real prop Flashcards
Generally, a real covenant is
an agreement between parties to do or not do something on land (e.g., maintain a stone wall) that is enforceable by an action for money damages.
the promising parties to a real covenant are bound under contract law, but their successors in interest are bound only if
the covenant runs with the land.
A real covenant will only bind successors in interest if the following elements are met: (6)
(1) writing,
(2) intent to run,
(3) touch and concern,
(4) horizontal privity,
(5) vertical privity, and
(6) notice if the person to be bound was a purchaser.
a grantor’s intent to transfer can be
presumed in some cases
when the grantor keeps the deed, what must evidence an intent to make a present transfer of the property interest?
the grantors “outward and visible acts”
where a grantor leaves the deed on a table in his residence, there is no ______________ of delivery
no presumption of delivery
a note left with a deed, reading: “this lot NOW belongs to X” demonstrates
a clear intent to immediately transfer the property to X- rendering the deed delivered
Under a land-sales contract, the seller can use the proceeds from the sale to eliminate a
mortgage obligation on the property.
If the proceeds of the sale of the house exceed the amount of the outstanding mortgage, then a title defect will be
extinguished and the seller can deliver marketable title to the buyer upon closing.
A purchase-money mortgage is granted to the seller or a third-party lender when
(1) the loan proceeds are used to acquire title to or construct improvements on the property and
(2) the mortgage is given as part of the same transaction in which title is acquired.
any type of mortgage is an
encumbrance that may render title unmarketable—regardless of priority.
A mortgage is subject to the same defenses (e.g., mistake, duress, fraud) as
the underlying obligation or debt secured by that mortgage.
when mortgaged property is transferred to a donee, the donee is entitled to assert
the donor-mortgagor’s defenses against the mortgagee-lender.
a purchaser who assumes an existing mortgage obligation as part of the purchase price
may not assert the donor-mortgagor’s defenses.*
A joint tenancy is a type of concurrent estate in which each
cotenant has an undivided and equal interest in the property with the right of survivorship.
The right of survivorship means that
a joint tenant’s interest disappears upon that tenant’s death and the remaining joint tenants’ interests automatically expand to absorb it.
joint tenants cannot
devise their interests upon death.
joint tenants are free to convey their interest to another
during life without the other tenants’ consent.
transfer of a joint tenant’s interest during their lifetime will
sever the joint tenancy and convert it into a tenancy in common
once the joint tenancy is severed, an a tenancy in common remains, each co tenant has
an equal right to possess the property without the right of survivorship.
each tenant in common is free to
unilaterally transfer or devise his/her interest.
A life estate is
a present possessory interest that terminates upon the death of an individual (the measuring life).
A life estate is _________transferable
freely transferrable
a life estate becomes “pur autre vie when
it is measured by the life of someone other than the current holder of the life estate (the life tenant).
The future interest that follows a life estate is either
a reversion (if held by the grantor) or a remainder (if created in a grantee).
a life tenant has the right to all
rents and income during the tenancy.
a life tenant also has a duty to pay
current charges that become due (e.g., property taxes, mortgage interest) unless the document creating the life estate provides otherwise.
(duty limited to amount of income that can be generated from the land)
The warranty of marketable title is
implied in all real estate contracts unless otherwise provided.
warranty of marketable title guarantees that
upon closing, the seller will convey the buyer title that is free from an unreasonable risk of litigation.
Whether the seller is aware of a substantial defect in title is irrelevant in determining
marketability of title
title must be marketable at the time of
closing—not at the time the contract is entered
A property that is free from encumbrances may nevertheless be unmarketable due to
a defect in the title itself—e.g., misnamed grantor or grantee, variance in property description between different deeds.
Marketable title does not mean that title must be free of any defect, but it should ensure
peaceable and quiet enjoyment of the property.
under the doctrine of tacking, an adverse possessor may
tack on the predecessor’s time if there is privity between successive adverse possessors.
Privity between successive adverse possessors is satisfied if
the possessor takes by nonhostile means (e.g., by descent, devise, contract, deed).
For who bears the risk of loss, most states follow the logic of the doctrine of
equitable conversion and place the risk of loss on the buyer during the executory period
doctrine of equitable conversion places the risk of loss on the buyer during
the executory period
the executory period is the period between
the execution of the real-estate contract and closing.
under equitable conversion the risk of loss is on the buyer during the executory period regardless of whether
buyer takes possession of the property during that period.
minority of jurisdictions have adopted the
Uniform Vendor and Purchaser Risk Act.
Under the Uniform Vendor and Purchaser Risk Act, the risk of loss remains with
the seller until the buyer takes possession of or receives legal title to the property.
when the owner/seller has possession of the building subject to the contract at the time it was destroyed; the most important issue in awarding judgment is whether
the jurisdiction has adopted the UVPRA or applies equitable conversion doctrine
The type of deed that a seller must supply when the contract is silent on this issue has no impact on
which party bears the risk of loss during the executory period.
Absent contrary language, an implied covenant of marketable title is part of
every land-sales contract.
an implied covenant of marketable title
that title to the property is free from an unreasonable risk of litigation
an implied covenant of marketable title does not guarantee
that the property itself is free from damage or dictate which party held the risk of loss.
Buyers can acquire casualty insurance in every jurisdiction because
buyers have an equitable interest in the purchased building.
the fact that buyers have an insurable interest has no impact on
who bears the risk of loss during the executory period.
An equitable mortgage can be established when
a debtor gives an absolute deed to a lender with the intent to secure a loan
an absolute deed
a deed that is free of encumbrances and transfers unrestricted title to property
To establish the existence of an equitable mortgage, the debtor-grantor must prove by clear and convincing evidence that
the deed was intended as security for a loan—not as an outright transfer.
under an equitable mortgage, if a debtor defaults, the deed recipient, like any other lender, may then bring
foreclosure action
owner conveyed his lot to the investor outright by warranty deed with the intent to secure a $75,000 loan from the investor. The investor had agreed to reconvey the lot to the owner once the loan was paid in full.
transaction created an equitable mortgage—not an outright transfer of the lot.
Therefore, the investor cannot immediately evict the owner.
The lender must first follow any applicable foreclosure procedures.
The statute of frauds generally requires that a transfer of real property be
in writing to be enforceable
The Statute of Frauds relating to land sale contracts does not prevent the introduction of
oral evidence to explain or interpret a written deed—e.g., to show that the deed was subject to an agreement that the property serve as security for a loan.
A void deed is invalid at its
inception and conveys no title to the grantee
void deed is unenforceable even if
it is relied upon by a bona fide purchaser
a bona fide purchaser—i.e., one who
purchases a property interest without notice of another’s prior interest in the property.
A deed need not be ___________ to be valid and convey _________ ________.
recorded;
good title
A warranty deed promises that
the grantor has title to the property and the right to transfer title without encumbrances.
a deed and the warranties therein are unenforceable if
the deed is forged
A future-advances mortgage (i.e., “line of credit”) is a mortgage given by a debtor (mortgagor) in exchange for
the right to receive money from the lender (mortgagee) in the future.
Priority with regard to proceeds from a foreclosure sale depends on whether the advances are:
optional or obligatory
if advances are optional
the future-advances mortgage has priority with respect to amounts loaned before the future-advances mortgagee received notice of a subsequent mortgage
if advances are obligatory
the future-advances mortgage has priority with respect to amounts loaned before and after the future-advances mortgagee received notice of a subsequent mortgage.
The Rule Against Perpetuities (RAP) applies only to
contingent future interests—i.e., future interests that are held by unknown/unborn persons or subject to a condition precedent.
Under the common law, RAP renders a contingent future interest
void ab initio (i.e., from the beginning)
unless the interest must vest or fail within 21 years after the end of a relevant life in being when the interest was created.
In foreclosure proceedings, lien priority is generally determined by
the “first in time, first in right” rule.
Unless there is recording act, then it governs
Under the “first in time-first in right rule”
liens that arise first (senior liens) typically have priority over liens that subsequently arise (junior liens).
A race-notice act gives a subsequent purchaser priority over a prior conflicting interest if the purchaser
(1) took its interest without noticeof the prior interest and
(2) recorded first.
A purchaser must “______ ________” for the interest in real property to be protected by the recording act.
“pay value”
____________ are considered to have paid value and are therefore protected, but this protection does not always extend to judgment liens.
“mortgagees”
Mortgage documents are used to convey a lender (mortgagee
an interest in real property to secure repayment of a debt
Mortgage documents may contain a “due on sale” clause, which
allows the lender to demand full payment of the remaining mortgage debt if the debtor(mortgagor) transfers the mortgaged property without the lender’s consent
if theres a “due on sale” clause, and the debtor does not pay, the lender can
can initiate foreclosure proceedings to recover any remaining debt.
Upon default on a loan obligation, a lender may elect to proceed against the debtor
personally or foreclose on the mortgage.
The applicable mortgage theory (lien or title) has no bearing on
the enforceability of a “due on sale” clause.
The applicable mortgage theory (lien or title) determines who (the mortgagor or the mortgagee) has
legal title to the mortgaged property.
Under the title theory, legal title is held by
the mortgagee until the mortgage debt has been fully paid.
An easement is the right held by one person to
make specific, nonpossessory use of another’s land (i.e., the servient estate).
an easement can be acquired by
prescription through OCAN
OCAN—i.e., use that is:
1) Open and notorious – apparent or visible to a reasonable owner,
2) Continuous –uninterrupted for the statutory period,
3) Actual – use of the land,
4) Nonpermissive – hostile and adverse to the owner
An easement can also be expressly created by the parties
in a writing that satisfies the statute of frauds
Owners of an easement have the right and the duty to
maintain the easement unless otherwise agreed.
when the easement is shared, the owner who maintains or repairs the easement may
seek contribution from the other owners.
The owner of the servient estate also has an obligation to
contribute if he/she uses the easement.
Specific performance
court-ordered performance of a contractual obligation—is available only when money damages are inadequate.
Since land is considered unique and money damages are inadequate to compensate for the loss of unique property, this remedy is
generally available to buyers.
The doctrine of after-acquired title (i.e., estoppel by deed) applies when
a grantor conveys property to a grantee by warranty deed before the grantor has acquired title to that property.
Under doctrine of after-acquired title (i.e., estoppel by deed); Once the grantor receives title, this doctrine will cause it to
automatically transfer to the grantee.
Detrimental reliance (i.e., promissory estoppel) and part performance are both defenses to
the statute of frauds, which requires that a land-sales contract be
1) in writing,
2) signed by the party against whom enforcement is sought,
3) and contain all essential terms
The “first in time, first in right” rule generally applies when determining
priority of interests in real property—i.e., whether an interest is junior or senior to another interest.
“first in time, first in right” rule is subject to various exceptions, including
purchase-money mortgages (PMMs) and recording acts.
A PMM is a mortgage granted to the seller of real property if
the mortgage is given as part of the same transaction in which title is acquired
A PMM has priority over liens that arose
prior to the PMM regardless of whether the PMM was recorded.
But a PMM does not necessarily
have priority over subsequent liens; the recording act (or, if there is no recording act, the “first in time” rule) will control
Condemnation is the
taking of land for public use or because it is unfit for use.
The right of a tenant upon condemnation depends upon whether the condemnation is:
partial or complete
partial condemnation
where only a portion of the leased property is taken, so the tenant must continue to pay rent but is entitled to compensation for the portion that was taken
complete condemnation
where the entire leased property is taken, so the tenant is discharged from his/her rent obligation and is entitled to compensation for the taking.
Every lease (commercial and residential) contains an implied covenant of
quiet enjoyment, under which the landlord promises not to interfere with the tenant’s possession of the leased premises.
implied covenant of quiet enjoyment is breached only when
the landlord prevents the tenant from possessing the leased premises.
A tenant’s duty to pay rent is excused due to
constructive eviction
constructive eviction occurs when
the landlord breaches a duty to the tenant that substantially interferes with the tenant’s use and enjoyment of the leasehold (e.g., failing to make repairs).
A partial eviction occurs when
a tenant is prevented from possessing or using a portion of the leased premises.
if a partial eviction occurs, The tenant is excused from paying rent for the entire premises if
the landlord was responsible for the partial eviction.
A mortgage is
an interest in real property given to a lender (mortgagee) to secure repayment of a debt.
The debtor (mortgagor) can freely transfer the mortgaged property to a grantee unless
the mortgage states otherwise.
After the conveyance, the mortgage remains attached to the property and the debtor remains
personally liable for the debt secured by the mortgage.
When a mortgage is conveyed, the grantee’s obligations depend on whether the grantee:
1) took subject to the mortgage
2) assumed the mortgage
took subject to the mortgage
then the grantee does not agree to pay and is not personally liable for the debt
assumed the mortgage
then the grantee agrees to pay and becomes primarily liable for the debt, and the debtor becomes secondarily liable as a surety.
debtor is relieved of personal liability for the mortgage debt if
the lender releases or impairs the mortgaged property
In a majority of jurisdictions, the seller of a residence has a duty to disclose
all material physical defects that are known to the seller and cannot be reasonably discovered by the buyer.
If the seller fails to disclose all material physical defects known to them,
buyer may rescind the sale or seek damages
A defect is material if it:
1) substantially affects the value of the residence,
2) impacts the health or safety of a resident, or
3) affects the desirability of the residence to the buyer.
buyer must show that the defect was not
readily observable or known to her
Landlords have a duty to repair defects that pose a health hazard, but
sellers do not
Sellers need only disclose a material physical defect to
prevent liability for those defects
The implied warranty of habitability (or of fitness, suitability, quality, workmanlike construction, performance) is implied in a contract for the sale of
a newly constructed residence
A defeasible fee is
an ownership interest in real property that has the potential to last forever but can be cut short if a specified event or condition occurs.
a fee simple determinable (FSD),
type of defeasible fee
fee simple determinable (FSD), which is created with
durational language (e.g., “so long as,” “during,” “until”).
The future interest that follows an FSD is either
a possibility of reverter; or an executory interest
a possibility of reverter
estate automatically reverts back to the grantor when the specified event occurs (presumed if not expressly stated)
executory interest
the estate automatically passes to a third party when the stated event occurs.
a possibility of reverter
freely alienable by the owner during life and upon death
FSD is freely
alienable, devisable, and descendible, it is always subject to the stated condition
A land-sales contract is executed when
the seller promises to deliver marketable title and the buyer promises to pay the purchase price.
promises must be performed on the closing date set forth in the contract if the parties set a strict closing deadline, which occurs when:
1) express language in the contract makes time of the essence,
2) the circumstances strongly suggest that the parties intended it to be or
3) one party gives the other party notice that time is of the essence.
when time is not of the essence
strict adherence to the closing date is not required in equity.
when time is not of the essence
performance is due upon closing or a reasonable time thereafter.
so long as performance can be rendered within a reasonable time after the closing date,
the delay does not provide grounds to rescind the contract and the other party must perform.*
a party that fails to render performance on the date set for closing in the real-estate contract will be
in breach and liable for incidental losses such as taxes, interest, etc.
Under the doctrine of equitable conversion, equitable title passes to the buyer upon entering the land-sales contract, but the seller retains
legal title during the pendency of the contract.
seller needs legal title to deliver
marketable title to the buyer at closing.
To be valid, a deed must:
1) be in writing and signed by the grantor
2) unambiguously identify the grantor and the grantee
3) unambiguously describe the land and
4) include words of transfer.
to clarify ambiguities in the deed
Extrinsic evidence can be admitted
if the extrinsic evidence is also unclear, then a court will not speculate as to the grantor’s intent and the deed
will be deemed void (i.e., of no legal effect).
Real-estate contracts usually require the buyer to make a deposit of
a portion of the purchase price (i.e., an “earnest money” deposit).
A liquidated damages clause is often included, which allows the seller to
retain the buyer’s deposit if the buyer breaches the contract and refuses to purchase the property.
liquidated damages clause is generally enforceable when
the amount of liquidated damages is reasonable—e.g., no more than 10 percent of the purchase price.
when evaluating reasonableness of a liquidated damages clause, courts may also consider:
1) sophistication of the buyer,
2) the nature of the transaction (commercial v. residential), and
3) whether the seller suffered an actual loss (if not, courts may refuse to enforce the clause).
A deposit for a reasonable amount may be retained in accordance with the liquidated damages clause—even if
the liquidated damages ($5,000) exceed actual damages ($4,000).
In a majority of jurisdictions, the nonpermissive requirement is met when
(1) the land is possessed without the owner’s permission and
(2) the possessor objectively demonstrates an intent to claim the land as his/her own
—the possessor’s subjective intent is irrelevant.
the exclusivity requirement focuses only on
the portion of the tract claimed by the adverse possessor—not the entire tract.
A court must balance the equities in determining
whether to issue an injunction.
A joint tenancy is a type of concurrent estate in which
two or more persons each own an undivided and equal interest in property with the right of survivorship
The right of survivorship means that a joint tenant’s interest
disappears upon death and the remaining joint tenants’ interests automatically expand proportionally to absorb it
joint tenant cannot
devise his/her interest at death.
When a foreclosure is conducted by a judicially supervised sale, the foreclosing mortgagee (here, the original owner):
1) must give notice to the holders of any junior interests in the property and
2) make them parties to the foreclosure action so that they can participate or send a representative
—otherwise, the junior-interest holder’s interest will remain after the sale may, but need not, join others who have an interest in the property (e.g., a senior-mortgage holder) or are liable on the debt (e.g., a guarantor) as proper, but not necessary, parties
a valid foreclosure only eliminates interests in the foreclosed property that are
junior to the interest being foreclosed
The doctrine of merger provides that
all obligations contained within a land-sale contract merge into the deed once the deed is delivered to and accepted by the buyer.
Under doctrine of merger, Any obligations contained within the land-sale contract can be enforced thereafter only if
they are incorporated into the deed.
obligations that are collateral to and independent of the conveyance (e.g., the seller’s obligation to remove his/her personal property prior to closing) are usually
not subject to the doctrine of merger.
certain transfers of residential real property are not subject to a due-on-sale clause—including
a transfer to the mortgagor’s living trust
A right of first refusal (ROFR) is
a preemptive right that gives its holder the opportunity to acquire property from a seller before it is transferred to a third party.
right of first refusal provision is valid if
it complies with the statute of frauds, and its terms are reasonable
reasonableness of right of first refusal provision is determined by
balancing the utility of the purpose served by this restraint against the likely harm that would result from enforcing it.
though direct restraints on alienation are invalid, an
ROFR is a reasonable indirect restraint
An express easement arises when
it is affirmatively created by the parties in a writing that complies with the statute of frauds (e.g., a deed).
unless limited by the easement’s express terms, the easement holder has the right to use the servient estate in any manner that is
reasonably necessary to use and enjoy the easement
An easement also anticipates
reasonable and natural development of the easement holder’s land (i.e., the dominant estate).
easement holder may increase the manner, frequency, and intensity of the easement’s use—so long as
that increase does not unreasonably damage or interfere with the use or enjoyment of the servient estate.
Even if the intent to bind successors in interest is not explicitly stated in the lease, it is generally presumed when the covenant
touches and concerns the land.
When a lease covenant does not run with the land, the original landlord
retains the right to enforce it.
RAP does not apply to a right of first refusal where
(1) granted in a lease to a current leasehold tenant or
(2) in most jurisdictions, created in a commercial transaction.
To finance the purchase of real property, a borrower typically executes two documents that serve as evidence of the debt:
Promissory note
Mortgage
Mortgage is recorded in the deed records to
provide notice of an outstanding debt attached to the real property.
A promissory note can be assigned to
another (an assignee) independent of the mortgage.
Once a note has been properly assigned, the mortgage
automatically transfers with the note
A negotiable promissory note can be assigned by
simply endorsing and delivering the note to the assignee
a nonnegotiable promissory note requires
a separate assignment document to transfer ownership.
a judgment obtained against the seller after the execution of the land-sale contract is not enforceable against the real property—even if
the claim arose before the contract was executed. (doctrine of equitable conversion)
A deed that names a nonexistent grantee is
void as to that nonexistent grantee.
if a nonexistent grantee was conveyed an interest in a tenancy in common, then the grantor would
retain the nonexistent cotenant’s interest and have a tenancy in common with the other cotenant(s) named in the deed.
Only the ___________ signature is required to render a deed valid
grantors
If the seller cannot convey marketable title (e.g., due to a zoning violation), the buyer can
rescind the contract and refuse to close; or can choose to accept the land with defect and enforce the contract
if seller refuses to perform, the buyer can
1) rescind the contract and seek restitution
2) seek specific performance with an abatement of the purchase price* or
3) sue for damages.
if buyer seeks abatement of the purchase price, this is
a price adjustment to compensate for the defect.
Under the doctrine of subrogation, a third party (subrogee) who pays another’s mortgage loan in full
becomes the owner of the loan and the mortgage securing that loan to the extent necessary to prevent unjust enrichment
Under the doctrine of subrogation subrogee may seek
reimbursement from the debtor (the former owner) or enforce the mortgage.
A common-interest community is
a real-estate development in which individually owned lots or units are burdened by a covenant that imposes an obligation to pay dues to an association.
