Real Property Flashcards
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Fee Simple Absolute (FSA)
This is the best type of estate.
- —-> A FSA holder has all possible rights that a person may have in that parcel of land.
- —-> May last forever – FSA is alienable, devisable, and descendible.
- —-> One way to terminate: Owner dies w/o a will or heirs, and property escheats to state.
EXAM TIP (terminology): Devisees take by will, heirs take by the law of intestacy in the relevant jurisdiction, and grantees take by inter vivos (literally “between the living”) transfer.
Creation
—–> “to A and his heirs” (CL); “to A” (modern law).
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Definition + 3 types)
An estate that may terminate upon some happening or event before its maximum duration (forever in fee) has run.
3 Types
(1) Fee Simple Determinable
(2) Fee Simple Subject to a Condition Subsequent
(3) Fee Simple Subject to Executory Interest
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Fee Simple Determinable)
Created by durational language—for so long as, during, until, or while.
- —-> “O to A for so long as liquor is not served on the premises.”
- —-> Terminates automatically on happening of a named future event.
- —-> The estate returns to the grantor.
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Fee Simple Subject to a Condition Subsequent)
Created by conditional language (provided however, however if, but if, on condition that, or in the event that) to occurrence of a condition that will terminate estate.
- —-> Power of termination must be expressly reserved to the grantor.
- —-> “A to B, provided that in the event the premises are not used for educational purposes, then A has the power to terminate B’s estate.”
- —-> “A to B, but if B stops using the premises for residential purposes, then A may reenter and retake the estate.”
- —-> “A to B for life, on condition that B uses the land for recreation, but if he fails to do so, A may re-enter and retake the estate.”
If the language is ambiguous, courts interpret the grant as an attempt to create a FSSCS; though, this often fails and the grant becomes a fee simple absolute for lack of a specific power of termination; thus, avoiding a forfeiture of the fee simple estate.
—–> NOTE: Courts disfavor forfeitures.
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Fee Simple Subject to Executory Interest)
Created by either durational or conditional language.
- —-> Termination occurs on the happening of an event that terminates the estate; property then passes to someone other than grantor.
- —-> “A to B so long as B farms the property during his lifetime and, if he does not, then to C.”
- —-> “A to B on condition that B gets married. If B dies without marrying, the property will pass to C.”
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Fee Tail
Common law: An estate that descended to grantee’s children only.
—–> EXAMPLE: “A to B and the heirs of his body.”
Modern law: Fee tails are disfavored and are treated in most jurisdictions as fee simple absolutes.
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Life Estate
Life estates last for the duration of the grantee’s life.
—–> EX: “A to B for life.”
“Life estate pur autre vie” = The duration of the estate is measured by the life of someone other than the grantee.
—–> EX: “A to B for the life of C.” As long as C is alive, B owns the property.
Can be made defeasible.
—–> EX: “A to B for life, as long as B farms the land.”
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Non-Freehold Estates
Term estate = Estate that is limited in duration (basically a landlord-tenant relationship).
—–> Exs: “A to B for 50 years.” or “A to B for 1 year.”
Ownership of Real Property –> Future Interests: Grantor Future Interests - Possibility of Reverter
A future interest in the grantor that follows a determinable estate.
—–> “A to B so long as B farms the land” creates a possibility of reverter in the grantor.
Creation: a fee simple determinable automatically creates a possibility of reverter; no special language needed.
—–> Upon the happening of the event, the land automatically reverts back to the grantor.
Transferability
Common Law: The power of termination could descend through intestacy but could not be devised or transferred inter vivos.
Modern law/Majority: The power of termination is freely transferable, devisable, and descendible.
—–> NOT subject to the Rule Against Perpetuities (RAP) because the grantor’s possibility of reverter has already vested.
Ownership of Real Property –> Future Interests: Grantor Future Interests - Power of Termination (Right of Reentry)
A future interest in the grantor when the grantor attempts to create a FSSCS or a defeasible life estate.
Creation: Not automatic; must be spelled out in the conveyance or it does not exist.
—–> EXAMPLE: “A to B, provided that B uses the premises for residential purposes, but if he does not do so, A may retake and re-enter.” If B ever stops using the premises for residential purposes, A or A’s heirs can enter and retake the property.
Upon the happening of the event, the property does not automatically revert.
- —-> The grantor must exercise the right of reentry and take affirmative steps to retake the property.
- —-> Courts favor a fee simple subject to condition subsequent over a fee simple determinable to avoid an automatic forfeiture.
Transferability
- —-> Common law: The power of termination could descend through intestacy but could not be devised or transferred inter vivos.
- —-> Modern law/Majority: The power of termination is descendible and devisable. However, the power of termination is not transferable inter vivos.
NOT subject to the RAP because the grantor’s power of termination has already vested.
Ownership of Real Property –> Future Interests: Grantor Future Interests - Reversionary Interest
Reversion = A future interest retained by the grantor when the grantor transfers less than a fee interest to a third person.
—–> EXAMPLE: “A to B for life.” A has given a life estate to B but has not provided for who is going to own the land after B dies. The property will return to A after B dies.
Transferability
- —-> Common law: The power of termination could descend through intestacy, but could not be devised or transferred inter vivos.
- —-> Modern law: The power of termination is freely transferable, devisable, and descendible.
NOT subject to the RAP because the grantor’s right has already vested.
—–> The RAP does not apply to any reversionary interests.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Remainder
A future interest created in a 3rd person that is intended to take effect after the natural termination of the preceding estate.
EXAMPLE: “A to B for life, then to C.” C has a remainder.
Contingent Remainder = Any remainder that is not vested.
—–> EXAMPLE: “A to B for life, then to the oldest child of C then living.” This would be a contingent remainder because we do not know who the oldest child is going to be until B dies. There is a condition precedent to that person taking – they must be alive when B dies.
Vested Remainder is vested at the point that it is:
(1) Created in an ascertainable person; and
(2) Is not subject to any condition precedent, other than termination of the preceding estate.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Special Types of Vested Remainders (Vested Remainder Subject to Total Divestment)
A remainder that is presently vested but may be terminated on the happening of a future event.
—–> EXAMPLE: “A to B for life, remainder to C, so long as liquor is never served on the premises.” C has a vested remainder but could lose it by serving liquor on the premises.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Special Types of Vested Remainders (Vested Remainder Subject to Open)
A remainder that has been made to a class and has at least one member who is ascertainable who has satisfied any conditions precedent to vesting, but may have other members join the class later. -----> “A to B for life, then to the children of C.” As soon as C has a child, that child is an ascertainable person and there is no condition to their taking other than the termination of the preceding estate (B’s death). Child would have a vested remainder, but it is subject to open because as other children of C are born, they will also share in the gift.
Class Opening
- —-> Inter vivos conveyance: class opens at the time of the conveyance.
- —-> Testamentary conveyance: class opens at the death of the testator.
Class Closing The RAP can void a future interest. -----> Generally, does not apply to vested interests except vested remainders subject to open. -----> If any member of a class could potentially claim in a way that violates the RAP, the entire class gift fails. -----> Rule of Convenience: Class closes as soon as one member of the class becomes entitled to immediate possession of the property.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Executory Interests (Definition)
Executory Interest = A future interest in a third person that cuts short the previous estate before it would have naturally terminated.
- —-> Because a fee estate has the potential to last forever, any interest created in a third party that follows the granting of a fee will always be an executory interest.
- —-> EXAMPLE: “A to B so long as liquor is not served on the premises in B’s lifetime. If liquor is served on the premises in B’s lifetime, the property will pass to C.” C has an executory interest.
Subject to the RAP.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Executory Interests (Two Types)
Shifting Executory Interest: The interest passes from one grantee to another—i.e. a grantee to a grantee (most common).
—–> EXAMPLE: “A to B so long as B completes law school by age 30. If B fails to do so, then to C.” Shifts the property from grantee B to grantee C.
Springing Executory Interest: The interest transfers from a grantor to a grantee.
—–> EXAMPLE: “A to B for life. Then 20 years after B’s death, to C.” B has a life estate. When B dies, the property reverts back to the grantor, A. 20 years later, the property transfers to C. A’s reversion would be in fee.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Rules Affecting Future Interests (rules abolished in majority of jdxs)
Have a brief understanding of:
• Doctrine of destructibility of contingent remainders
• Doctrine of merger
• Rule in Shelley’s Case
Ownership of Real Property –> Future Interests: Grantee Future Interests - Rules Affecting Future Interests (Doctrine of Worthier Title)
It is worthier to take by descent than by devise, meaning a grantor cannot create a remainder in his or her heirs.
• This is a rule of construction, not law.
EXAMPLE: “A to B for life, remainder to A’s heirs.” Whether or not A included “remainder to A’s heirs,” the property would have gone to A’s heirs via a reversion. Should pass by descent rather than the devise.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Rules Affecting Future Interests (Waste)
Determines what someone who owns land can or cannot do with it.
- —-> Owner of a fee estate can do whatever he or she wants with the property.
- —-> Owner of less than a fee estate cannot commit waste (e.g., harm the property at the expense of the person who will hold it after them).
Three Types of Waste:
(1) Voluntary Waste = A life tenant cannot intentionally or negligently damage property. If they do, they are liable for the damage.
(2) Permissive Waste = A life tenant must take reasonable steps to avoid damage. Failure to do so constitutes permissive waste, and the life tenant will be liable.
(3) Ameliorative Waste = A life tenant makes improvements to the land.
—–> Common law: A life tenant was not allowed to make substantial alterations unless authorized to do so and could be held liable for costs of restoring the land to its previous condition.
—–> Modern law: A life tenant is now allowed to commit ameliorative waste if:
• Market value of the remainderman’s interest is not impaired; and
• It is permitted by the remainderman OR a substantial and permanent change in the neighborhood justifies the improvement.
A remainderman has standing to sue for past or future waste.
- —-> Vested Remainderman: Can sue for damages or an injunction to stop the waste from occurring.
- —-> Contingent Remainderman: Cannot sue for damages and can only sue for an injunction to stop the waste from occurring.
EXAM TIP: Watch out for situations involving the mortgagor/mortgagee relationship and the landlord/tenant relationship. Both relationships are also governed by the doctrine of waste.
Ownership of Real Property –> Special Problems: Rule Against Perpetuities (RAP)
The common law Rule Against Perpetuities provides that “no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest.”
Purpose of the Rule:
- —> The law does not want land tied up forever with ridiculous contingencies that could go on in perpetuity.
- —> The rule attempts to place a limit on contingencies on ownership of land.
The rule deals solely with possibilities.
—-> If you can look at a future interest in a conveyance and can come up with an interpretation where someone could be claiming more than 21 years after everyone currently alive connected to the grant is dead, it violates the rule.
Application
—–> RAP does not apply to present possessory estates.
—–> RAP only applies to three future interests:
• Executory interest;
• Contingent remainder; and
• Vested remainder subject to open
—–> Two other interests subject to the rule:
• Purchase option; and
• Right of first refusal
—–> All other future interests are exempt from the RAP.
Steps for Dealing with a RAP Problem:
(1) Identify the type of interest and make sure the RAP applies:
• Executory interest;
• Contingent remainder;
• Vested remainder subject to open;
• Purchase option; and
• Right of first refusal
(2) Is it possible to interpret the facts so someone can claim an interest more than 21 years after everyone currently alive is dead?
—-> If yes, the future interest is wiped out and interpret the rest of the grant accordingly.
—-> If no, the interest will stand.
Ownership of Real Property –> Special Problems: Restraints on Alienation
EXAMPLE: “A to B for life, but if B tries to sell his interest, then to C.”
Total Restraint
EXAMPLE: “A to B, but if B ever tries to sell the property, then the property will revert to A.”
—> On a fee: This will generally not be valid.
—> On less than a fee: This will be upheld, if reasonable.
Partial Restraint (both are valid, if reasonable)
—> Purchase Option
EXAMPLE: “A to B and her heirs, but A reserves the right to buy back the property at any time during A’s life.”
—> Right of First Refusal
EXAMPLE: “A to B and her heirs, but if B ever attempts to sell during A’s life, B must first offer the property to A at the same price.”
—> Courts look to whether a restraint is limited in scope or time, the purpose of the restraint, the legitimate interests of the party, and whether the restraint is supported by consideration in assessing its reasonableness.
Ownership of Real Property –> Special Problems: Conflicts of Law Related to Real Property
If a property interest is involved, characterize it as either a “movable” or “immovable” interest.
—–> If an interest is closely connected with land (e.g., a leasehold or the right to rents), it is immovable. If it is not, it is movable.
—–> The law of the situs governs all rights in land and other immovables.
• Validity and effect of a conveyance (e.g., the form of the deed or the capacity of the grantor) are governed by the law of the situs.
• Mortgages, their creation, validity, and foreclosure are governed by the law of the situs.
• But the underlying contract or note is governed by law of the place of its making.
• Liens (e.g., mechanic’s or laborers’ liens) are governed by the law of the situs.
Ownership of Real Property –> Cotenancy: Generally
Any time property is being transferred to more than one person to be held concurrently, you have to determine how they are going to hold the property.
o Tenancy in Common = Each co-tenant owns an undivided possessory interest in the whole of the property.
o Joint Tenancy = Each co-tenant owns an undivided possessory interest in the whole of the property AND has a right of survivorship.
Ownership of Real Property –> Cotenancy: Right of Survivorship
If you have property that is jointly owned, and one of the co-tenants dies, the property passes to the surviving co-tenant automatically.
Common Law: A conveyance to two or more people to jointly own property was presumed to create a joint tenancy, unless specifically stated otherwise.
Modern Majority: A conveyance to two or more people to jointly own property is presumed to create a tenancy in common, unless specifically stated otherwise.
You MUST use language to demonstrate that you want the right of survivorship attached to the grant.
—–> EXAMPLE: If A and B own property as joint tenants and B dies, the property automatically passes entirely to A, and A owns the property outright.
The right of survivorship takes precedence over a will or inheritance by intestacy.
—-> If there is a tenancy in common (no right of survivorship) a concurrent interest held in a tenancy in common is freely transferable and can be willed away or inherited through intestacy.
Ownership of Real Property –> Cotenancy: Creation
Traditionally, a joint tenancy requires four unities (TTIP):
(1) Time: Joint tenants must take at the same time;
(2) Title: Joint tenants must take by the same instrument;
(3) Interest: Joint tenants must take equal shares of the same type; and
(4) Possession: Each joint tenant has the right to possess the whole.
Today, most jurisdictions do not require the unities of time and title, only interest and possession.
- —-> Tenancy in common only requires unity of possession.
- —-> EXAMPLE: A and B own a piece of property as tenants in common. A owns 25%, B owns 75%. Each owns the entire parcel, but A owns 25% interest and B owns 75% interest.
Main Differences between Joint Tenancy and Tenancy in Common:
(1) Right of survivorship.
(2) Four unities: time, title, interest, and possession.
Ownership of Real Property –> Cotenancy: Tenancy by the Entirety
A form of concurrent ownership reserved for married couples, which gives each spouse an undivided interest in the whole of the property and a right of survivorship, unless expressly stated otherwise.
- —> Can be created by deed or will, but not by descent.
- —> Not recognized in community property states.
Ownership of Real Property –> Cotenancy: Severance
Tenancy by the Entirety - severance only occurs when:
(1) The spouses jointly convey to a third party;
(2) One spouse conveys to the other spouse; or
(3) The couple divorces.
Severing a Joint Tenancy Creates a Tenancy in Common
—-> Done by an inter vivos act of one of the parties.
• Can seek a partition action.
• Joint tenant sells his interest in the property.
• Joint tenant mortgages his/her interest in the property.
—————> Majority View (Lien Theory Jurisdiction): Mortgage is viewed as a lien on the property, will not sever.
—————> Minority View (Title Theory Jurisdiction): Mortgage is viewed as a title to the property, will sever.
—————> Giving out a lien on the property will not sever a joint tenancy, but transferring title to the property will sever a joint tenancy.
—————> In both types of jurisdictions, the mortgage encumbers only the portion belonging to the mortgagor. In lien theory jurisdictions, if the mortgagor dies before pay-off or foreclosure, the living joint tenant(s) inherits the whole free of the mortgage. If there is a foreclosure before the mortgagor dies, the foreclosure severs the joint tenancy.
Ownership of Real Property –> Cotenancy: Partition
Each co-tenant has the right to seek partition of the property.
o Voluntary Partition: Done by exchange of deeds or selling the property and dividing the proceeds.
o Involuntary Partition: Is the result of a partition action filed by one or more co-tenants in court.
Ownership of Real Property –> Cotenancy: Rights and Duties of Co-Tenants
Possession: Each co-tenant is entitled to possess the whole property.
—–> If a co-tenant is denied possession, they can bring suit for damages and/or ejectment.
Profits
- —-> If a profit is produced by one of the co-tenant’s efforts, then the other co-tenants have no right to share in those profits (unless they’ve been ousted from the property).
- —-> If a profit is generated by a third party (e.g., rent), then all co-tenants are entitled to a proportionate share of the profits.
Expenses
—–> Taxes/Mortgage Payments: Each co-tenant must pay a proportionate share.
—–> Repairs: No direct duty of repair imposed on any co-tenant; however, a co-tenant who makes repairs to the property may be compensated for the amount of the repair by a set-off against any third party rents received or from proceeds in a partition action.
—–> Improvements: Generally, there is no duty imposed on any co-tenant to improve the property. If one co-tenant chooses to improve the property, they cannot get contribution from the other co-tenants.
• Exception: If the property is sold, any amount attributable to the improvement goes to the tenant who made the improvement.
Ownership of Real Property –> Landlord-Tenant: Creation
A lease can be oral or in writing.
—–> A writing is required for a lease term longer than one year.
An implied lease may occur through the conduct of the parties, e.g., where the written lease is never signed, but the tenant pays rent periodically, creating a periodic tenancy.
Ownership of Real Property –> Landlord-Tenant: Types of Leases - Term of Years
A lease that has a definite beginning and end (set date, months, or years).
- —> EXAMPLES: Tenant leases the property for five years; tenant leases the property for one month.
- —> Creation: Express agreement between the landlord (LL) and the tenant for a term specified in the lease. If the duration is for longer than a year, the agreement must be in writing.
- —> Termination: Automatically at the end of the period; no notice is required.
Ownership of Real Property –> Landlord-Tenant: Types of Leases - Periodic Tenancy
A lease with a set beginning date and continues from period to period (e.g., month to month) without a set termination date, until proper notice is given.
—-> Creation: Expressly or by implication with a holdover tenant.
—-> Termination: The landlord or the tenant must give appropriate notice of intent to terminate.
• Appropriate notice must be:
(1) in writing, if the lease or state statute so specifies, otherwise it can be oral; and
(2) equal to the rental period, up to a maximum of six months.
EXAMPLES:
One-month tenancy = 1 months’ notice
Three-month tenancy = 3 months’ notice
One-year tenancy = 6 months’ notice
Timing of Notice
- —-> Common law: Notice had to be given at the start of the rental period.
- —-> Modern law: Notice is good whenever given but it does not take effect until the start of the next rental period.
Ownership of Real Property –> Landlord-Tenant: Types of Leases - Tenancy At-Will
Has no fixed duration and lasts only as long as the landlord and tenant desire.
Creation: Generally, by express agreement of the parties.
Termination: This is a very fragile tenancy, it terminates:
(1) Freely as soon as either party decides (no notice requirement);
(2) If either the landlord or the tenant dies; or
(3) If either party attempts to transfer their interest.
Ownership of Real Property –> Landlord-Tenant: Types of Leases - Tenancy at Sufferance (Holdover Tenant)
Creation: A holdover situation (e.g., The tenant does not move out at the end of the agreed upon tenancy).
A holdover tenant will become either a periodic tenant or a tenant at sufferance.
The determining factor of whether the tenant becomes a periodic tenant or a tenant at sufferance is the landlord:
(1) If the landlord wants the tenant to remain on the land, the tenant becomes a periodic tenant.
(2) If the landlord does not want the tenant to remain on the land, the tenant becomes a tenant at sufferance until the landlord can get the tenant off the property.
(3) Crucial factor: Acceptance of rent from the tenant.
- —–> If the landlord accepts rent from the tenant, this is evidence that the landlord wants the tenant to stay on the land.
If the tenant becomes a periodic tenant, the period is determined by the type of jurisdiction.
——> Common law: The length of the expired lease, with a maximum of one year.
——> Modern law (most jurisdictions): Treat the period as the period for which rent is reserved.
EXAMPLE: T pays rent monthly; the period will be month-by-month.
Ownership of Real Property –> Common Disputes Between Landlord and Tenant: Fight Over Rent - How much rent can the LL sue for?
(1) Tenancy for Years = tenant liable for all unpaid rent in the lease.
- —-> CL: LL could only sue for rent as it accrued.
- —-> Modern Majority Rule: allows for anticipatory repudiation but the LL has a duty to mitigate (make reasonable efforts to re-rent the property)
(2) Periodic Tenancy = tenant liable for rental obligation up until proper notice is given to terminate the lease.
(3) Tenancy At-Will = The tenant is liable for the amount of rent stated in the agreement that is already owed.
- —-> Generally, under this type of tenancy, rent is usually not money—e.g., T can stay as long as T gardens the property.
(4) Tenancy at Sufferance
- —-> The tenant is liable for the reasonable rental value of the property.
Ownership of Real Property –> Common Disputes Between Landlord and Tenant: Fight Over Rent - Tenant’s Defenses (Failure to Deliver Possession)
Majority Rule: The landlord has an obligation to deliver possession of the property to the tenant.
Minority (“American”) Rule: The landlord has no obligation to deliver possession of the premises; the tenant must take it.
Ownership of Real Property –> Common Disputes Between Landlord and Tenant: Fight Over Rent - Tenant’s Defenses (Tenant has Been Evicted)
Actual Eviction = The tenant is physically removed from all, or part, of the property.
—–> A partial, actual eviction excuses the tenant from paying any rent. (Note, this acts as sort of a penalty for the landlord’s bad-faith behavior, which is why the tenant gets complete rent cancellation.)
Constructive Eviction = The landlord has allowed the condition of the premises to deteriorate to the point that the tenant is essentially being forced out. The use and enjoyment of the property is being substantially interfered with.
- —-> Tenant must actually move out within a reasonable time following the acts constituting the substantial interference.
- —-> Even if the acts constituting the substantial interference are due to third parties, the landlord can be liable because the landlord should have had reason to know that the interference would cause a constructive eviction.
- —-> Total Constructive Eviction - Defense to the payment of any rent.
- —-> Partial Constructive Eviction - Reduction in rent only.
Ownership of Real Property –> Common Disputes Between Landlord and Tenant: Fight Over Rent - Tenant’s Defenses (Tenant Surrenders Premises to Landlord)
In order to claim this defense, the landlord must accept the surrender and retake possession of the premises.
——> The landlord will typically be required to mitigate damages via contract law.
Ownership of Real Property –> Common Disputes Between Landlord and Tenant: Fight Over Rent - Tenant’s Defenses (Destruction)
Common law: Generally, did not excuse payment of rent because the tenant was still in possession of the actual land.
—-> Note, there would be a different result had T only leased a portion of the building.
Modern law: No distinction is drawn between leasing all or a portion of the building. Destruction will be a defense to payment of rent.
—-> Exception: If the tenant intentionally or negligently causes the destruction.
Ownership of Real Property –> Common Disputes Between Landlord and Tenant: Fight Over Rent - Tenant’s Defenses (Warranty of Habitability)
An implied warranty that the premises are fit for habitation.
The majority of jurisdictions apply the warranty of habitability to residential leases only. A minority of jurisdictions also extend the warranty of habitability to commercial leases.
Requires the landlord to maintain the premises in a habitable condition.
- —> If the landlord fails to do so, and the premises become uninhabitable, and the tenant moves out, it could be viewed as a constructive eviction.
- —> If there is a problem, but the tenant does not want to move out, the tenant must notify the landlord to correct the problem.
- —>The tenant is obligated to give the landlord a reasonable period of time to fix the problem.
- —>If the landlord has not done what is necessary, the tenant can do what is necessary and offset the costs of doing so against rent that is owed.
Rule: To claim a breach of implied warranty of habitability, the tenant must:
(1) Provide the landlord with notice; and
(2) Allow the landlord reasonable time to repair the problem.
There are other statutory obligations imposed by each state.
Ownership of Real Property –> Common Disputes Between Landlord and Tenant: Fight Over Rent - Tenant’s Defenses (Other K Defenses)
Impossibility, impracticability, and frustration of purpose.
Violation of quiet use and enjoyment of the property.
Ownership of Real Property –> Condition of the Premises and Who has the Obligation to Maintain
Landlord’s Obligations
—-> Common law: Absent an express promise in the lease, the landlord has no obligation to maintain or repair leased premises.
—–> Modern law: An implied warranty of habitability and other statutory obligations may apply.
—–> Additional Liability in Tort:
• Tort land occupier duties owed (invitees, licensees, trespassers). Who owes the duty? Not the owner, but the possessor. During the lease, the tenant has possession so the tenant owes the duties.
• The landlord retains a duty for common passageways and other areas under the landlord’s control (stairs, hallways etc.).
• If the landlord rents the premises with a known defective, dangerous condition not readily apparent to the tenant, the landlord retains liability until the tenant has had reasonable time to inspect and repair.
Tenant’s Obligations
—–> Common law: No obligation to repair the leased premises.
—–> Duty to Avoid Waste:
• Voluntary Waste: The tenant is liable if the tenant intentionally, or negligently, damages the property.
• Permissive Waste: The tenant must take steps to guard against damage to the property.
• Ameliorative Waste:
(1) Common law: The tenant had no obligation to make improvements and the landlord could hold the tenant liable.
(2) Modern law: The tenant can make improvements if expressly authorized, or if there is a change in circumstances that warrants the improvements to be made (provided that the improvement does not depreciate the value of the property).
- —-> Security Deposits: (Three kinds)
(1) A true security deposit, that is returned to tenant at end of lease, minus funds used to repair damage done by tenant;
(2) A deposit to be forfeited in the event of default; and
(3) A deposit denominated as advance rent for the last period of the lease.
Ownership of Real Property –> Fight Over Possession
Rule: The landlord can retake the property if the tenant has committed a material breach of the lease.
—-> Common law: The landlord was entitled to use reasonable force to retake possession of the premises from the tenant.
—-> Modern law: The majority of jurisdictions no longer allow the use of any force and the landlord must use the legal process.
• Generally, the landlord has to give the tenant notice to either cure the breach or vacate.
• There will then be a judicial hearing to determine whether the tenant has committed a breach, and if so, the tenant will be evicted.
Courts will not uphold a retaliatory eviction.
Ownership of Real Property –> Dispute Over Improvements
Common law: Anything, except for a trade fixture, affixed to the land became part of the land and had to stay.
—-> “Trade fixture” = Any item used in the course of the tenant’s trade or business.
• Rule: A trade fixture could be removed unless removal would cause substantial damage to the property.
Modern law: If the fixture can be removed without affecting the premises, the tenant is entitled to remove the fixture (no distinction between regular and trade fixtures).
—-> If the fixture can be removed, and the premises left in substantially the same condition as when the tenant arrived, then the tenant is entitled to remove the fixture before leaving the premises.
—-> If something is removable, it must be removed before the expiration of the lease.
• Exception: Some jurisdictions will give tenants a reasonable amount of time after the expiration of the lease, if the tenant has no way of knowing when the tenancy will terminate, e.g., a tenancy at will.
Presumption: Structural changes cannot be removed because the premises cannot be returned to substantially the same condition as when the tenant arrived.
Ownership of Real Property –> Assignment and Subletting: LL’s Transfer of Interest
Who is entitled to collect the rent? The landlord of record, on the date the rent is due, is entitled to that rent.
Ownership of Real Property –> Assignment and Subletting: Tenant’s Transfer of Interest
Assignment versus Sublease
- —> Assignment = Tenant transfers all of the remainder of the interest (rental obligation) to a new party.
- —> Sublease = Tenant transfers less than the entire interest in the contract.
Is the new tenant an assignee or a sublessee?
- —> Assignee = If a tenant transfers all of the remainder of the rental obligation.
- —> Sublessee = If a tenant transfers only a portion of the time left on the rental obligation.
Ownership of Real Property –> Assignment and Subletting: Liability of Parties
Assignment:
- —> The assignee comes into privity of estate with the landlord, while the tenant remains in privity of contract with the landlord.
- —> Assignee is liable to the landlord for rent, unless he or she re-assigns to a new assignee who takes over privity of estate.
- —> The tenant is liable to the landlord for rent, even after assignment, unless there is a contract novation.
Sublease:
- —> The sublessee comes into privity of estate and privity of contract with the tenant, owing the tenant rent.
- —> The tenant continues to owe rent to the landlord.
Ownership of Real Property –> Assignment and Subletting: Covenant to Pay Rent
Can be enforced by the landlord against the original tenant because of the contractual nature of the relationship.
In order for the original landlord to enforce against a new tenant, the requirements for a covenant running with the land must be satisfied:
- —> Key issue = Vertical privity. An assignee is in privity of estate with the landlord but a sublessee is not, so a covenant can be enforced against an assignee but not a sublessee.
- —> If the landlord is not receiving rent, this is a material breach of the lease and the landlord can have the assignee or sublessee evicted.
If there is more than one transfer, only the original tenant and the current tenant are liable to the landlord for rent.
—-> Middle-of-the-chain assignees are not liable to the landlord, only to the original tenant.
Ownership of Real Property –> Assignment and Subletting: Transfer of Interest in Leases
Generally, interests in leases are fully transferable.
To prohibit both an assignment and a sublease, the lease must specifically state that both are prohibited.
Consent: A consent clause in the lease that does not state a standard or condition for giving or withholding consent is commonly known as a “silent” consent clause.
—-> Traditional/Majority Rule: A silent consent clause gives the landlord the right to withhold consent for any reason, or for no reason at all, even if withholding consent is arbitrary and unreasonable.
o This rule is subject to any applicable statutory housing discrimination laws.
—-> Minority Rule: Requires the landlord to be reasonable in withholding consent for an assignment.
Rule in Dumper’s Case: If there is an express prohibition against an assignment in a lease, and the landlord either expressly or impliedly waives that restriction, once waived it is deemed waived for the remainder of the lease except if specifically stated otherwise.
Rights in Land –> Covenants that Run with the Land: Covenants v. Equitable Servitudes
Covenants when breached lead to an award of damages.
—-> Equitable servitudes lead to the granting of an equitable remedy, such as an injunction.
An implied reciprocal servitude, where one owner sells lots w/ restrictions that benefit the land retained by that owner, after which the owner cannot violate the same restriction.
—-> The restriction becomes mutual, benefits that owner’s land, and the land sold.
Rights in Land –> Covenants that Run with the Land: Creation of Covenants - Generally; Mnemonic
Creation: For a covenant to run with the land, the following elements must be met (mnemonic: PINT): Privity, Intent, Notice, and Touch and Concern.
Rights in Land –> Covenants that Run with the Land: Creation of Covenants - Privity
Horizontal Privity = The relationship between the original covenantor and covenantee.
Requires privity of contract in connection with the land.
- —> Landlord/tenant
- —> Grantor/ grantee
- —> Mortgagor/mortgagee
Vertical Privity = The relationship between an original party to a running covenant and the successor in interest to the original party.
—-> In order for the burden to run, privity of estate will only exist when the holder of the servient estate transfers all of his interest in the servient estate to the new owner.
Rights in Land –> Covenants that Run with the Land: Creation of Covenants - Intent
The writing (Statute of Frauds applies) must include language that shows the parties’ intent for the covenant to run with the land and bind successors in interest.
EXAM TIP: The Statute of Frauds requires that all promises made for the purchase and sale of real property must be in writing to be enforceable.
—-> Remember to check for Statute of Frauds issues anytime you see transactions involving real estate or interests in real property created or transferred for example, by a covenant or easement, on the bar exam.
Rights in Land –> Covenants that Run with the Land: Creation of Covenants - Notice
The current owner of the servient estate must take with notice of the restriction
—-> Requirement on servient side only.
Recordation will provide notice.
- —> Actual Notice (what you know).
- —> Constructive Notice (recordation).
- —> Inquiry Notice (you learned enough information that would lead a reasonable person to inquire further, but failed to do so).
Rights in Land –> Covenants that Run with the Land: Creation of Covenants - Touch and Concern the Land
Servient Estate: The restriction must reduce the use and enjoyment of the servient estate.
Dominant Estate: The restriction must increase the use and enjoyment of the dominant estate.
Affirmative restriction (reqs burdened estate to do something) v. negative restriction (reqs burdened estate not to do something)
Rights in Land –> Covenants that Run with the Land: Creation of Equitable Servitudes
Touch and Concern the Land:
(1) The burden must run with the servient estate;
(2) The benefit must run with the dominant estate.
Intent: The writing (SoF applies) must include language that shows the parties’ intent for the restriction to run with the land and bind successors in interest.
—–> NOTE: If the P cannot show intent in a writing for the covenant to run, he may nevertheless establish intent by showing a common scheme.
Notice: The current owner of the servient estate took with notice (actual, constructive, or inquiry).
Relief: Can be enforced in equity through an injunction; damages are not available.
Rights in Land –> Covenants that Run with the Land: Implied Reciprocal Servitude
To create an implied reciprocal servitude, look for a filed declaration containing the restrictions (called CC&R’s – covenants, conditions, and restrictions).
- —> The Statute of Frauds does not apply (no req of a writing, because it can be implied).
- —> Works for negative restrictions only.
One way to impose a reciprocal servitude is by showing a common scheme or plan.
- —> Restriction must be part of a common scheme or plan for development of the area and the current owner takes with notice of the restriction.
- —> An implied reciprocal servitude is imposed on any lot that does not contain the restriction if a common scheme was evident at the time of the conveyance of those lots.
- —> Factors to show a “common scheme”:
(1) A large percentage of lots expressly burdened;
(2) Oral representations to buyers;
(3) Statements in advertisements to buyers; or
(4) Recorded plat maps or other declarations. - —> Enforcement: can be enforced by:
(1) The original grantor;
(2) Any purchaser affected by the common scheme; or
(3) A condo or subdivision association for common land conveyed to it.
Rights in Land –> Covenants that Run with the Land: Ways to Terminate a Covenant or Equitable Servitude
(1) Written release;
(2) Merger of the dominant and servient estates;
(3) Abandonment;
(4) Estoppel; or
(5) Changed circ’s so that the reason behind the restriction is no longer valid.
Rights in Land –> Covenants that Run with the Land: Property Owners’ Associations
Generally, property owners’ associations have standing to enforce covenants and equitable servitudes.
Rights in Land –> Easements: Definitions (Servient Estate v. Dominant Estate)
Servient Estate = The estate that is burdened by the easement (must always have a servient estate).
Dominant Estate = The estate that is benefited by the easement (do not always have to have a dominant estate).
Rights in Land –> Easements: Definitions (Easement Appurtenant v. Easement in Gross)
Easement Appurtenant = Benefits a parcel of land; the dominant estate.
Easement in Gross = Benefits a person or entity rather than a piece of land (no dominant estate).
Rights in Land –> Easements: Creation of Easements - 3 Ways
Can be created:
(1) expressly,
- —-> A writing must satisfy the Statute of Frauds.
(2) by implication, or
(3) by prescription.
Rights in Land –> Easements: 3 Part Test
o Was an easement ever properly created?
o What is the scope of the easement?
o Has the easement been terminated?
Rights in Land –> Easements: Creation of Easements - By Implication (Easement Implied by Prior Use)
4 Reqs:
(1) Severance of title to land held in common ownership;
(2) The use giving rise to the easement was in existence at the time of the severance;
(3) The use was apparent and could be discovered upon a reasonable inspection; and
(4) At the time of severance, the easement was necessary for the proper and reasonable enjoyment of the dominant tract.
Rights in Land –> Easements: Creation of Easements - By Implication (Easement By Necessity)
2 Reqs:
(1) Common ownership of the dominant and the servient estate, then severance; and
(2) Strict necessity for the easement at the time of severance.
Rights in Land –> Easements: Creation of Easements - By Implication (Easement By Plat)
A buyer in a platted subdivision acquires an implied easement to use streets, alleys, and parks in the subdivision.
Rights in Land –> Easements: Creation of Easements - By Prescription (Adverse Possession)
If someone actually, openly, notoriously, and exclusively uses land with hostile intent for the statutory period.
Rights in Land –> Easements: Scope of Easements
If an express easement states a particular use, then that is the only allowable use.
—–> Otherwise, an easement can be used to the extent that it is reasonably necessary to do so.
• This does not terminate the easement; however, the holder of the servient estate can sue for an injunction or damages.
The holder of the easement may do what is reasonably necessary to maintain the easement, even if it interferes with the servient owner’s use of their property.
Rights in Land –> Easements: Termination of Easements - Destruction of the Servient Estate
Generally, destruction of the servient estate will terminate an easement unless the owner of the servient estate intentionally caused the destruction.
Rights in Land –> Easements: Termination of Easements - Termination Based on the Actions of the Easement Holder
Merger of Title:
—-> Occurs when the owner of the dominant estate also acquires the servient estate.
Written Release:
—-> Expressly terminates the owner’s rights in the easement (must satisfy the Statute of Frauds).
Abandonment:
—-> Requires proof of intent to abandon and an affirmative act in furtherance of the intent.
Estoppel:
—-> The owner of the servient estate foreseeably and detrimentally relies on the easement holder’s action/abandonment.
Severance:
—-> The owner of the dominant estate tries to sever the easement from the dominant estate (only arises with easements appurtenant).
Rights in Land –> Easements: Termination of Easements - Termination Based on the Actions of the Owner of the Servient Estate
Prescription:
—-> The owner of the servient estate interferes with the use of the easement for the statutory period.
The Servient Estate is Sold to a Bona Fide Purchaser:
—-> Pays value and takes without notice.
End of Necessity:
—-> For an easement created by necessity, the easement ends when the necessity ends.
Rights in Land –> Profits
A profit is a nonpossessory interest in land. The holder of the profit has the right to go on someone else’s land and take something off of it.
—-> EXAMPLE: Permission to log trees of a certain size on the owner’s land.
Creation:
—-> Can only be created expressly or by prescription (analysis is otherwise the same as easements).
Profits are transferable.
Termination:
—-> Same as easements.
Rights in Land –> Licenses
A license is a privilege, usually to do something on someone else’s property—i.e. go on the land.
- —> This is a personal right, not an interest in the land.
- —> Can be oral (no Statute of Frauds analysis).
- —> Licenses are freely revocable at any time, for any reason.
- —> Licenses are not transferable unless the licensor so intends.
- —> Licenses terminate on the death of the licensor or the conveyance of the servient estate.
Rights in Land –> Licenses: Exceptions - License Coupled with an Interest
The licensee purchases personal property that is located on the licensor’s property and is given permission to come onto the land to claim that property.
Rights in Land –> Licenses: Exceptions - Executed License
The licensee expends money or labor in reliance on the license; license is irrevocable until the person gets value out of the expenditure.
Rights in Land –> Fixtures
A fixture is a chattel (personal property) attached to the land
- —-> A chattel becomes a fixture if it is owned by the landowner and is so necessary or convenient to the use of the land that it is regarded as part of the land.
- —-> The intent to annex a chattel is a question of fact, judged by the reasonable person standard.
- —-> A deed to the land transfers all fixtures on the property, unless buyer and seller agree otherwise.
- —-> A mortgage covers the land and all its chattels, no matter when the chattels are annexed.
Rights in Land –> Zoning: Authority
Power to Zone: Granted by statute from a state to a city, county, township, or other appropriate political subdivision.
- —-> It gives the political subdivision the ability to divide its geographical areas into zones where some uses are permitted and other uses are prohibited.
- —-> Ordinances that do not conform to state enabling acts are unauthorized.
Rights in Land –> Zoning: Classifications
Common classifications include: residential, commercial, agricultural, industrial, spatial, and mixed-use.
Rights in Land –> Zoning: Purpose
Must promote the public health, safety, prosperity, morals, or welfare.
Rights in Land –> Zoning: Uniformity
Must be uniform for each class or kind of buildings and uses throughout each district, but the regulations in one district may differ from those in other districts.
Rights in Land –> Zoning: Scope
Regulations in each district may regulate, restrict, permit, prohibit, and/or determine:
(1) Use of land, buildings, and structures;
(2) Size, height, area, location, construction, repair, and removal of structures;
(3) The areas and dimensions of land, water, and air-space to be occupied and open spaces to be left unoccupied; or
(4) The excavation or mining of soil or other natural resources.
Rights in Land –> Zoning: Enforcement - Notice of Zoning Violation
When a property is found to be out of compliance with the zoning code, the political subdivision will issue to the property owner a Notice of Zoning Violation.
Cease and Desist:
The notice may contain instructions to cease and desist from a certain use, or instructions on how to modify the property to bring it into compliance, or how to cure the violation.
—–> If the property owner does not protest the notice, and does not bring the property into compliance, the political subdivision may:
(1) Obtain a court-ordered injunction to enforce the notice;
(2) Apply civil fines until compliance is achieved; or
(3) Require a zoning violation to be recorded to alert potential buyers (some states).
Challenges:
A Notice of Zoning Violation must include information on how to protest the notice by appealing to the local board of zoning appeals.
—-> If relief is not granted, an appeal to a court must be provided.
Tenants and Occupiers:
While the property owner is always liable for civil zoning violations, whether committed by the owner or a tenant or other occupier, in most jurisdictions a tenant or other occupier who is committing the violation is also liable.
—-> An owner, however, cannot be liable for a criminal misdemeanor committed by the tenant or occupier because the element of intent is lacking.
Rights in Land –> Zoning: Constitutional Limitations - In General
The Due Process Clause of the Fourteenth Amendment provides for both procedural and substantive due process.
PDP
Requires notice and an opportunity to be heard
—–> When a property owner receives a Notice of Zoning Violation, and appeals it to the local board of zoning appeals or other administrative board, there is a public hearing. If the owner does not receive relief, an appeal to the courts must be provided.
—–> When a property owner requests a variance from the zoning code, the owner is entitled to a public hearing that has been noticed to all who might take an interest in the request, including nearby property owners. If relief is not granted, an appeal to the courts must be provided.
—–> Where appeal to the court is taken, the court reviews the administrative decision to see if it was illegal, arbitrary or capricious, or unsupported by a preponderance of the evidence.
SDP
—–> A zoning ordinance violates substantive due process if it is arbitrary and capricious, meaning that it is not reasonably related to public health, welfare, or safety.
EPC
- —-> A zoning ordinance may give rise to an equal protection challenge if similarly situated people are treated differently.
- —-> However, where there is no fundamental right impacted, and where there are no suspect classifications, then the rational basis test will be applied.
1A
—-> A zoning ordinance may also be subject to a First Amendment challenge if it regulates billboards or aesthetics.
Rights in Land –> Zoning: Constitutional Limitations - Protection of Preexisting Property Rights (Takings)
The 5A provides that private property shall not be taken for public use without just compensation (applies to the states through the DPC of the 14A).
- —> A land-use regulation is a “taking” if it denies an owner all reasonable, economically beneficial uses of his or her land [Lucas v. South Carolina Coastal Council].
- —> To analyze regulations that merely decrease economic value, the court uses a balancing test to determine if there is a taking, which happens rarely, considering the following factors:
(1) The economic impact of the regulation on the claimant;
(2) The extent to which the regulation has interfered with distinct investment-backed expectations; and
(3) The character of the governmental action.
Rights in Land –> Zoning: Rezoning
If rezoning is inconsistent with a comprehensive plan for that area, then it must be based on a change of conditions in the land, neighborhood, environment, or public opinion.
Rezoning of a particular piece of land is quasi-judicial and requires procedural due process.
—-> A broader rezoning is legislative.
An owner may petition for a rezoning to change the classification; however a use variance or special use permit is much easier to obtain.
Rights in Land –> Zoning: Zoning Changes - Nonconforming Use
A nonconforming use is a use permitted by zoning statutes or ordinances to continue, notwithstanding the fact that similar uses are not generally permitted in the area.
- —> A nonconforming use may not be expanded or rebuilt after substantial destruction.
- —> Local ordinances often prohibit the enlargement, alteration, or extension of a nonconforming use.
- —> Some local ordinances require certain nonconforming uses to be amortized (reduced) over a specified period, at the end of which they must be terminated.
Rights in Land –> Zoning: Zoning Changes - Variances
A variance is the permission by the local zoning authorities to use property in a manner forbidden by the zoning ordinances in order to alleviate conditions peculiar to a particular parcel of property.
- —> If a variance is sought from an area restriction, the petitioner must show that there are practical difficulties in meeting the requirements of the zoning code or that the requirements are unreasonable or create an undue hardship.
- —> If the variance is sought from a use restriction, the petitioner must show undue hardship, meaning that, without a use variance, there is no viable use of the property.
Rights in Land –> Zoning: Zoning Changes - Special Use Permits
A special use permit is required for uses in an area not zoned for those uses, but which would be beneficial to the public welfare and compatible with the area.
—-> An applicant for a special use permit is entitled to a public hearing that has been noticed to all who might have an interest in the application, including nearby property owners.
Rights in Land –> Zoning: Zoning Changes - Conditional Use Permits
A conditional use permit is required for uses in an area not zoned for those uses, but which would be beneficial to the public welfare, and compatible with the area if certain conditions are met.
- —> Granted only if the applicant agrees to meet the additional conditions.
- —> An applicant for a conditional use permit is entitled to a public hearing that has been noticed to all who might have an interest in the application, including nearby property owners.
Rights in Land –> Zoning: Zoning Changes - Spot Zoning
A parcel, or small area, may be zoned for a use or structure that is inconsistent with the rationale of the overall plan or ordinance; this is called spot zoning.
—-> Spot zoning is illegal when the zoning ordinance is designed solely to serve the private interests of one or more landowners.
Rights in Land –> Zoning: Zoning Changes - Exactions
An exaction is an approval of use in exchange for money or a dedication of land.
Permissible only if:
(1) The local government can demonstrate that the increased public need is causally related (i.e., has an essential nexus) to the owner’s use; and
(2) The amount of the exaction is approximately equal to the additional public cost imposed by the use (i.e., has a rough proportionality to the use).
Rights in Land –> Support Rights: Lateral Support
Right of a landowner to physical support of his or her land in its natural state by adjoining land.
General Rule: A landowner has an absolute right to lateral support; therefore, if the adjoining landowner fails to provide lateral support, the adjoining landowner will be strictly liable for any damages suffered.
If the land has been improved, you should ask yourself the following question: Would the property have subsided anyway, or was it the weight of the improvement that caused the land to subside?
- ——> If the land would have subsided anyway (due to its natural state)—remains strictly liable.
- ——> If the weight of the improvement caused the land to subside, the adjoining landowner is liable only if there was negligence in depriving the neighboring property of lateral support.
Rights in Land –> Support Rights: Subjacent Support
Typical problem: Owner of a parcel will sever the below-ground and above-ground estates and sell the underground (e.g., mineral) rights to someone else; underground landowner excavates and causes above-ground structures to subside.
General Rule: The right of support extends to:
(1) Land in its natural state; and
(2) Buildings existing on the date when the subjacent estate was severed from the surface.
(3) However, the underground landowner is liable for damages to subsequently erected buildings only if he or she is negligent.
Rights in Land –> Water Rights
Riparian View (majority): Anyone who is within the watershed (touches the lake or stream) has a right to make reasonable use of the water. This is the rule for many Eastern states.
Prior Appropriation/Use View (minority): Awards the right to use the water to the first person to take the water for beneficial purposes. This is the rule for many Western states.
Diffuse Surface Water
o Common Enemy Rule (Eastern states): Floodwater can be diverted by any method onto another’s land.
o Civil Law Rule (Western states): No interference with any surface water is allowed.
o Reasonable Use Rule: Surface water can be diverted onto another’s land if using reasonable means to do so.
Contracts –> Creation and Construction: Statute of Frauds
The Statute of Frauds requires a writing for a transfer of an interest in real property.
The writing must be signed by the party to be charged and must include:
(1) Description of the property;
(2) Description of the parties;
(3) Price; and
(4) Any conditions of price or payment, if agreed on.
Contracts –> Creation and Construction: Statute of Frauds Exceptions
Doctrine of Part Performance:
May be used to enforce an otherwise invalid oral contract of sale, provided the acts of part performance unequivocally prove the existence of the contract.
—-> A showing of at least two of the following three facts must be made:
(1) Payment of all or part of the purchase price;
(2) Taking of possession; or
(3) Making substantial improvements.
Equitable and, under the modern trend, promissory estoppel may be used to prove an oral contract for the sale of land.
- —> Equitable estoppel is based on an act or a representation.
- —> Promissory estoppel is based on a promise.
Contracts –> Equitable Conversion
When a land-sale K is formed, at that point there is a bifurcation of title.
- —-> Equitable title passes to the buyer.
- —-> Legal title remains with the seller until the deal closes.
Majority Rule:
—–> The risk of loss is deemed to follow equitable title; therefore, the risk of loss is on the buyer.
Uniform Vendor and Purchaser Act (Minority Rule):
—–> The risk of loss remains with the seller until the legal title or possession of the property passes to the buyer.
Contracts –> Marketability of Title
Marketable Title: Every land sale contract, unless expressly stated otherwise, contains an implied covenant of marketable title.
—-> This means that the seller must deliver a title at closing that is reasonably free from defects in both fact and law (not perfect title).
Defects may include:
(1) Unpaid mortgage or lien;
(2) Covenant or easement that restricts use of the land;
(3) Title acquired by adverse possession until the adverse possessor quiets title; or
(4) Existing condition on the land that violates a zoning ordinance.
This covenant only manifests itself at the date of closing.
—-> Majority Rule: A seller may use the proceeds of the sale to remove a cloud on the title and make it marketable.
Contracts –> Merger: General
Covenants in a land-sale contract merge into the deed at closing.
Merger does not apply to collateral matters (e.g., if seller agreed to remove a junk car from the property prior to closing and failed to do so).
Contracts –> Merger: Merger Doctrine (Quitclaim Deed / Warranty Deed + Types)
Merger Doctrine: Because the covenant of marketable title is implied in the contract, and the contract merges into the deed, the buyer cannot assert it and must sue on any covenants now contained in the deed.
- —–> Quitclaim Deed: The buyer cannot sue because this is an “as-is” deed (no warranties/covenants), and the seller conveys whatever interest he or she has.
- —–> Warranty Deed: The buyer can sue on the deed through one of the covenants of title contained in the warranty deed:
(1) General Warranty Deed: Contains all six covenants of title, which covers the period prior to the sale. The seller warrants there are no defects in the chain of title.
(2) Special Warranty Deed: May contain some, or all, of the covenants and typically limits liability only to the period of the seller’s ownership of the land. The seller warrants that no defects have occurred during his or her ownership.
Contracts –> Merger: Covenants of Title in General Warranty Deeds - Present Covenants
Do not run with the land and can be breached only at the time of closing.
—–> The buyer’s successors in interest are unable to sue on these covenants.
Three Kinds:
Seisin: The grantor promises he or she owns the property.
Right to Convey: The grantor promises he or she has the power to convey the property.
Covenant against Encumbrances: The grantor promises there are no encumbrances (visible or invisible) on the property.
Contracts –> Merger: Covenants of Title in General Warranty Deeds - Future Covenants
Run with the land and breach can be at the time of closing or afterwards
Three Kinds:
Quiet Enjoyment: The grantor promises that the grantee will not be disturbed by a third party asserting a valid claim to the land.
Warranty: The grantor promises to defend the grantee against any third-party claim.
Further Assurances: The grantor promises to do everything reasonably necessary to perfect the grantee’s title.
Contracts –> Fitness and Suitability
Residential Homes
Duty to disclose material latent defects known to the seller but not readily observable and not known to the buyer.
—-> Applies to commercial builders and developers of new homes.
—-> Some states extend the duty to all sellers of homes, new or used.
—-> If the seller fails to follow through or has an ongoing duty to make sure the premises are habitable or fit, it may lead to tort liability.
Implied Warranty of Quality
Applies to the sale of new or remodeled homes by builders and developers.
—-> Does not apply to commercial structures.
—-> Covers significant latent defects.
—-> Defects must be discovered within a reasonable time after construction or remodeling.
Contracts –> Real Estate Brokerage
A real estate broker who lists a seller’s real property for sale is the seller’s agent, and as such, owes the seller a fiduciary duty of disclosure.
—–> Under this duty, the broker must disclose any information obtained that would be beneficial to the seller in negotiating the sale of the property.
A real estate broker who contracts with a buyer to assist in the purchase of real property is the buyer’s agent, and as such, owes the buyer fiduciary duties of loyalty and obedience.
- —-> The duty of loyalty requires the broker to give his or her undivided loyalty to the buyer and to put the buyer’s interests before the broker’s own interests
- —-> The duty of obedience requires the broker to follow the buyer’s lawful orders.
A real estate broker who lists a seller’s real property for sale is liable to the buyer for any intentional misrepresentations of facts known to the broker.
Mortgages/Security Devices –> Types of Security Devices: Mortgages - General
An interest in real property that is designed to secure performance of an obligation (usually repayment of a debt).
—–> Mortgages must be in writing to satisfy the Statute of Frauds.
Mortgagor = Debtor, person borrowing the money—issuing a mortgage to the lender.
Mortgagee = Bank; lender—creditor receiving the mortgage.
Two instruments that make up a mortgage:
(1) Mortgage: Document that represents an interest in the land.
(2) Note: Represents the personal obligation of the debtor to repay the debt.
- —-> Generally, the mortgage is deemed “to follow the note,” meaning that when the note has been transferred, the mortgage securing it automatically follows to the transferee.
Creditor’s remedies - choice to sue:
(1) In Personam: Sue on the note; or
(2) In Rem: Foreclosing on the land through the mortgage.
Mortgages/Security Devices –> Types of Security Devices: Mortgages - Deed of Trust
Debtor (settlor) borrows money from the creditor and executes a deed to the property.
—–> This deed to the property is given to a 3rd party (the trustee) who holds on to the deed and will not return the deed to the debtor until the debt is paid.
Mortgages/Security Devices –> Types of Security Devices: Mortgages - Purchase-Money Mortgage (PMM)
A mortgage that covers part, or all, of the purchase price (e.g., as opposed to a mortgage obtained to remodel a kitchen).
- —-> A PMM that is recorded has priority over other types of mortgages.
- —-> To maintain the top priority, the PMM has to be recorded to give constructive notice to future mortgages.
Things to note about PMMs:
(1) Vendor-Purchase Money Mortgage
(2) The buyer borrows money from a third party (typically a bank) to pay off the purchase price and gives a mortgage.
- —-> Note: this has to be one continuous operation; there are not gaps in time for these occurrences.
Mortgages/Security Devices –> Types of Security Devices: Mortgages - Furture-Advance Mortgage
A future-advance mortgage is any line-of-credit (e.g., construction loan) or home-equity loan where $ can be borrowed as it is needed.
—–> If the lender has discretion to advance funds depending on mortgagor’s financial situation, it is called an optional future-advance mortgage as opposed to an obligatory future-advance mortgage.
The most common issue involving future-advance mortgages is the fact that the arrangement is being executed at the present time, but the funds are not being accessed until a date in the future.
—–> The question then involves determining at what point the mortgage attached to the property.
—–> If proper notice is given to future creditors, the mortgage interest attaches on the date that the obligatory future-advance mortgage arrangement is made, not on the date that the funds are actually accessed.
—–> In an optional future-advance mortgage, if the mortgagee has notice when it makes the advance that a subsequent creditor has filed, then the future-advanced mortgage loses its priority.
—–> Split in jurisdictions on what constitutes notice:
Majority view—actual notice is required; Minority view constructive notice is sufficient to protect the creditor.
Mortgages/Security Devices –> Types of Security Devices: Mortgages - Installment Land-Sale Contract
The buyer buys land and agrees to pay off the purchase price in installments.
- —-> The buyer takes possession today, the seller holds on to the deed until the debt is entirely paid.
- —-> Typically, these types of contracts contain a “time is of the essence” clause.
What happens if there is a default?
- —-> If the contract states that time is of the essence, the seller can declare that the buyer breached the contract and the seller keeps the land and all payments to date.
- —-> Because this is such a harsh result, courts look to avoid this outcome and see if time really is of the essence.
- —-> If the buyer was previously late and the seller accepted payment, courts will waive the time is of the essence clause.
Mortgages/Security Devices –> Types of Security Devices: Mortgages - Absolute Deed or “Deed Absolute”
A debtor borrows money then issues a deed to the property to the creditor that looks absolute on its face.
—–> Extrinsic evidence would be required to establish that this was not meant to be an absolute conveyance, rather a disguised mortgage arrangement.
Mortgages/Security Devices –> Security Relationship Theories
What Does a Mortgagee Receive?
(1) Lien Theory:
- —-> The mortgagee receives a lien on the property, the mortgagor retains the right to possess the property and the rights to rents and profits from the mortgaged property.
(2) Title Theory:
- —-> The mortgagor retains possession until default, the mortgagee has the right to rents and profits produced by the mortgaged property.
(3) Intermediate Theory:
- —-> Lien theory deemed to apply until default and then the title theory kicks in.
- —-> The effect is that prior to default, the mortgagor retains the right to possession and rents/profits; upon default, the mortgagee is entitled to possession and rents/ profits.
(4) Duties:
- —-> A person in possession has the duty to manage the property in a reasonably prudent manner (i.e., cannot commit waste).
Mortgages/Security Devices –> Transfers By Mortgagor
The mortgagor (borrower) can make three types of sales of land encumbered by a mortgage:
(1) The buyer takes “subject to the mortgage”
- —-> the buyer has no responsibility to pay on it, either before or after foreclosure;
(2) The buyer “assumes the mortgage”
- —-> the buyer becomes personally liable for it, along with the original borrower; or
(3) The buyer “assumes the mortgage” plus a novation (new contract) with the lender
- —-> the buyer alone is personally liable for paying the mortgage.
In each case, the mortgage remains on the land and is available if the mortgagee (lender) needs to foreclose on it.
Assumption
- —-> If the grantee has assumed, then the grantee is primarily liable and the grantor is secondarily liable.
- —-> If the debt falls into default, the creditor can sue the grantor and the grantor can get an exoneration (court order compelling the grantee to pay the debt paid by the grantor).
- —-> If the grantor makes payments following the transfer, the grantor can sue the grantee for reimbursement.
- —-> Subrogation: grantor is secondarily liable. Can pay off debt to debtor, and then be subrogated to mortgage and note.
Due-On-Sale Clause
—–> Gives the mortgagee the option to require that the entire debt be due and payable upon any transfer (enforceable if in the mortgage).
Mortgages/Security Devices –> Transfers By Mortgagee
Mortgagee (lender) may transfer the note and the mortgage, which travel together.
Mortgages/Security Devices –> Discharge of Debt and Mortgage: Prepayment of Mortgage
There is no right to prepay mortgage debt unless the terms of the mortgage expressly authorize payment.
—–> If prepayment is permitted, it is usually accompanied by prepayment fees, which are routinely upheld.
Mortgages/Security Devices –> Discharge of Debt and Mortgage: Deed in Lieu of Foreclosure
The mortgagor issues a deed in lieu of foreclosure, which takes subject to all mortgages on the property.
—–> Junior lienholders are unaffected.
Mortgages/Security Devices –> Foreclosure: Remedies on Default - Types of Foreclosure
(1) Judicial Foreclosure:
- —-> Judicial proceeding with pleadings, service of process, etc.
(2) Private Sale/Power-of-Sale:
- —-> Occurs without judicial action, pursuant to a power-of-sale clause included in the mortgage documents.
There is no limit to the number of mortgages on a property that one may have (“first in time, first in right” principle applies).
Mortgages/Security Devices –> Foreclosure: Remedies on Default - Deficiency Judgement
When the foreclosure sale raises less money than the amount of the outstanding debt.
Mortgages/Security Devices –> Foreclosure: Remedies on Default - Acceleration Clause
Makes the entire debt become due on the happening of an event, such as a default or sale.
Mortgages/Security Devices –> Foreclosure: Remedies on Default - Debtor’s Remedy = Redemption
Redemption will stop the foreclosure if the debtor pays off all the debt (all payments due and fees paid).
—–> Note: If there is no acceleration clause, the mortgagor can bring the loan current and avoid foreclosure
Equitable Right of Redemption:
- —-> Right automatically exists in interest of equity.
- —-> Exists any time up until there has been a foreclosure sale; until that time, the debtor can redeem by paying off the debt or bringing the loan current, if allowed.
- —-> As soon as the foreclosure sale occurs, there is no more equitable right of redemption.
Statutory Right of Redemption:
—–> Debtor will have a limited time (6-12 months) following the foreclosure sale to go to the buyer and force them to sell the property at the foreclosure price.
Titles –> Adverse Possession: Generally
Legally sanctioned stealing of title to land away from the rightful owner (the law favors productive use of land).
Three major components:
(1) physical,
(2) mental, and
(3) time.
Titles –> Adverse Possession: Physical Component
Rule: Adverse possessor actually, openly, notoriously, and exclusively occupies the land in a manner sufficient to put the true owner on reasonable notice of a cause of action (trespass) against the adverse possessor.
Minority Rule: Requires adverse possessor to also pay taxes on the property.
Titles –> Adverse Possession: Mental Component
Rule: Adverse possessor has to occupy the land with a sufficiently hostile intent.
—-> Hostile = Claiming the land as your own.
Two ways to satisfy this requirement:
(1) Claim of right (claiming the land as your own); or
(2) Color of title (adverse possessor believes he or she has good title to the property under a deed but does not).
Permission to be on the land destroys hostile intent.
—-> Mere knowledge of the adverse possessor by the true owner does not imply permission.
Co-Tenancy Situation:
- —> It is difficult for one co-tenant to adversely possess against another.
- —> The only way it can be done is by one co-tenant ousting the other co-tenant from making any use of the property.
Split of authority on whether encroachment is hostile intent:
- —> Majority Rule: A mistaken encroachment is sufficient hostile intent.
- —> Minority Rule: Hostile intent exists only if the person who was doing the encroaching intended to encroach.
Titles –> Adverse Possession: Time Component - Rule
Rule: An adverse possessor has to be on the land continuously for the statutory period.
- —> Common law is 20 years.
- —> Otherwise, it is determined by statute within the jurisdiction.
- —> “Continuously” is a question of fact based on the nature of the land and the use to which it is being put.
Titles –> Adverse Possession: Time Component - Tacking
Combines adverse possessors periods of possession in order to meet the statutory requirement.
—-> There must be a transfer from one adverse possessor to another in order to allow for tacking.
Titles –>Adverse Possession: Scope of What the Adverse Possessor Obtains
(1) Generally, once the claim has ripened, the adverse possessor can only claim that portion of the land actually occupied.
- —> Exception: An adverse possessor enters under color of title and occupies a significant portion of the parcel described in the flawed deed. When the adverse possessor completes the statutory period, he or she can claim the entire parcel described in the flawed deed.
(2) An adverse possessor typically gets whatever the true owner has.
(3) Future interests cannot be obtained by the adverse possessor until they become presently possessory.
Titles –>Adverse Possession: Disability
A disability (infancy, incompetence, imprisonment) can suspend or toll the running of the statute of limitations if the disability exists at the time the adverse possession starts. ----> The adverse possession period begins to run once the disability ends (e.g., the true owner gets out of jail or turns 18).
Titles –>Adverse Possession: Rights of the Adverse Possessor and True Owner
True Owner:
—-> Can eject the adverse possessor and collect damages up to the point the statutory period has run.
Adverse Possessor:
- —> When the adverse possession begins, the adverse possessor is considered to be the owner against the entire world except the true owner.
- —> Once the statute of limitations runs, the adverse possessor is the true owner as of the date he or she entered the land.
Titles –> Transfer by Deed: Generally
Three requirements for a valid conveyance: donative intent, delivery, and acceptance
Titles –> Transfer by Deed: Donative Intent
The grantor must intend to transfer an interest immediately to the grantee, if the grantor intends the deed to take effect only on the death of the grantor, formalities of a will must be observed.
Titles –> Transfer by Deed: Delivery of the Deed - Generally
Delivery exists if the grantor has the mental intent to transfer the property to the grantee.
Ways to Deliver the Deed:
(1) Grantor Gives Deed to Grantee
(2) Grantor Retains the Deed
(3) Grantor Gives Deed to a Third Party to Give to Grantee (escrow)
Titles –> Transfer by Deed: Delivery of the Deed - Ways to Deliver the Deed (Grantor Gives the Deed to the Grantee)
Rebuttable presumption of delivery that may be rebutted by extrinsic evidence that shows that the grantor did not intend a present transfer.
Titles –> Transfer by Deed: Delivery of the Deed - Ways to Deliver the Deed (Grantor Retains the Deed)
Rebuttable presumption of no delivery.
—-> May be rebutted by extrinsic evidence that shows a delivery was intended.
Titles –> Transfer by Deed: Delivery of the Deed - Ways to Deliver the Deed (Grantor Gives Deed to a Third Party to Give to Grantee)
Doctrine of Relation Back (or relation-back doctrine):
—-> Conveyance to the grantee relates back to the date the grantor gave the deed to a third party.
Conditions on Delivery:
- —> When the grantor hands the deed to the third party and places conditions on the delivery, it gives rise to concerns regarding a situation where the grantor transfers the property to someone else before the condition occurs.
- —> The more conditions the grantor places on the conveyance, the more likely the conditioned conveyance will fail.
Death Escrow:
- —> The typical situation occurs when the grantor gives the deed to the third party, and says, “Give this deed to the grantee when I die.”
- —> Courts will approach this as follows: When the grantor gives the deed to a third party, the grantor is at that point making a present transfer of a life estate to himself and giving a remainder to the grantee.
- —> If the grantor expressly retains the right to reclaim the deed from the third party, there is no transfer of title through the escrow.
Titles –> Transfer by Deed: Acceptance of the Deed by the Buyer
Acceptance is presumed if the transfer is beneficial to the grantee. If the grantee refuses to accept, there is no transfer of property.
Titles –> Deed Suff to Satisfy the SoF
Four written requirements of a valid deed:
(1) Sufficient identification of the parties;
(2) Words indicating an intent to make a present transfer of the property;
(3) Sufficient description of the property; and
(4) The grantor’s signature (the grantee does not need to sign the deed).
Titles –> Transfer by Operation of Law and Will: When Seller Dies Before Closing
If the seller dies after executing a sales contract, but before closing, the decedent’s personal representative must complete the transaction.
—-> The money received goes to the beneficiary who inherits personal property, not real estate, because money is personal property.
Titles –> Transfer by Operation of Law and Will: Inheriting Real Property - Ademption
If a gift of real estate described specifically in a will is not in the testator’s estate at the time of death, the gift is adeemed by extinction, and the beneficiary takes nothing.
If a gift of real estate was made during the testator’s lifetime, but the specific property is still mentioned in the will, the gift is adeemed by satisfaction because the beneficiary has already received it.
If a gift of real estate was made during the testator’s lifetime, but a general devise is in the will (e.g., “one-third of my estate”), then the real estate already received will not be adeemed by satisfaction unless:
(1) Will provides for deducting the gift;
(2) Testator, in writing, declared that the gift was part of the general devise; or
(3) Devisee, in writing, acknowledged that the gift was part of the general devise.
Titles –> Transfer by Operation of Law and Will: Inheriting Real Property - Exoneration
Majority Rule: Inherited real property is taken subject to all outstanding liens and mortgages (estate does not pay them off).
Titles –> Transfer by Operation of Law and Will: Inheriting Real Property - Lapse
Common Law: If a beneficiary predeceases a decedent, any gift to the beneficiary fails.
Modern Law: Many states now have anti-lapse statutes (e.g., beneficiary’s heirs “stand in his shoes” and get the bequest).
A will may also contain alternate instructions in the event that a beneficiary is not alive at the time of the testator’s death.
Titles –> Title Assurance Systems: Recording Acts - Rule
There is a strong presumption that first in time is first in right.
- —> The first person to have a valid claim to property via adverse possession, contract, or deed is the one who presumptively owns the property.
- —> Recording acts can change this by protecting subsequent purchasers.
Titles –> Title Assurance Systems: Recording Acts - 3 Types of Recording Statutes
Race Statute: The person who records first prevails.
Notice Statute: A bona fide purchaser (BFP) for value who takes without notice of any other claim prevails.
• Pays Value = Paying more than a nominal amount (i.e., purchase price or reasonable amount).
• Types of Notice:
—–> Actual Notice: Where you actually know something. What knowledge you actually possess.
—–> Constructive Notice: Comes through the recording acts. As soon as you record a deed, you give constructive notice to the world that the property is yours.
—–> Inquiry Notice: Arises from information that is learned or could have been learned that would lead a reasonable person to inquire further. Held to a standard to notice what a reasonable person would have learned.
Race-Notice Statute: An unrecorded conveyance is invalid against a subsequent bona fide purchaser who takes without notice and records first.
Titles –> Title Assurance Systems: Recording Acts - Indexes (how to record a conveyance)
Tract Index (Minority) A legal description of the tract of land followed by a chronological listing of all conveyances involving that piece of land. -----> You would immediately see any recorded conveyance and will always have constructive notice of a claim to property.
Grantor-Grantee Index (Majority)
Two sets of books where the conveyance is recorded: one arranged by name of the grantor, the other by name of the grantee.
