quasi-easement.” Easement by prescription: An easement by prescription requires that the use is continuous, actual, open, and hostile for a specific period (e.g., 10 (many states), 15, or 20 years). Regarding the hostile requirement, the majority of jurisdictions rebuttably presume that a use that meets the other requirement is non-permissive. Doesn't need to be exclusively used.

Question 32

Ways to ends an easement

Answer 32

Abandonment: Need more than mere non-use. Must show a clear intent to relinquish the easement by affirmative actions. Merger: An easement is terminated if the owner of the dominant or servient estate acquires fee title to the other estate; the easement is said to “merge” into the title. The easement is not automatically revived on the separation of the property into the previous dominant and servient estates. Sale to BFP: If an express easement is granted but not recorded, then, depending on the applicable recording act, the easement may not be enforceable against a subsequent purchaser of the servient estate. The easement itself is not terminated, but rather cannot be enforced against the purchaser.

Question 33

Covenants

Answer 33

Involve a promise to do or not do something in relation to land; land can be either benefitted or burdened; covenants can exist between landowners and also between landlords and tenants

Question 34

Requirements for covenant to run with the land and damages

Answer 34

For the benefit of real covenant to run there must be a writing complying with statute of frauds, intent for it to run, touch and concern, and vertical privity. For the burden to run must have WITHVN Touch and concern: must affect both pieces of land in some way. Horizontal privity: for the burden to run the original parties must have shared some interest other than the promise, such as grantor-grantee Vertical Privity: Relationship between grantor and successor party. For burden the entire interest must be granted. Damages for violating a covenant are monetary

Question 35

Equitable Servitudes

Answer 35

Damages are an injunction For burden to run need; WITN For benefit: WIT

Question 36

Mortgages and Deeds of Trust

Answer 36

Mortgage: Document that conveys property interest in real property as security for an obligation Deed of Trust: A writing grants an interest in property as security for an obligation, but the deed goes to a third party trustee; allows the mortgagee to buy the property during foreclosure PMM: The borrower uses the loan in order to purchase the mortgaged property. Has priority during foreclosure and beats prior liens even if not recorded. A seller's PMM has priority over a lender's.

Question 37

Transfer of mortgaged property

Answer 37

The original mortgagor remains liable even after selling the property. The buyer is liable if they "assume the mortgage" If a deed is silent or ambiguous as to the transferee-buyer’s liability, then the transferee-buyer is considered to have taken the property subject to the mortgage obligation. However, a minority of jurisdictions imply an assumption of the mortgage when the transferee-buyer pays the seller the difference between what the house was worth and the outstanding balance on the mortgage obligation.

Question 38

Future Advance Mortgage

Answer 38

Arises when a borrower grants an interest in their property for a line of credit. If the advance is obligatory then it will have priority over a subsequent mortgage. If it is optional it will only have priority if made before notice of other mortgage. May be considered optional if given on condition of progress made during something such as a renovation.