property rules Flashcards
fee simple absolute
absolute ownership of potentially infinite duration.
“To A” or “To A and his heirs”
can be sold, divided, devised, inherited.
fee tail
“to A and the heirs of his body.”
common law: would pass to lineal blood descendants only, owner had a reversion.
today: creates a fee simple absolute, goes to heirs upon death if intestacy or however T devises.
What is a defeasible fee?
Defeasible fees are fee simple estates of potentially infinite duration that can be terminated by the happening of a specified event.
- fee simple determinable
- fee simple subject to condition subsequent
- fee simple subject to executory limitation
fee simple determinable rule, language creating it, and future interest tied to it
a fee simple estate that terminates upon the happening of a stated event and automatically reverts to grantor.
language: “for so long as”, “until”, “while”, “during”
ex: “To A for so long as the premises are used as an animal shelter”
future interest= possibility of reverter.
fee simple subject to condition subsequent
rule, language to create, future interest
an estate in which the grantor reserves the right to terminate upon the happening of a stated event.
“To A, but if coffee is ever consumed on the premises, grantor reserves the right to take.”
language: provided that, on condition that, but if
future interest: right of entry.
does not automatically revert, O must do something to take property back.
fee simple subject to executory limitation
rule, language to create, future interest
estate that, upon the happening of a stated event, is automatically divested in favor of a third party.
i.e., even if it says but if __ to B, B does not have to take action like a grantor would- it automatically goes to B.
ex: “to A, but if jazz is played, to B.”
future interest is a shifting executory interest- executory interest that divests a transferee’s freehold estate.
restraints on alienation- types and which are permissible
- absolute restraints are void- ex: to A, as long as she doesn’t try to sell.
- partial restraint- restraint linked to a reasonable, time limited purpose
Promissory restraints (a covenants not to sell) are ok if reasonable and partial
Disabling and forfeiture restraints are prohibited. Disabling voids transfer and forfeiture means the grantee will lose title if they try to sell (as shown above)
life estate- rule and accompanying future interest
estate that is measured by the life or lives of one or more people
“To A for life.”
Future interest: reversion in O, or remainder in 3rd party.
life estate pur autre vie- rule and accompanying future interest
“To A for the life of B”
or if a life tenant conveys his/her interest to another person, the transferee’s estate is measured by the life of the original life tenant
future interest- reversion
life tenants and duty not to commit waste
life tenant cannot do anything to injure the interests of a remainderman or reversioner.
life tenant rights
life tenant is entitled to ordinary uses and profits of the land
affirmative waste- natural resources
life tenant must not consume or exploit (PURGE) natural resources unless:
- PRIOR USE i.e. impliedly able to exploit (for mines- if mining on land prior to life estate, at common law the life tenant could mine open mines but only those open. now trend is to allow mining if it was happening prior to the grant.)
- necessary to REPAIR or maintain the land
- GRANTED the right impliedly or expressly by grantor (implied might be by prior
- land is suitable only for such EXPLOITATION
permissive waste
tenant fails to meet his obligations:
- preserve land and structures
- pay interest on mortgage
- pay ordinary taxes
only obligated up to the income from the land.
duty limited to reasonable rental value if none.
ameloriative waste- common law rule vs modern rule
common law: tenant must not engage in acts to enhance property’s value unless all future interest holders are known and consent
modernly- can destroy or alter buildings if market value of future interests diminished and
- remainderman don’t object, or
- substantial and permanent change in neighborhood conditions deprived property in its current form of reas. productivity or usefulness
reversion
future interest arising in a grantor that conveys less than he/she owns. (but not FSSCS or FSD b/c those have right of entry and poss of reverter)
future interests in people other than grantor
vested remainder
contingent remainder
executory interest
remainder
future interest created in grantee that is capable of becoming possessory upon the expiration of a prior possessory estate expressly created in the same conveyance
remainders only follow life estates
vested remainder subject to open
vested remainder created in a class of persons certain to become possessory but subject to diminution (others born later who also share)
ex: to A for life, then to B’s kids. B has 2 kids- C and D. (have to be identifiable people)
indefeasibly vested remainder
created in an existing and ascertained person
not subject to condition precedent.
Not subject to total divestment by condition subsequent
Not subject to partial divestment by others joining the class
has a right to immediate possession when the prior estate ends.
“to A for life, then to B”
(no strings attached)
In a will “to my children” bc will is effective at death and kids at death are ascertained
vested remainder subject to divestment
vested remainder subject to condition subsequent (i.e. it has a string attached)
“to A for life, remainder to B, provided, however, that if B dies before he reaches 25, to C.”
*look for commas following the remainder
contingent remainder
remainder created in unborn or unascertained persons or subject to condition precedent (condition that has to be satisfied before remainderman has a right)
*look for commas before the remainder to identify condition precedent
ex: to A, then if B goes to law school to B
or to A, then to A’s son (and A doesn’t have kids yet)
rule of destructibility of condition remainders
at common law, a contingent remainder was destroyed if it did not vest before or upon the termination of the preceding estate
“To A for life, then to B if he has reached 21”
if B has not reached 21 when A dies (and the life estate ends), B’s remainder would be destroyed at common law.
now, a springing executory interest is created if the contingent remainder hasn’t vested yet.
“To A for life, then, on A’s death, to A’s heirs” what interest does A have?
common law and now
common law- Rule in Shelley’s case. present and future interests merge to give A a fee simple.
today- A has a life estate, O has a reversion (A could have no heirs) and A’s heirs have a contingent remainder (since they are unascertained)
doctrine of worthier title
If the grantor creates a remainder in his heirs, it is invalid and will become a reversion in the grantor
ex: To A for life, then to my heirs.
(DOWT- it is just “to A for life” with O’s reversion)
DOWT yields in the face of contrary grantor intent (i.e. can still create a contingent remainder in your heirs in the example above if you clearly express you want to do that)
common law rule of convenience
class closes whenever any member can call for distribution.
ex: T wills property to W for life, then A’s children. A has 2 kids, B and C. A has another child, D. T dies, E is born, then W dies. After W’s death, A has another child, but only B, C, D, E take.
ex2: T’s will gives property to “A’s children that are 21.”A’s child B is 21 at T’s death. At T’s death the class will close because B can call for distribution.
when any member can call for distribution, then those alive or in the womb at that point can take.
springing executory interest
follows a gap in possession or divests the transferor
(ex: to A, if A goes to medical school- because O holds title until condition satisfied; or “to A for life, then five years after A’s death to B”)
“to A, if he marries.” A has springing exec interest
rule against perpetuities
no interest in property is valid unless it:
-must vest, if at all
-no later than 21 years
-after a life in being at the creation of the interest.
doesn’t apply to: vested remainders, right of entry, possibility of reverter, reversion, gifts from charity to charity
things RAP considers possible for purposes of when interests vest
- people meeting conditions could die
- old people can have babies
RAP and class gifts
if the gift is bad as to any member of the class, it is bad as to all of them.
-ex: to A for life, then to A’s children who are 30. B and C are A’s kids and both above 30, but gift still void because A could have a new child and then die so would not know within 21 yrs if he reached 30
things that violate RAP
- class gift conditioning survival on ages beyond 21
- shifting executory interests (ex: to A, as long as no liquor consumed on premises, then to B.)
- unborn widow issues- to A, then to A’s widow, then their issue
if “but if” language is stricken because of RAP violation, what happens?
there is a fee simple absolute b/c no complete sentence if you just cross out “then to x” so you have to cross off starting at but if
wait and see doctrine
assesses the validity of future interests at the end of the measuring life. (i.e., if they actually vested at that point)
if a disposition violates the rule, a court can reform it in a way that closely matches grantor’s intent and can reduce an offensive age condition to 21.
USRAP
interest must vest within 90 years.
if a disposition violates the rule, a court can reform it in a way that closely matches grantor’s intent and can reduce an offensive age condition to 21.
joint tenancy
an estate held concurrently by several people, with a right of survivorship. the right of survivorship must be clearly expressed or else the deed will be construed as a TIC
identical interests, taken at:
the same time,
by the same instrument (title)
with same right of possession.
how a joint tenancy is severed
- voluntary or involuntary conveyance (mortgages and leases- states split, liens usually don’t sever)
note: even a CONTRACT to sell severs b/c of equitable conversion
if a joint tenancy is severed, a tenancy in common results. if there are 3 original tenants and 1 sells, that person is a tenant in common and the other 2 tenants are still joint tenants. (1/3 and 2/3 JT)
tenancy by entirety
an estate between married partners like joint tenancy
- can only be conveyed by both tenants
- individual spouse cannot convey or encumber
tenancy by entirety- severing
- death, divorce, mutual agreement
- judgment by creditor of BOTH spouses
- one spouse conveying does NOT sever
- one spouse’s creditor’s lien does NOT sever
tenancy in common
an estate held concurrently by several people, with no right of survivorship and each may possess the whole property (can’t claim exclusive possession over a part)
can hold different interests
concurrent estates: contribution for rents and profits
co-tenant leasing all or part of premises to a 3rd party must account to other tenants.
co-tenant has a right to retain profits from own use.
exception: if it’s an exploitation of land (mining, natural resources), must share
concurrent estates: ouster
when one tenant claims an exclusive possession over part or of the tract. the other tenants can sue to regain possession
tenant who ousts others is liable to other tenants for profit.
concurrent estates: effect of mortgages and liens on other co-tenants’ interests
can only foreclose up to the debtor co-tenant’s interest
concurrent estates: contribution for repairs, taxes, mortgages, improvements
repairs- if one person pays more than their share, they are entitled to contribution from other tenants if they notify the others of the need for repairs
taxes and mortgages- can seek contribution
improvements- cannot seek contribution
can one co-tenant gain exclusive control by adverse possession?
No, not unless he ousted the others because co-tenants always share possession and thus not hostile
tenancy for years
lease for a fixed period of time.
the lease ends automatically on the stated day. no notice is needed.
periodic tenancy
- continues for successive periods until terminated by written notice by either party
- automatically renewed until notice is given.
- notice = 1 full period in advance; 1 yr lease- 6 mo in advance
- if no time is stated in a lease, this arises by implication based on when rent is due (ex: ea. mo.)
- if an oral lease (>1 yr) is invalid under SOF, periodic tenancy arises based on rent
what kind of tenancy does a holdover tenant have?
landlord can evict or bind to a new periodic
- if landlord elects to bind him, tenancy measured by the way rent is now paid. (residential)
- commercial tenants: year to year if original lease 1 year or more, month to month if orig lease was less
if notice is given mid month (ex: May 15) for a periodic tenancy, when will the lease end?
June 30 (prior to the start of July period). can only end at the conclusion of a natural lease period.
tenancy at will
- a tenancy terminable at will of either landlord or tenant
- must be created by express agreement that it ends at will b/c courts otherwise presume periodic tenancy based on rent
- termination: notice and reasonable time to vacate
tenancy at sufferance
tenancy where T has held over and landlord has not yet bound the tenant to a new term or began to evict.
in rented premises, who is liable if a third party is injured?
the tenant, even if landlord covenanted to repair. (tenant just might be able to seek indemnification)
tenant’s duties
duty to repair- duty to maintain premises and make ordinary repair (T must repair ordinary wear and tear unless stated otherwise)
duty not to commit waste- removing fixture = waste
fixture
- a once movable chattel that, because of its annexation to realty, objectively shows an intent to permanently improve realty
- if express agreement or removal causes substantial damage it is a fixture
if tenant does not pay ren
Tenant in possession vs out of possession
- in possession: landlord may evict, and recover rent owed
- out of possession: treat failure to pay as an offer to surrender (must send a writing if rest of lease >yr); ignore and hold responsible for rent (minority); relet premises and hold T liable for deficiency (majority rule)
landlord duty to make premises safe- liability in tort
common law: no duty
- Common areas- use reas. care
- Assumed repairs- liable if negligent in repairing (whether by K or agrees to despite not contracting)
- Latent defect- L knows/should know of and that T could not discover by reas. inspection
- Public use- knows/should know of condition; that T may admit public w/o fixing; L fails to fix.
- Short-term lease: L liable for any defect
modern rule: in residential leases landlords do have a duty to residential tenants if LL had notice and opportunity to fix
landlord warranty of habitability
implied in residential leases. nonwaivable.
must be fit for basic human dwelling, and comply with housing codes.
(no running water, no heat in winter)
tenant remedy for breach of implied warranty of habitability
Repair and offset against future rent
Abate rent
Terminate lease and move out
Stay, pay full rent and sue for damages
landlord duty of quiet enjoyment
must not interfere with tenant’s quiet enjoyment and possession of premises
Landlord breach by eviction:
i) Constructive- act or omission by landlord making property unhabitable and tenant’s use is substantially interfered with; gives notice; vacates
ii) Actual- physically excluded from whole by landlord, someone with a greater claim of title, or a holdover tenant.
iii) Partial- physically excluded from part
*no duty to pay rent if evicted from any part. constructive allows P to sue for damages
duty to deliver possession
landlord must put tenant in actual possession of premises at start of lease
(holdover tenant remaining is a breach)
can landlord be liable for constructive eviction for something someone else does?
yes, if it is a tenant and it is a nuisance L permitted. L also must control common areas.
assignment- definition and who is now liable
-complete transfer of the entire remaining lease term
-assignee is now in privity of estate with T and liable for covenants that run with the land
-covenants run if they touch and concern the land (benefit landlord and burden tenant, or vice versa, in respect to their interests in the property). rent runs.
-original tenant is in privity of contract w/ L
Both original and assignee can be liable for rent
sublease- definition and what it means for landlord
- if tenant retains any part of the remaining term, the new tenant has a sublease.
- sublessee is not in privity of contract w/ L
- sublessee not in privity of estate- not liable for covenants
- L can only recover rent from original tenant and look to tenant to perform all other covenants
easement
a grant of a nonpossessory property interest to use another person’s land
affirmative- the holder may affirmatively use
negative- holder may compel the servient tenement to refrain from engaging in activity
(common law- only recognized for Light; Air; Support; Streamwater
-now treated as covenants)
must be express & in writing
appurtenant easement *
The right to use another persons property that benefits the easement holder in the physical use or enjoyment of his own property
must be 2 tracts: dominant (benefited) and servient (burdened tract)
ex: a right of way to enable you to access your land
Benefit will run with the benefited parcel
Burden will not run if the later transferee is a bond fide purchaser who had no actual inquiry record or constructive notice
easement in gross
gives the holder a right to use the servient tenement but does not benefit him in his use of another parcel of land
easements giving a commercial advantage are transferable, but those that do not are not
(ex: can transfer right to place billboards on someone else’s land, but not right to ice skate on their pond in winter)
ways to create an easement
prescription
implied in law
necessity
grant (express)- must be in writing
implied
Divided one tract into two
Apparent and continuous use of servient pre-division
Intent for the use to continue
Reasonably necessary to enjoy the dominant
easement by necessity
Easement implied when
landowner sells part of his tract of land
Conveyance deprives that part access to a road or utility line
Only way to access is over the landowner remaining property
servient tract holder can choose where the easement is located
prescription
continuous use for the statutory period
open and notorious
adverse (without permission)
implied easement b/c of a map
lots sold in reference to a recorded plat or map that also shows streets leading to the lots
terminating an easement
- Estoppel- easement holder makes an oral statement he will abandon and servient estate holder reasonable relies
- Necessity ends (if created by necessity)
- Destruction of servient tract
- Condemnation
- Release- written release from holder of easement to owner of servient estate
- Act of abandonment- physical action by easement holder demonstrating intent not to use (building a fence to prevent use of the easement)
- Merger- servient tract and easement owned by same person, and interest acquired must be equal to or greater than the interest owned
- A has fee simple easement in B’s estate. A has a lease or life estate in servient estate (B) less than easement means easement not extinguished. - Prescription- servient estate holder continuously, openly, adversely interrupts the use for statutory period
license*
- revocable privilege to enter upon the land of another.
- exception- estoppel: irrevocable if licensee invests substantial money or labor
- need not be written.
example of license is a ticket
*oral attempt to create easement creates license; revocable unless estoppel above applies
when does an easement appurtenant pass with the dominant tract?*
the servient tract?
dominant: easement appurtenant passes with the land automatically and need not be mentioned in deed
servient: passes automatically and need not be mentioned in the deed, unless it goes to BFP with no actual or constructive notice
actual notice- actual knowledge
constructive- notice from the visible appearance of the easement on the land OR from the fact that the document creating the easement is recorded in the public records.
(ex: if landowner conveys servient estate by will it passes to the devisee, or by intestacy)
covenant
a promise to do (affirmative) or to refrain from doing something on land (restrictive)
ex: promise to paint house pink, not to build for commercial purposes, not to put up a for sale sign
when does a covenant run with the land- burdened tract
Writing
Intent to run (may be inferred from circumstances, may be explicitly stated)
Touch and concern- must diminish burdened party’s rights, privileges, powers in connection with enjoyment of his land
Horizontal privity- original covenanting parties were connected as grantor/grantee, landlord/tenant, mortgagor/mortgagee
Vertical privity - contract, devise, descent
+
Notice
note: homeowner’s association fees and covenants not to compete do touch and concern
no vertical privity if adverse possession
equitable servitude
writing intent touch and concern notice equitable servitude
no privity required
general or common scheme doctrine
no writing necessary- implied equitable servitude IF
- subdivider or developer had a common scheme for residential development when he began selling the parcels (shown in a recorded plat, oral statements to early buyers, or most deeds having the restriction except a few)
- the person at issue had NOTICE
Can have either actual, inquiry (neighborhood conformity) or record notice
negative restrictions bind all parcels as equitable servitudes
types of notice
Actual - person actually knew
Inquiry- apparent conformity to common restriction
Record- prior deed with covenant in grantee’s chain of title
equitable defenses to an equitable servitude
to an implied servitude by common scheme:
-changed circumstances- whole area has changed
generally:
acquiescence- enforcer acquiesced to a violation
estoppel- person seeking to enforce acted in a way that created a reasonable belief of abandonment
unclean hands- someone violating servitude can’t sue to enforce against another violator
Laches- person waits unreasonably long time to sue to enforce
adverse possession
- continuous- uninterrupted for statutory period (tacking w/ predecessors allowed)
- open and notorious- of the kind of use a usual owner would make, sufficiently apparent to put a true owner on notice
- actual: literal entry. Note that if under color of title (bad deed) the person is actually occupying the property if a reasonable portion of the described land is occupied
Exclusive- excluding the owner or the public - hostile: without the owner’s consent
when can one adverse possessor tack his possessory period on to someone else’s?
as long as there is privity, they may tack.
one AP ousting another doesn’t satisfy
what prevents the statute of limitations from running against a true owner?
disability at the start of the adverse possession. not that arises after the adverse possession begins
in a situation where someone is selling land, when do you sue on the contract and when does the deed and covenants become the basis of a COA?
- you sue on the land sale contract covenant of marketable title before the deed is executed at closing. Notify seller of any defects, give until closing date, then rescind if still a problem.
- At closing, the deed merges with the contract and the deed becomes the operative document.
- After closing, you must sue on the deed. certain covenants must sue immediately and others when disturbed.
land contract and statute of frauds- minimum contents
must be in writing and signed by party to be charged, must describe property, state consideration, and identify the parties.
if the land promised in the contract contains less than the land conveyed, what can buyer do?
Seek specific performance.
If contract satisfies SOF, no problem. If it doesn’t, look to satisfying 2/3 of part performance elements: 1) taking possession; 2) paying all or part of the price; 3) makes substantial improvements.
equitable conversion
equity regards as done what ought to be done.
from the moment the deed is signed, the land is viewed as the buyer’s.
therefore, if land is destroyed the buyer bears risk of loss unless the contract states otherwise.
implied promise of marketable title*
every contract carries w/ it an implied promise to convey marketable title AT CLOSING. no liability on this ground after that.
-marketable title = free from questions posing unreasonable risk of litigation
-no mortgages or liens unless buyer waives
BUT if mortgage is on the land, seller has right at closing to pay it off and buyer can’t object title is unmarketable
-zoning violations existing at time of closing
-title you have by adverse possession = unmarketable
-future interests in unascertainable people
-no significant encroachments or easements that are not beneficial or visible
implied promise not to misrepresent material fact in land contract
seller liable for failing to disclose latent material defects (serious enough that buyer wouldn’t want to proceed, seller knows/should know, not obvious)
misrepresentation
active concealment
a disclaimer of “as is” does not bar fraud liability
implied warranties in land contracts
only implied warranty of marketable title and that there are no false statements of material fact or undisclosed latent defects, unless sale of new home built by a builder-vendor. in that limited case:
- workmanlike construction
- fitness for human habitation
Most courts say this runs to original buyer only but some will extend it to later successors on the basis there wasn’t an opportunity to inspect
requirements for deed to effectively pass title
“LEAD”- lawfully executed and delivered
- lawfully executed: in writing, signed, reas. identify parties and land (good lead- “all my land in Blackacre”- and not too indefinite)
- delivery: grantor must intend to make presently effective (parol evidence of intent, notary, actual delivery)…i.e. “hold on to this, you can have my land when I die” is not delivery
- acceptance is presumed (esp. if benefits grantee)
- rejection defeats delivery
escrow
grantor delivering through a third party. valid if grantor gives instructions to give to the grantee if conditions occur (ex: purchase price paid)
parol evidence of conditions
only allowed if given to an escrow.
if deed directly given to grantee, not allowed to prove conditional delivery.
quitclaim deed
releases the interest grantor has. no covenants included or implied. (grantor isn’t making any promises.)
general warranty deed
contains all covenants- seisin right to convey covenant against encumbrances covenant for quiet enjoyment covenant of warranty further assurances
present covenants
breached at the time the deed is delivered. must sue on it within the SOL after delivery. they do not run to successor owners.
- covenant against encumbrances
- covenant of seisin;
- covenant of right to convey
Esc
covenant of seisin
the grantor warrants that he has the estate or interest he purports to convey (i.e., both title and possession) at the time of the grant
i have what i SAY i have
covenant of right to convey
grantor has the authority to make the grant
covenant against encumbrances
no physical (encroachments) or title (mortgage or lien) encumbrances.
future covenants
covenants that are breached when the grantee is disturbed in possession. they run with the estate and so successors can sue on them.
- covenant of quiet enjoyment
- covenant of warranty
- Covenant further assurances
special warranty deed by statute
- grantor only covenants against the title defects he himself created.
a) grantor hasn’t conveyed same interest to others
b) free from encumbrances made by grantor
covenant of quiet enjoyment - deeds
right not to be disturbed by a third party’s lawful claim of title
covenant of warranty
grantor agrees to defend against reasonable claims of title by third parties
covenant for further assurances
do what’s reasonably necessary to perfect title
notice jurisdictions and BFPs
if BFP has no notice at time of conveyance, wins. he can record after later taker or not at all.
**note- if later person records before BFP buys, that is notice (constructive)
“No conveyance of an interest in land, other than a lease for less than one year, shall be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded”
race notice jurisdictions and BFPs
BFP must record and have no notice at time buys
i.e. earlier taker must not have recorded when BFP buys, and then BFP also has to record before them
look for “unless conveyance is recorded” at end
ex: No conveyance of an interest in land, other than a lease for less than one year, shall be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded.”
race
BFP loses if someone else records first
look for “first recorded” at end
“Any conveyance of an interest in land, other than a lease for less than one year, shall not be valid against any subsequent purchaser for value, whose conveyance is first recorded
who do recording statutes apply to protect
only mortgagees and BFPs
BFP = purchaser for value (SOME value, FMV immaterial)
NOT donees.
for purposes of recording statutes, what kind of notice suffices?
actual
inquiry- whatever a reasonable inspection would reveal, even if none made
record
proper recording
within the chain of title- sequence of recorded documents capable of giving record notice to later takers
wild deed = O to A not recorded, but A to B is recorded. B’s title is not linked to O’s
if O sells to someone else that person will win b/c they had no notice of B’s title, not in O’s chain
shelter rule
a person- even if not BFP- who takes from a BFP will prevail against any interest the transferor-BFP would have prevailed against
*protects donees and people w/ actual knowledge
-only works in race notice and notice
mortgage
conveyance of a security interest in land. the debtor is the mortgagor and the lender is the mortgagee. the lender can realize on the mortgaged real estate only by having a judicial foreclosure sale
Ability of mortgagor and mortgagee to transfer the mortgage
either party may transfer the mortgage.
transfer by mortgagor
1) the grantee takes subject to the mortgage by default- meaning he is not liable on the loan.
BUT he could still lose the loan if MR does not pay, assuming mortgagee meets recording statute.
2) he may also assume the mortgage, which makes him primarily liable. original MR is secondary.
transfer by mortgagee
1) transfer by endorsement and delivery of note-
if the note is transferred without the mortgage, the mortgage follows automatically.
effect: transferee is a holder in due course (as long as it’s original note that is endorsed and delivered)
2) transfer by assignment- if the note is not transferred with the mortgage, some states hold the note automatically follows.
holder in due course
the original note must be endorsed and delivered to the transferee lender, who must pay value for it in good faith.
the mortgagor can’t assert defenses that he could assert against the mortgagee against the transferee- lack of consideration, fraud in inducement, unconscionability, waiver, and estoppel.
also: if mortgagor w/o notice of transfer pays mortgagee, transferee can seek payment
in determining whether a buyer takes property subject to a mortgage, look to recording statutes
notice- did the mortgagee record before BFP bought or did BFP otherwise have notice?
race notice- did the mortgagee record before buyer’s purchase, or before buyer recorded?
in foreclosure, what if the land is less than debt? more?
if less- personal COA for deficiency against debtor
if more- applied to 1) sale costs; 2) attorney fees and court costs; 3) foreclosed loan’s principal and interest; 5) junior interests*
*each interest is entitled to be fully paid before the next in line is paid
foreclosure’s effects on other interest
- terminates junior interests IF joined (nec. parties)
- does nothing to senior interests. buyer takes subject to senior interests
- deficiency judgment- to get, must join debtor
if a senior interest is left on the land- effect on new buyer?
not personally liable but may be foreclosed on if debtor can’t pay it.
new buyer may pay off the senior loan to avoid.
his bid price often reflects the amt of the sr loan: it is the FMV- sr loan
priority of different types of mortgages
PMM: mortgage given in exchange for funds to buy property.
priority over PRIOR, non-purchase money mortgages
LATER non-PMM mortgages can still win under recording act
if 2 PMMs: seller’s has priority over 3rd party’s
redemption
equitable: debtor may pay the amt in arrears or if there’s an acceleration clause then must pay accelerated full balance and keep the land after he defaults, as long as it is BEFORE the sale
statutory: AFTER the sale, may redeem during set time if state has statute allowing
attempts to get mortgagee to waive right to redeem valid?
If it is in the mortgage itself, it is prohibited. this is called clogging the equity of redemption.
if it is waived after default, it is allowed.
partial taking
regulation decreasing property value so there is very little economic use.
factors in analyzing taking:
-social goals sought to promote
-diminution in value to owner
-owner’s reas. expectations re use of property
must UNJUSTLY reduce property value
(prop value reduced greatly, public welfare benefit only slight)
Easement
Grant of a non possessory interest that entitles the holder to use or enjoy another persons property
Right to view, air, light, support, stream water from artificial flow
Only if expressly created by a deed containing a negative easement to prevent another landowner from depriving you of any of these. Note that view is only recognized in a minority of jurisdictions.
what happens if there is a problem with a deed description?
if the property is smaller than promised, the buyer can sue for specific performance and receive a pro rata price reduction.
if the deed description is ambiguous (ex: “my house on Black Street” and only own 1 house on that street) parol evidence is admissible and the parties can file a law suit for reformation of the deed, BUT if there is no description or the description is too indefinite (ex: all my land on Black Street, and there are 3 houses I own on Black Street; or all my land in City of X and I own 3 houses in City of X) the deed fails and the grantor keeps title.
when can a debtor redeem a mortgage in default?
At equity, at any time before the date of the foreclosure sale.
At law, some states have statutes allowing the mortgagor to redeem for a specified period of time after the sale.
between a prior, unrecorded lien (such as a floating lien) and a later purchase money mortgage that is properly recorded, who has priority
the properly recorded purchase money mortgage
what happens if a junior interest is not joined in a foreclosure sale?
the foreclosing mortgagee will take title subject to the junior interest.
difference between buyer taking subject to and assuming a mortgage
1) buyer is consenting to the mortgage remaining on the land, but the seller stays personally liable and buyer is not liable. risk of foreclosure and losing title to the lender.
2) buyer signs an assumption agreement and is responsible for making payments on the loan. buyer is primarily liable, and the seller is secondarily liable.
covenant of quiet enjoyment
the party has the right to possession of the property without being disturbed by a third party with a greater claim
special warranty deed
all the same covenants as the grant deed but the grantor only warrants and defends against defects created by himself or people acting through him
implied warranty of habitability
warranty implied into residential leases that the premises will be fit for basic human habitation. determined by compliance with local housing code.
example of breach: no running water, no heat.
how do you determine if an option or right of first refusal is valid?
at common law, determine whether it violates the rule against perpetuities.
at modern law, determine whether it is an unreasonable restraint on alienation.
Changed circumstances
Defense to a covenant that runs with the land - must affect all tracts and neighborhood must be so changed that restriction can’t fairly be enforced
mortgage modifications and optional advances
lose priority to junior mortgages if the holder of the modified mortgage or mortgage subject to the optional advance had notice of the junior
if two parties contract for sale of land and the seller has insurance and a casualty occurs, does the buyer have to pay the whole purchase price despite the casualty?*
no, the buyer will receive credit for the seller’s insurance proceeds to avoid unjust enrichment to seller
equitable mortgage
when a deed is given as security for a loan and not an outright transfer. likely to be found if there is evidence of a debt owed by the grantor, that the land would be returned upon payment, and property worth more than the debt.
the intent to use the property as security for the debt doesn’t need to be in the deed and can be shown by parol evidence.
use of an escrow for delivery
grantor may deliver a deed to an escrowee with instructions that it be delivered to the grantee when certain conditions (e.g., death of the grantor) are met. When the conditions occur, title passes automatically to the grantee.
The delivery occurs when the condition is satisfied.
can a mortgagee take possession of the encumbered property before a foreclosure sale?
In a title theory jurisdiction, yes because the mortgagee always had title to the land.
In a lien theory jurisdiction, the debtor must have the right to redeem first
if a defect in premises arises after T takes possession, when will landlord be liable for it?
at common law, he was not liable and had no duty to make the premises safe.
however now the majority rule is that if the defect arises after the tenant takes possession, the landlord is liable only if the landlord knew or had reason to know of the defect.
when is the buyer in breach for failing to deliver the purchase price?
if the seller has delivered title. the buyer’s obligation to pay the purchase price and the seller’s obligation to convey title are deemed to be concurrent conditions. Thus, neither party is in breach of the contract until the other party tenders performance, even if the date set for closing has passed.
what happens when the holder of an easement or profit uses it excessively?
In an easement this is a surcharge and the owner of the servient estate can sue for an injunctionor damages if the servient estate has been harmed
In the case of a profit this terminates the profit
types of restraints on alienation
promissory- promise not to convey (ok if reasonable)
disabling- any transfer is void
forfeiture- any transfer will cause the transferor to lose their interest
disabling and forfeiture restraints are void and not recognized under the law
how are profits created?
in the same way as an easement
shifting executory interest
an executory interest that divests another transferee (moves the property from one transferee to another)
remainders and executory interests
defined in reference to when they can take possession.
remainder is a future interest that allows the person to take possession at the natural termination of the previous estate. Can be contingent or vested.
executory interest is a future interest that divests the prior estate and allows the person to take possession upon the happening of a certain event, satisfaction of a condition or when land ceases to be used a certain way.
when does a co tenant have to share profits?
when they earn profits from renting to third parties, or if they earn profits from their use of the land and their use of the land reduces the land value
when does a class close?
if by a will and no conditions on the gift, on death of the testator
if by will and no one is in the class yet, class stays open
if by a will and the gift takes effect after x years or after y’s death, then when that time period passes or condition satisfied. rule of convenience means when one person in the class can claim then the class closes.
Common law recording rules
The first person to receive a deed would prevail (because law would recognize that the owner had nothing to give at the time the second conveyance was made)
What happens if a joint tenant mortgages their interest and then died?
The mortgage gets extinguished along with the deceased joint tenant interest
when is the closing in an installment land contract?
when the buyer makes the last payment and the seller conveys the deed
Ways leases terminate
Expiration
Eviction (note that landlord can constructively evict tenant and t can then terminate)
Abandonment by tenant and LL either
1) accepts the surrender and ends the lease, t not liable for rent for rest of term
2) repossesses the property and relets it. Tenant is still liable for difference between lease rate and fair market rent
Fair housing act exceptions
Landlord who owns only three single family dwellings or less
Landlord who lives in a building with 4 or fewer units
These exemptions do not protect violations of law in advertising
Privity of estate- assignment and subleases
In an assignment the assignee and landlord are in privity of estate because the assignee took the entire leasehold interest from tenant
In a sublease the landlord is not in privity of estate with the assignee because the original tenant stillholds part of the leasehold interest. Landlord is still in privity of k and estate with the original tenant, and tenant and assignee are in privity of k and estate. LL must recover from T only.
Deeds- Interest in land transfers when
Deed is lawfully executed and delivered
Adequately describes the land (enough to give good lead)
LEADD
Right of first refusal and options
Generally violate rule against perpetuities unless
It’s an option to purchase or renew in a lease or
They are held by an ascertainable person and do not include his heirs and assigns
What is a profit?
Right to enter on another persons property to gather minerals, oil, timber, or hunt animals
Can be appurtenant to a piece of property or
Can be in gross (held by particular person)
What happens when a seller or buyer to land contract dies ?
Seller- the title passes to heirs and devisees subject to the contract and they can be forced to give up title to the buyer by specific performance . The right to receive the money passes to the takers of personal property
Buyer- the right to receive the title passes to heirs or devisees receiving real property and obligation to pay the purchase price passes to the heirs or devisees receiving personal property
Remedy for lack of marketable title
Notify seller and allow them to cure until the closing date (or extend if time not of essence)
If they do not cure then can rescind contract or sue for specific performance with reduced purchase price
Seller liability for defects in property in PSA
If seller has actively concealed the defects
If the seller has made a false statement of material fact (material to value or buyer willingness to proceed), a reasonable person would rely on it, and the buyer did rely, can be liable for misrepresentation
No warranty of fitness for habitation or workmanlike construction unless the seller is the builder of a residence
Measuring lives
People connected with the vesting of an interest
To A for life then to B’s sons ; b has no sons at time of deed
Measuring life would be b because b has ability to have sons
When conveyance (containing a future interest) becomes effective
In a will on testator death, in a trust when it is irrevocable, and in a deed when it is delivered and accepted
Relation back of delivery
Sometimes equity allows the delivery date of the deed to relate back to the date of delivery to the escrowee in cases such as:
1) death of grantor (because deed would need to be effective before death to avoid inconsistency w/ a will)
2) incompetence of grantor (to avoid the rule that an incompetent can’t convey title)
3) a non-BFP creditor tries to attach the property to satisfy a debt
Is there vertical privity when the owner got title by adverse possession or from an adverse possessor?
No
If there is a mortgage on property that is being sold does that make title unmarketable?
The owner has a right to use the sale proceeds to pay off the mortgage at closing
If they do not, title will be unmarketable
Time of the essence
Real estate contracts presume that time is not of the essence
Presumption overcome by
Contract language saying it is of the essence
Circumstances surrounding the deal
Notice from one party that they consider it of the essence
Deed with grantee name left blank- valid?
Law presumes the grantee or person taking delivery (escrow) has authority to fill in their name
What evidence is available to prove delivery?
Extrinsic evidence can be used to prove delivery was intended, or that there were conditions
Are judgment creditors protected by recording statutes?
The majority rule is no but some states protect them
Void deed
A deed that stated the correct grantor but was signed by another person without authority
A deed to a deceased person or corporation that has not been formed
A deed that was signed because the grant was fraudulently induced
Presumptions regarding delivery and acceptance *
Delivery presumed if the deed is: (1) handed to the grantee, (2) acknowledged by the grantor before a notary, or (3) recorded.
Acceptance is in most states presumed if the conveyance benefits the grantee. In some states however the grantee must also know of the grant.
Acceptance in all states presumed if deed is to a child or incompetent person.
Is a contract allowing someone to keep the deposit as liquidated damages in the event of a breach enforceable?
The courts routinely uphold the seller’s retention of the deposit if the amount appears to be reasonable in light of the seller’s anticipated and actual damages.
In a title theory state, for purposes of distributing joint tenancy property at death, is mortgaging a joint tenancy interest treated as conveying the whole interest to the mortgagee?
Yes. On death the mortgagee will inherit an ownership interest in the property
does a surrender need to be in writing?
yes, if the remainder of the lease term is more than 1 year
facts that suggest acceptance of surrender
& effect of accepting surrender
the tenant is only liable for the rent that is due up to the time of surrender
facts that show acceptance are landlord taking possession for himself or reletting without saying he is doing it on behalf of T
if a landlord does not accept surrender what damages are they entitled to?
difference between tenant’s rent and market rent
if landlord doesn’t accept surrender but also doesn’t attempt to relet, the court will give him this measure as well
if a landlord accepts the keys back, makes repairs, and offers to relet on T’s behalf, is that acceptance of a surrender?
No, it is mitigation of damages
are future interests transferable? devisable? descendable?
They are transferable
They are devisable and descendable BUT NOT IF SURVIVAL IS A CONDITION
if a deed is not clear about whether it creates a fee simple determinable or fee simple subject to condition subsequent what should the court choose?
Because courts try to protect the public policy of avoiding forfeitures, a court should construe the grant as a FSCS because the grantor would have to take action to divest the transferee.
if a deed from A to B has the language “to B provided the property is not used as a barn” and then no language following it what are courts most likely to construe it as?
language expressing a motive that doesn’t have any effect, or a restrictive covenant but that’s rare
**a right of entry to create FSSCS must be explicitly stated, doesn’t arise automatically
what future estate is not transferable during the holder’s life?
in most jurisdictions, the right of entry
all others- possibility of reverter, executory interests, vested remainders, and contingent remainders are transferable
if future interest language is ambiguous what is the preferred construction?
vested remainder subject to partial divestment rather than contingent remainder or executory interest
Easement by express reservation *
Reserving an easement from land granted to someone else
For the grantors use (cannot reserve for a third person use)
When does a covenant benefit run with the land?*
Writing
Intent to run (binding on successors and assigns language)
Touch and concern (benefit party in use of their land)
Vertical privity between original covenanting benefited party and person seeking the benefit now
When to use covenant rules and when to use equitable servitude rules*
When the remedy is damages - covenant
When the remedy is an injunction- equitable servitude
If silent on remedy sought - both
How are covenants and equitable servitude terminated?
Merger of benefited and burdened properties
Condemnation
Release
Legal description in deed blank- valid?
No, unless grantor or grantee can prove that grantee had express authority to fill it in
What does a deed to be delivered on condition of grantors death convey?
On condition of surviving the grantor?
A present conveyance of future interest
If condition is survival the conveyance itself does not become effective until death
Void and voidable deeds when property passes to a bfp *
When it is discovered a deed is Void title can be taken away from the bfp
When it is discovered there is a Voidable deed title cannot be taken from bfp
Void = fraud in factum (misrepresentation about what grantor was signing); forgery; deeds never delivered
Voidable = grantor lacks capacity, signed bc of mistake, fraud, duress
Fraudulent deeds*
Signed to defraud a creditor
Set aside by creditors if intent to defraud creditors can be shown or that property was not conveyed for value and grantor insolvent
If a later buyer assumes a mortgage and then modified it what is the effect on original owner liability?
Original owner is no longer liable
