Real Property Flashcards
How may ownership in real property be transferred?
by sale, by gift, or, upon death, by devise or intestate succession
The seller or donor is called the “grantor,” and the buyer or recipient is called the “grantee.”
Main Categories of Land Interests
Present and future possessory interests in land (which are subject only to the rights of others), and nonpossessory interests in land (which are subject to specific restrictions as to the use of the land).
What is a freehold?
To be categorized as a freehold, an estate must be (i) immobile (either land or some interest derived from or affixed to land) and (ii) for an indeterminate duration (as opposed to a leasehold, which is for a limited duration).
Present Estates
- Fee Simple Absolute
- Defeasible Fees
- Fee Tail
- Life Estate
The owner of a present estate has the right to currently possess the property.
What are the three main types of defeasible fees?
(i) fee simple determinable,
(ii) fee simple subject to a condition subsequent, and
(iii) fee simple subject to an executory interest.
Fee Simple Absolute
- Absolute ownership of potentially infinite duration
- Most common form of property ownership and the broadest ownership interest recognized by law
- “Freely alienable” because it is able to be transferred inter vivos, by will, or intestacy without restriction
- Has no accompanying future interest
Although common law required words of limitation (e.g., “and heirs”), conveyances that are ambiguous (e.g., “to B”) are now considered fee simple by default.
Ex. A conveys Blackacre “to B and his heirs.” C conveys Whiteacre to “B.” Both conveyances give B a fee simple absolute estate in the property.
Defeasible Fees
- Ownership of potentially infinite duration, but may be terminated by the occurrence of an event
- Freely alienable during life and upon death
- Three defeasible fee simples are (i) fee simple determinable, (ii) fee simple subject to a condition subsequent, and (iii) fee simple subject to an executory interest.
If a statement in a conveyance of real property merely indicates a grantor’s desire, intent, or purpose for which the property is to be used rather than imposing a condition on the ownership of the property itself, the property interest is treated as a fee simple absolute, rather than a defeasible fee.
Fee simple determinable
- A present fee simple estate that is limited by specific durational language (e.g., “so long as,” “while,” “during,” “until”).
- Terminates automatically upon the happening of the stated event.
- Future Interest mathc: possibility of reverter
Possibility of reverter
- Type of future interest retained by the grantor in a fee simple determinable
- Upon the occurrence of the stated event, the estate automatically reverts to the grantor or her successors.
- The grantor retains a future interest in the estate, even though the conveyance does not mention this future interest or the grantor as its owner, unless the conveyance provides otherwise.
- A possibility of reverter is freely alienable during the grantor’s life, and upon her death devisable and, if not devised, descendible.
Ex. A conveys Blackacre “to B and his heirs until B gets married.” The estate reverts back to A if B gets married. B has a fee simple determinable in Blackacre, and A has a possibility of reverter.
Executory Interest
- A future interest in a 3rd party that generally cuts the prior estate short upon the occurrence of a specified condition.
- Follows a Fee Simple subject to an executory interest
- Upon the occurrence of the stated event, the passage of the estate is automatic; the third party is not required to take any action in order to become the owner of the estate.
- Freely alienable during life, and upon death devisable and, if not devised, descendible.
- Two types of executory interests: shifting and springing.
Ex. A conveys Blackacre “to B and his heirs until B gets married, then to C.” B has a fee simple determinable in Blackacre, while C has an executory interest. A does not have an interest in Blackacre.
When the future interest is in a third-party grantee, some jurisdictions label the present defeasible fee interest as a “fee simple subject to an executory interest” rather than a “fee simple determinable.”
Fee simple subject to a condition subsequent
- A present fee simple that is limited in duration by specific conditional language (e.g., “provided that,” “on condition that,” “but if”)
- Upon the occurrence of the condition, the grantor (or his successor interest) has the right to terminate this estate, but the termination is not automatic. The present fee simple will terminate only if the grantor affirmatively demonstrates intent to terminate (e.g., by going to court).
- The grantor must explicitly retain the right to reenter. When the grantor fails to retain this right, a court may find that the condition constitutes only a covenant for which the owner may be entitled to damages or an injunction, but that the owner does not have the right to regain possession of the property.
Ex. A conveys Blackacre “to B and his heirs, but if B gets married, then A can reenter Blackacre.” B has a FS subject to a condition subsequent in Blackacre, and A has a right of reentry. If B gets married, B will retain his current possessory estate in Blackacre until A exercises his right to terminate B’s estate. Until A retakes Blackacre, B continues to own the land.
FS determinable v. FS subject to a condition subsequent
- Durational Laungauge v. Conditional Language
- In a FS determinable, the present interest automatically terminates upon the occurance of the stated event. Future Interest is a possibility of reverter.
- In a FS subject to a condition subsequent, the occurance of the stated event brings about a right to reentry, but does not automatically terminate without some further affirmative action by the grantor (or his sucessor in interest).
- If the language in the conveyance is ambiguous, courts typically adopt a preference for the FS subject to a condition subsequent over a FS determinable.
Right of Reentry
A.k.a. “right of entry,” “right to terminate,” “power of termination”
- A future interest retained by the grantor after a fee simple subject to a condition subsequent is granted.
- Must be explicitly retained in the covenant
- In most jurisdictions, this right is freely alienable during life, and upon death devisable and, if not devised, descendible.
- The owner may waive this right, but the mere failure to assert it does not constitute a waiver.
Fee simple subject to an executory interest
also known as a fee simple subject to an executory limitation
- A present fee simple estate that is limited by specific conditional language (e.g., “provided that,” “on condition that,” “but if”), such that, upon the occurrence of the specified event or condition, title will automatically pass to a third party (i.e., someone other than the grantor or the holder of the present fee).
- Future interest is an Executory Interest.
Fee Tail
- A fee tail is a freehold estate that limits the estate to the grantee’s lineal blood descendants by specific words of limitation (e.g., “heirs of the body”).
- The fee tail estate has been eliminated in most states; it is treated as a fee simple absolute estate.
Life Estate
- A present possessory estate that is limited in duration by a life.
- The language in the document must be clear (e.g., “to A for life”), and the duration must be measured in terms of a life, not a unit of time (e.g., years).
- Future Interest: Remainder (3rd party) ot Reversion (grantor) - If no future interest is specifically stated, ownership of the property reverts to the grantor on the death of the measuring life.
- Transferable while the person by whom the life estate is measured is alive, but the interest terminates at the death of the person by whom the life estate is measured.
Ex. A conveys Blackacre “to B for B’s life, and then to C.” B has a life estate in Blackacre, which terminates upon B’s death. C has a remainder. On B’s death, ownership of Blackacre vests in C.
Ex. A conveys Blackacre “to B for life.” B has a life estate in Blackacre, which terminates upon B’s death. A has a reversion; upon B’s death, ownership of Blackacre reverts to A.
Measuring life of a life estate
- Unless the conveyance specifies otherwise, the life of the grantee (i.e., the life tenant) is the measuring life. A life estate measured by the grantee’s life is transerable inter vivos but is neither devisable nor descendible by the grantee.
- May be measured by the life of an individual other than the grantee; known as a “life estate pur autre vie.” When the measuring life survives the life tenant, the life estate may be devised by the life tenant or inherited by the life tenant’s heirs.
Ex. A conveys Blackacre to “B for life.” B has a life estate that is measured by his own life.
Ex. O conveys Blackacre to “A for the life of B, with a remainder to C.” A has life estate for the life of B. A dies before B and devises the life estate to D. D has a life estate until B dies, at which time C’s remainder becomes possessory.
Defeasible life estate
also known as a determinable life estate
- A life estate subject to a condition that may cut it short of the duration of the measuring life
- Qualified by language that specifies one or more events that might cause the life estate to terminate before the death of the individual who serves as the measuring life.
- Future Interest: Executory Interest
Example: A conveys Blackacre “to B for life, but if B remarries, then to C.” B has a defeasible life estate. C has an executory interest.
Rights of a Life Estate Grantee
- Right of Alienation: A life tenant has the right to possess the property, as well as the right to lease, sell, or mortgage his interest in the property.
- Right to Rents: Generally, rents generated from the lease of the property belong to the life tenant.
- Right to Profit: The life tenant may have the right to profit (take natural resources from the land) when the grantor expressly or impliedly gives the life tenant this right. When this right is not expressly or impliedly given, exploitation of natural resources can constitute waste.
- Right to Sale the Property: Generally, a life tenant can only sell her life estate when the future interest holders agree to the sale of the property in fee simple. However, in a majority of jurisdictions, a life tenant may seek a court order compelling the sale of the property in fee simple when future interest holders cannot be ascertained or are unwilling to sell the property. Courts consider equitable factors, such as whether the income generated by property is insufficient to meet the life tenant’s obligations with respect to the property, when deciding whether to compell a sale. The proceeds from the sale are distributed based on the present value of each interest.
Right to Profit in the context of estates
a right to take natural resources from land (e.g., oil, gas, minerals)
“Open Mines” doctrine
When resources are being taken (mined) from the land when an estate becomes possessory, there is a presumption that the grantor intended the grantee to have the right to profit from the resources (mining).
Doctrine of Waste
- A life tenant generally must deliver the property to the future interest holder in substantially the same condition that it was in when she took possession, with allowance for normal wear and tear.
- The owner of property in fee simple absolute who divides ownership of the property into a life estate and one or more future interest may alter or eliminate the applicability of this doctrine to the life tenant. In addition, the future interest holders may consent to the life tenant’s conduct.
- Two kinds of waste, permissive and voluntary.
Permissive waste
- Occurs when the life tenant “permits” the premises to deteriorate through neglect or a failure to preserve or protect the property.
- A life tenant has a duty to make reasonable repairs. This constitutes a personal obligation of the life tenant only to the extent that the life tenant receives a financial benefit from the property (i.e., the amount of income generated by the property, or, if the life tenant uses the property (e.g., farms the land, occupies the residence), its fair rental value).
- In most jurisdictions, the life tenant is not responsible for damage caused by natural forces or 3rd parties that the life tenant could not prevent. For damage to the property caused by a 3rd party, the life tenant and the future interest holder each have the right to sue the 3rd party for damages.
- In most jurisdictions, the life tenant is not under an obligation to insure the land for the benefit of the future interest holder.
Voluntary (affirmative) waste
- Occurs when the condition of the property is substantially changed due to the life tenant’s affirmative action.
- Generally, a life tenant’s affirmative action that results in the diminution in value of the property is prohibited by the doctrine of waste.
Ameliorative waste
Type of waste where the life tenant’s affirmative action substantially changes the condition of the property but does not result in a dimunation of value (e.g., putting up a fence, house renovations)
- Common law: prohibited because the condition of the property was changed.
- Most jurisdictions today: permitted when the change results in reasonable use of the property.
A life tenant has a duty not to change the premises if the future interest holders have a reasonable ground for objection.
- A reasonable ground for objection does not exist if a substantial and permanent change in neighborhood surroundings makes the change necessary to continue reasonable use of the property, and the proposed change is one that an owner of a fee simple estate would typically make.
- In determining the reasonableness of a change, the life tenant’s life expectancy and good faith in making the change are factors to be considered.
Payment of Property Taxes on a Life Estate
- Only assessed to the life estate because they are imposed on an annual basis
- Generally, a personal obligation of the life tenant only to the extent that he receives a financial benefit from the property. Any excess can be assessed against the life estate interest as a lien which can be enforced through a judicial sale.
Payment of a pre-existing mortgage obligation on a Life Estate
Subject to allocation between the life tenant and the future interest holder.
Allocation can vary depending on the type of obligation.
- If the obligation requires only the periodic payment of interest until the principal amount is due, the life tenant is responsible for such interest payments.
- If the obligation requires the periodic payment of both interest and principal, the payment obligation is allocated between the life tenant and future estate holder based on the present value of each interest.
When the holder of a future interest pays the outstanding mortgage obligation because the life tenant fails to do so, the holder can bring an action against the life tenant personally to recoup his payment of the life tenant’s portion of the obligation, but only to the extent of the life tenant’s financial benefit from the property. Any excess can be assessed against the life estate interest as a lien which can be enforced through a judicial sale. A life tenant who pays a future interest holder’s mortgage obligation is entitled to a similar remedy.
Payment of an assessment for a public improvement on a Life Estate
An assessment for a public improvement (e.g., paving road, installing water or sewer lines) typically is subject to allocation between the life tenant and future estate holder.
Dower and Curtesy Rights
At common law, a surviving spouse had a life estate in property owned by deceased spouse. For a widow, this life estate interest was known as a dower right; for a widower, a curtesy right.
Because every jurisdiction now provides other protections for a surviving spouse, such as a surviving spouse’s right to at least a portion of the deceased spouse’s property in fee simple, less than a handful of jurisdictions have retained a surviving spouse’s right to a life estate in the deceased spouse’s property.
Future Interests
A future interest is an ownership interest in presently existing property, which may commence in possession or enjoyment sometime in the future.
- Reversion
- Possibility of Reverter
- Right of Reentry
- Remainder
- Executory Interests
Reversion
- The future interest held by the grantor who grants a life estate or estate for years but does not convey the remaining future interest to a 3rd party.
- Reversions are not subject to the Rule Against Perpetuities.
- A reversion is fully alienable during life, and upon death devisable and, if not devised, descendible.
Remainder
- A future interest created in a grantee that is capable of becoming an estate that is presently possessory upon the natural expiration of a prior estate (e.g., a life estate, estate for years) that is created in the same conveyance in which the remainder is created.
- By definition, a remainder interest cannot follow a defeasible fee interest; a future interest in a 3rd party that follows a defeasible fee is an executory interest.
- Freely alienable
- A remainder can be either vested or contingent.
Vested remainder
An interest that is not subject to any conditions precedent and is created in an ascertainable grantee.
Ex. A conveys Blackacre “to B for life, then to C and his heirs.” Here, the grantee, C, has a vested remainder. There are no preconditions on C’s entitlement to his remainder interest and C, as the designated individual, is an ascertainable grantee.
Vested remainder subject to open
a.k.a. vested remainder subject to partial divestment
When a remainder interest is transferred to persons designated as a group (class gift; e.g., children, grandchildren) and at least one member of the group is individually ascertainable and entitled to the remainder interest, but that person’s interest may be subject to being shared with other members of the group
Ex. A conveys Blackacre “to my son for life, and on his death to his children.” When A conveys Blackacre, his son is alive and has one child. That child has a vested remainder subject to open because his interest in Blackacre may be subject to being shared if A’s son has other children.
Ex. A conveys Blackacre “to my son for life, and on his death to his children who attain 21 years of age.” When A conveys Blackacre, his son is alive and has one child who is 30 years of age. That child has a vested remainder subject to open because his interest in Blackacre may be subject to being shared if A’s son has other children who attain 21 years of age.
Vested remainder subject to complete divestment
A vested remainder where the occurrence of a condition subsequent will completely divest the remainder interest.
Ex. A conveys Blackacre “to B for life, and then to C; but if C has no children, then to D’s children.” C has a vested remainder interest, but if he is not survived by his children at the time of B’s death, then C’s interest will be divested. Consequently, C has a vested remainder subject to complete divestment.
Contingent Remainder
A remainder is contingent if it is created in a grantee that is unascertainable, or if it is subject to an express condition precedent to a grantee’s taking.
Normally occurs when (i) the property cannot vest because the beneficiary is unknown, or (ii) the property cannot vest because the known beneficiary is subject to a condition precedent that has not yet occurred.
At common law, which a few jurisdictions continue to follow, a contingent remainder could not be transferred during life.
Ex. A conveys Blackacre “to B for life, and on his death to his children.” When A conveys Blackacre, B does not have any children. B’s unborn children have a contingent remainder.
Ex. A conveys Blackacre “to B for life, then to B’s children who attain 21 years of age.” When A conveys Blackacre, B has one child who is 10 years old. B’s child has a contingent remainder.
Destruction of contingent remainders
Common law: a contingent remainder was destroyed if it had not vested by the time the preceding estate terminated.
Most jurisdictions today: the grantor’s reversion becomes possessory, and the person holding the contingent remainder takes a springing executory interest, which becomes possessory if the condition precedent is met.
Ex. A conveys Blackacre “to B for life, remainder to C’s heirs.” B and C are alive. Subsequently, B dies and is survived by C.
- At common law, the contingent remainder in C’s heirs was destroyed, and A had in fee simple absolute in Blackacre by virtue of A’s reversion.
- Today, in most jurisdictions, A has a fee simple subject to an executory interest, and C’s heirs have a springing executory interest that will become a fee simple absolute interest on C’s death.
Rule in Shelley’s Case
- At common law, prevented a contingent remainder in the grantee’s heirs. The rule changed the interest that the grantor purported to give to the grantee and his heirs to a vested remainder in the grantee.
- Under the doctrine of merger, when the life estate in the grantee was immediately followed by a remainder in the grantee’s heirs, both the present and future interests were merged, and the grantee took the property in fee simple absolute.
- Most jurisdictions have abolished the Rule in Shelley’s Case, and the grantee’s heirs take the future interest as conveyed in the deed.
Ex. A conveys Blackacre “to B for life, remainder to B’s heirs.”
- If the Rule in Shelley’s Case applies, then after merger of the present and future estate, B owns Blackacre in fee simple absolute.
- If the Rule in Shelley’s Case has been abolished, then B has a life estate and B’s heirs have a contingent remainder in Blackacre.
Doctrine of Worthier Title
- Common law rule that prevents a grantor from creating a remainder in the grantor’s heirs; it applies in a minority of jurisdictions to an inter vivos conveyance.
- The rule creates a presumption of a reversion to the grantor, which is rebuttable by a showing of contrary intent.
Ex. A conveys Blackacre “to B for life, remainder to A’s heirs.”
- If the Doctrine of Worthier Title applies, then B has a life estate, and A has a reversion, unless a contrary intent is established.
- If this doctrine has been abolished, then B has a life estate, and A’s heirs have a contingent remainder.
Shifting executory interest
A shifting executory interest divests the interest of the grantee by cutting short a prior estate created in the same conveyance. The estate “shifts” from one grantee to another on the happening of the condition.
Ex. A conveys Blackacre “to B and his heirs, but if C returns from Paris, then to C.” This conveyance creates a fee simple subject to an executory limitation in B and a shifting executory interest in C.
Executory interest that follows a fee simple determinable
While a future interest that follows a fee simple determinable and is held by a third party (rather than the grantor) is an executory interest, it is not characterized as a shifting executory interest, even though the event results in the estate passing to a grantee, because the executory interest arises naturally out of the termination of the fee simple determinable rather than cutting the fee simple determinable short.
Ex. A conveys Blackacre “to B and his heirs until C returns from Paris, then to C.” This conveyance creates a fee simple determinable subject to an executory limitation in B and an executory interest in C.
Springing executory interest
A springing executory interest divests the interest of the grantor or fills a gap in possession in which the estate reverts to the grantor.
Ex. A conveys Blackacre “to B for life, and one year after B’s death to C and his heirs.” This conveyance creates a life estate in B, a one-year reversion in A (in fee simple subject to an executory limitation), and a springing executory interest in C.
Ex. A conveys Blackacre “to B if she passes the bar.” Creates a Fee Simple Subject to an Executory Condition in A and springing executory interest in B.
Creditor rights to a future interest
Most states permit a future interest to be reached by creditors of the interest holder, except for those interests held by unascertainable or unborn persons or those held in certain trusts (e.g., a spendthrift trust).
Transfer of an interest back to the grantor
Although a remainder or an executory interest is initially created in a grantee, not a grantor, these two future interests retain their designations if transferred back to the grantor.
Ex. A conveys Blackacre “to B for life, and then to C.” C has remainder interest. C conveys her interest in Blackacre to A. A has a remainder interest.
Classification of Interests
It is important to classify the various interests in a disposition clause in order (i.e., from left to right) because the characterization of the first interest usually determines the characterizations of the following interests.
Example 1: A conveys Blackacre “to B for life, then to C if C survives B; but if C does not survive B, on B’s death to D.”
- B has a present life estate.
- C has a future interest, which is a remainder because it can become possessory upon the termination of the preceding possessory interest (i.e., B’s life estate), and it is a contingent remainder because C’s taking is conditioned on C surviving B.
- D also has a future interest, which is a remainder because it can become possessory upon the termination of B’s life estate; it is a contingent remainder because D’s taking is contingent on C not surviving B.
Ex. A conveys Blackacre “to B for life, and on B’s death to C. But if C predeceases B, on B’s death to D.”
- B has a present life estate.
- C has a future interest, which is a remainder because it can become possessory upon the termination of B’s life estate. C’s remainder is vested because C is ascertainable and there is no condition precedent that C must satisfy to take Blackacre. However, C’s vested remainder is subject to complete divestment if a condition subsequent (C predeceasing B) occurs.
- D has a future interest, but it is not a remainder because C’s interest is not an estate of a fixed duration but is instead a fee simple estate, which has an unlimited duration. However, if the condition subsequent occurs, then D would be entitled to take possession of Blackacre, thereby cutting short C’s interest. Consequently, D has a shifting executory interest.
Class Gifts
A donative transfer during life or at death by will to persons as members of a group (e.g., children, heirs). The beneficiaries of the gift are subject to change as is each beneficiary’s share of the gift.
Single-generation class gifts
A gift to a single generation (e.g., children, grandchildren, siblings, nieces and nephews) include only members of that generation.
Gifts to children
A gift to children (e.g., “my children,” “my daughter’s children”) include natural children as well as adopted children but exclude stepchildren who have not been adopted. Natural children can include nonmarital children.
In most jurisdictions, a rebuttable presumption exists that a posthumously born child is the natural child of the deceased spouse if the child is born within 280 days of the spouse’s death. A posthumously born child born more than 280 days after the spouse’s death has the burden of proving that he is the deceased spouse’s natural child.
Multiple-generation class gifts
A multiple-generation class gift other than heirs or next of kin (e.g., descendants, issue) include children of the designated individual as well children of those children, and likewise with regard to more remote generations.
Class gifts to heirs
A class gift to heirs includes individuals who would succeed to the designated individual’s intestate estate if the designated individual died intestate on the distribution date owning only the subject matter of the gift.
Express Survival Contingency
When a gift is expressly conditioned on survival, the donee must satisfy the condition to take the gift.
Gifts that are expressly conditioned on survival include:
- “To A for life, remainder to his surviving children.”
- “To A for life, and should he die leaving surviving children, to such children.”
- “To A for life, and after the death of A, remainder to the children of A then living.”
Implied Survival Contingency
When a gift is to an individual’s heirs, descendants, or issue, it is implied that the donee must survive the individual to take the gift.
Ex. A devises Blackacre “To my spouse for life, and then to her heirs.”
- When Blackacre is devised to A’s spouse, A’s spouse has two children, each of whom are eligible to be her heirs. At the time of the death of A’s spouse, one of her children has predeceased her without ever having children. Blackacre passes to the surviving child of A’s spouse.
Ambiguous Survival Contingency
If a survivorship contingency is ambiguously stated in a conveyance, the majority view is that the contingency applies at the termination of the interest that immediately precedes distribution of the remainder.
A minority approach interprets a survivorship contingency to require the future interest holder to survive only the grantor (e.g., testator) and not the holder of the interest that immediately precedes the remainder interest (e.g., life tenant).
Ex. A conveys Blackacre “to my spouse for life, and then to my children who survive.” When A dies, A has two surviving children, C and D. When A’s spouse dies, A has only one surviving child, C.
- Under the majority view, only C takes Blackacre, as only C has survived to the distribution of the remainder.
- Under the minority view, both C and D are entitled to Blackacre, as both survived A, the grantor. D’s interest passes to D’s estate.
Rule Against Perpetuities
- Specific future interests are valid only if they must vest or fail by the end of a life in being plus 21 years, with a fraction of a year added for the term of gestation in cases of posthumous birth.
- Tests the future interest as of the time that it is created (ex. a future interest created by a will is tested as of the testator’s death)
- If there is any possibility that it will not be known whether the interest will vest or fail within that period, then the Rule has not been satisfied.
- Ask “what is the lastest possible time this interest could vest?”
- If a future interest fails to satisfy the Rule, then only the offending interest fails. In the rare case when the voiding of the future interest undermines the grantor’s intent, the entire transfer is voided.
Ex. A conveys Blackacre “to B for life, and then to the first male descendant of B, then to C.”
- This provision violates the Rule because it may be many generations before there is a male descendant of B, if at all. The opportunity for B to have a male descendant does not end after he dies.
Example 2: A conveys Blackacre “to B for life, and then to B’s first son who reaches the age of 18, then to C.”
- This provision is valid because any son of B will attain age 18 within 21 years after B’s death.
Future Interests Affected by the Rule Against Perpetuities
It does not apply to future interests that are held by the grantor (i.e., reversion, possibility of reverter, right of reentry).
The Rule applies only to the following interests:
- contingent remainders,
- vested remainders subject to open,
- executory interests, and
- powers of appointment.
The Rule may apply to
- Rights of first refusal and options unless they arise in commercial transactions
- beneficiaries’ equitable interest in a trust
Measuring Lives for the Rule Against Perpetuities
A measuring life must be human, but there can be more than one measuring life, provided the number of such lives is reasonable.
If a measuring life is not specified, then the measuring life is the life directly related to the future interest that is subject to the Rule.
If there is no measuring life, then the applicable vesting period is 21 years from the time that the future interest is created.
Ex. A devises Blackacre “to B for life, and then to B’s children who reach the age of 25.” B’s life is the measuring life.
Ex. A devises Blackacre “to a charity for so long as the property is used as an animal shelter, and then to C.” Because there is no measuring life, C’s interest must vest or fail within 21 years of the creation of C’s interest in order to satisfy the Rule. Since there is no guarantee regarding the future use to which Blackacre is put, C’s interest violates the Rule.
Rule against perpetuities and class gifts
If the transfer of a future interest is made to a class, and the Rule voids a transfer to any member of a class, then the transfer is void as to all class members, even those whose interests are already vested (i.e., “bad as to one, bad as to all”).
Two main exceptions:
- Transfers of a specific dollar amount to each class member (e.g., “$50,000 to each grandchild who survives his parent”)
- Transfers to a subclass that vests at a specific time (e.g., “to the children of B, and upon the death of each, to that child’s issue”)
- With these exceptions, any person who is entitled to the transferred interest is not prohibited from taking that interest simply because there are other members of the class who are prohibited from taking the interest.
EXAM NOTE: Beware of fact patterns with class gifts to grandchildren of an inter vivos grantor instead of a testator. An inter vivos transfer is more likely to violate the Rule because the grantor could have another child after the gift, while a deceased testator cannot.
Ex. A devises Blackacre “to B for life, and then to B’s children who graduate from college.” At the time of A’s death, B had two children: X, who had graduated from college, and Y, who had not. X has a vested remainder subject to open; Y, as well as any afterborn children of B, has a contingent remainder. At the time of B’s death, Y has also graduated from college, and B has had a third child, Z, who is in elementary school. Because it may take Z more than 21 years to graduate college and thereby vest his interest, not only is Z’s interest void under the Rule, but X and Y’s interests are also void.
Rule of convenience
- A rule of interpretation which can operate to prevent the application of the Rule against Perpituities to a class transfer.
- Under this rule, membership in a class closes whenever any member of the class is entitled to immediate possession of a share of the class gift.
- Does not apply when the grantor specifies that the class should remain open even though a member of the class is entitled to immediate possession of a share of the class gift.
Ex. A conveys Blackacre “to B for life, and then to B’s grandchildren.” At the time of the conveyance, B has one grandchild, X. X has a vested remainder subject to open. Although B may have grandchildren born more than 21 years after B’s or X’s death, the class will close upon B’s death because B has a grandchild, X. Consequently, X and any other grandchildren born prior to B’s death will take Blackacre. The Rule will not apply to void their interests in Blackacre.
Ex. Same as above, except that B has no grandchildren at the time of the conveyance. After the conveyance, B has a child, C. Then, A, B, and all of B’s children die themselves childless, except C. Twenty-two years later C has a child, G. Since G’s interest will not vest within a life in being plus 21 years, and there is no member of the class who was entitled to immediate possession of a share of the class gift on B’s death, the contingent remainder in B’s grandchildren is void under the Rule and is not saved by the rule of convenience.
Charity-to-charity exception to the Rule Against Perpetuities
If property passes from one charity to another charity, then the interest of the receiving charity is not subject to the Rule.
Ex. Blackacre is conveyed “to charity B, as long as the premises are used for a school, and then to charity C.” The executory interest of charity C may not vest within the time allotted by the Rule, but, because the Rule does not apply to charity-to-charity transfers, C’s executory interest is valid.
Common violations of the Rule against Perpituities
1) Class transfers—”survival beyond age 21” condition
- If a transfer to a class is conditioned on the class members surviving to an age beyond 21 and the class is open, then the transfer to the class violates the Rule.
- Ex. “to B for life, and then to B’s children who reach the age of 30.”
2) Fertile octogenarian
- Anyone, regardless of age or physical condition, including an 80-year-old woman, is deemed capable of having children for the purposes of the Rule.
- Some states have set an age limit (e.g., 55 years old) beyond which it is rebuttably presumed that a woman cannot have a child.
3) Unborn spouse
- If an interest following a widow’s life estate cannot vest until the widow dies, then it violates the Rule.
- Ex. A conveys Blackacre “to B for life, then to B’s widow for life, then to B’s children who are then living.” The contingent remainder in B’s children violates the Rule because B’s widow may be someone who is not yet alive at the time of the conveyance. The contingent remainder would not violate the Rule if the life estate was conveyed to a particular person (e.g., B’s current spouse) instead of “B’s widow.”
4) Defeasible fee followed by an executory interest
- An executory interest that follows a defeasible fee violates the Rule, unless there is a time limit on the vesting of the executory interest that satisfies the Rule.
- If the limit on the defeasible fee is durational (e.g., “so long as,” “while”), then the striking of the executory interest leaves the grantor with the possibility of reverter. If the limit on the defeasible fee is a condition subsequent (e.g., “but if,” “upon the condition that”), then the striking of the executory interest leaves the holder of the defeasible fee with a fee simple absolute interest in the property.
5) Conditional passage of interest
- If there is a condition imposed on the passing of a future interest subject to the Rule that is not confined to a specified time limit that meets the Rule’s testing period, such as probating the will or termination of a current military conflict, then the future interest runs afoul of the Rule.
Concurrent Estates
a.k.a. co-tenancies
- Arises when two or more persons own real property simultaneously.
- The most common concurrent estates are tenancy in common, joint tenancy, and tenancy by the entirety.
- Co-tenants can alter their rights by agreement
Tenancy in Common
- Exists when two or more co-owners have an equal right to possess property (unity of possession) but do not have a right of survivorship with respect to the property interest held by another co-owner.
- In most jurisdictions, there is a rebuttable presumption that a conveyance of property to two or more persons as joint owners creates a tenancy in common rather than a joint tenancy.
- Each co-tenant holds an undivided interest with unrestricted rights to possess the whole property, regardless of the size of the co-tenant’s interest.
- Each tenant can unilaterally transfer, devise, mortgage, or lease his interest to a third party, without affecting the interest of the other tenants in common.
Joint Tenancy
- Exists when two or more persons own property with the right of survivorship.
- On the death of a joint tenant, that person’s interest terminates and the surviving joint tenants’ interests are accordingly increased. Where there is only one surviving joint tenant, that person owns the property outright upon the death of the other joint tenants.
- Some jurisdictions have abolished this concurrent estate or eliminated its right of survivorship, thereby effectively transforming it into a tenancy in common.
To determine if a joint tenancy was created, look for survivorship language (e.g., “to A and B, as joint tenants with right of survivorship”).
Four unities
Traditionally, a joint tenancy must have all four.
- Unity of Possession: an equal right to possess or use the property
- Unity of Interest: each interest must be equal to the other interests (some jurisdictions permit joint tenants to own unequal interests)
- Unity of Time: each interest must have been created at the same time
- Unity of Title: each interest must have been created in the same instrument.
[Mnemonic−”PITT”].
The modern trend focuses on the intent of the parties if the language creating the tenancy is unclear.
Unlike a joint tenancy, a tenancy in common requires only the unity of possession.
Creation of a joint tenancy by a by current fee simple owner
Traditionally, the fee simple owner of real property cannot directly create a joint tenancy with one or more other persons. To do so violates the unities of time and title because the owner’s interest in the property arose prior to the other persons’ interest and by virtue of a prior instrument. To overcome this problem, the fee simple owner can transfer the property to “strawman,” who then transfers the property to the owner and the other persons as joint tenants.
Many jurisdictions now permit the fee simple owner to forego this formality and directly create a joint tenancy with one or more other persons.
Severance of joint tenancy
The severance of a joint tenancy converts it into a tenancy in common. However, if there are more than two joint tenants, a severance does not automatically affect the joint tenancy of all joint tenants.
Severence may occur by
- A lifetime (inter vivos) transfer
- Mortgages
- Judicial lien
- Leases
- Intentional killings
Ex. X and Y hold Greenacre as joint tenants. X gives his interest in Greenacre to Z. X’s action results in a severance of the joint tenancy. After the severance, Y and Z hold Greenacre as tenants in common.
Ex. X, Y, and Z hold Greenacre as joint tenants. X gives his interest in Greenacre to A. X’s action results in a severance of the joint tenancy with respect to X’s interest. After the severance, A holds a one-third interest in Greenacre as a tenant in common with Y and Z, who each still hold a one-third interest in Greenacre as joint tenants between themselves.
Lifetime transfer of an interest in a joint tenancy
A lifetime (inter vivos) transfer by a joint tenant of his property interest effects a severance of the joint tenancy.
In most states, a joint tenant may effect a severance by executing a contract to convey his property interest.
In some states, a contract to convey property held in a joint tenancy that is executed by all of the joint tenants does not effect a severance. Severance occurs only upon the transfer of the property. In other states, severance occurs upon the execution of a contract to convey by all joint tenants.
Mortgage on a Joint Tenancy
- A joint tenant may grant a mortgage in her joint tenancy interest.
- In lien theory states (the majority), the mortgage is only a lien on the property; the granting of a mortgage does not sever the joint tenancy, and severance occurs only upon a foreclosure sale following a default.
- In title theory states (the minority), the granting of a mortgage by a joint tenant constitutes a transfer of title; the joint tenancy is between the mortgagee and the other joint tenants, and it is severed and converted into a tenancy in common; if there is more than one remaining joint tenant, however, they continue to hold their property interests with each other as joint tenants.
Judicial lien on a Joint Tenancy
A judicial lien is typically imposed as a consequence of an adverse judgment against a joint tenant stemming from a contractual or tort liability.
In most states, a judicial lien imposed on the property interest of a joint tenant does not sever the joint tenancy. There must be a levy and sale of the property interest to effect a severance. If the joint tenant against whose property interest the lien is imposed dies prior to the sale, the remaining joint tenants are entitled to that property interest by right of survivorship.
Leases on Joint Tenancies
There is a split among jurisdictions with respect to how to handle joint tenancies when one joint tenant leases his interest.
Some jurisdictions hold that the lease destroys the unity of interest and thus severs the joint tenancy, while other jurisdictions believe that the lease merely temporarily suspends the joint tenancy, which resumes upon expiration of the lease.
Intentional killings in a Joint Tenancy
When one co-tenant intentionally kills the other co-tenant, some states allow the felonious joint tenant to hold the property in constructive trust for the deceased joint tenant’s estate. This means that the surviving joint tenant does not profit from the felony but can keep his interest in the property.
Other jurisdictions have statutes that sever the joint tenancy upon a felonious killing of one joint tenant by another joint tenant.
Tenancy by the Entirety
- A joint tenancy between married persons with a right of survivorship.
- Same rules for joint tenancy apply to tenancy by the entirety, plus the joint tenants must be married when a deed is executed or the conveyance occurs (the fifth unity—unity of person).
- Neither spouse can alienate or encumber the property without the consent of the other.
- Tenancy by the entirety is recognized in about half of the states.
- In states in which it is recognized, a majority rebuttably presume that a conveyance to a married couple creates a tenancy by the entirety, and, upon divorce, that the property is held in a tenancy in common.
- A majority of states also treat the involuntary alienation (e.g., judgment lien) of property held in a tenancy by the entirety as void; similarly, the voluntary alienation (e.g., mortgage) by only one spouse is void.
Co-tenant’s right to possession
- Unless there is an agreement to the contrary, each co-tenant has the right to possess all of the property
- One co-tenant may not bind another co-tenant to a boundary line agreement with a neighbor.
- A co-tenant is generally not required to pay rent to the other co-tenants for the value of her own use of the property, even when the other co-tenants do not make use of the property.
- A co-tenant is generally not required to share profits earned from the use of the property, such as from a business conducted on the property.
Because of each tenant’s right to possess the entire property, a co-tenant’s exclusive use of the property does not, by itself, give rise to adverse possession of the interest of another co-tenant.
Ouster by a Co-tenant
- When a co-tenant refuses to allow another co-tenant access to the property, the ousted co-tenant may bring a court action (e.g., an injunction) to gain access to the property and to recover the value of the use of the property for the time during which the co-tenant was denied access to the property.
- Under the majority rule, a co-tenant in exclusive possession of the property who merely rejects a demand by another co-tenant that the co-tenant in possession either pay rent or vacate a portion of the premises has not committed ouster.
- For an ouster to occur under the majority rule, the co-tenant in possession must refuse a demand by another co-tenant to use the property.
Natural resources in a co-tenancy
A co-tenant is entitled to the land’s natural resources (e.g., timber, minerals, oil, gas) in proportion to her ownership share.
Property-related expenditures and income in a co-tenancy
- A co-tenant who makes property-related expenditures is, in some cases, entitled to contribution from the other co-tenants based on the ownership interest of each co-tenant. - A co-tenant who receives income from a third party for use of the property may be subject to an action for an accounting of that income and its distribution among the co-tenants based on the ownership interest of each co-tenant.
Partition of a co-tenancy
- A tenant in common or a joint tenant generally has the right to unilaterally partition the property, but a tenant by the entirety does not have this right.
- Property can be partitioned either voluntarily (if the co-tenants agree in writing on the division of land) or involuntarily (by court action).
- The holder of a future interest who shares that interest with another (e.g., jointly held remainder interest) does not have the right to immediate possession and therefore cannot maintain an action for involuntary partition.
In a “partition in kind” action, the court divides the jointly owned property into distinct physical portions. If physical division of the property is not practicable or fair, the court may order a partition by sale and distribute the proceeds among the co-tenants in accordance with their ownership interests. Courts prefer a partition in kind.
An agreement by co-tenants not to seek partition is enforceable. However, the agreement must be clear, and the time limitation must be reasonable.
Easements on co-tenancies
- The co-tenants may agree to create an easement jointly. This grant operates like any other easement and may be enforceable against later purchasers of the servient estate.
- If a co-tenant attempts to create an easement unilaterally, the easement is only enforceable against that co-tenant’s interest. The easement cannot be enforced against later owners of the servient estate unless the other co-tenants consent to the easement.
Ex. A and B own a piece of land as tenants in common. Without B’s knowledge or permission, A grants an easement to a neighbor to cross the land. Even though B did not consent, the neighbor can enforce the easement pursuant to A’s right to possess the entire property.
Later, A and B decide to sell the land to Buyer. Even if Buyer has notice of the easement, the neighbor cannot enforce the easement against Buyer unless the neighbor can show that all co-tenants consented to the easement.
Fair Housing Act (FHA)
- Prohibits discrimination in the sale, rental, and financing of homes/dwellings and in other housing-related transactions (such as advertising, homeowner’s insurance, and zoning).
- Primarily focuses on multi-family residential housing
- Cannot state discriminatory intent or preference in an advertisement
Exemptios:
- owner-occupied buildings with no more than four living units (including the owner’s living unit),
- single-family housing sold or rented without the use of a broker, and
- housing operated by religious organizations and private clubs that limit occupancy to members.
Classes protected by the FHA
- Prohibits discrimination based on race, color, religion, national origin, sex, disability, and familial status.
- “Sex” has been interpreted to include sexual orientation and gender identity.
- Protected familial status includes having or securing custody of children under the age of 18 and being pregnant.
- Exemption from familial status protection exists for housing for older individuals (e.g., housing for individuals who are 62 years of age or older).
- Also requires reasonable accomedation for disabilities
Proving racial discrimination under FHA
- The plaintiff need only show a disparate racial impact, not a racial intent or purpose.
- In showing a disparate racial impact, the plaintiff must establish that the defendant’s policy caused the disparate impact; statistical evidence of disparate impact is not in itself sufficient.
Compare constitutional discrimination: To establish a violation of the 14th Amendment’s Equal Protection Clause, the plaintiff must show a racial intent or purpose; a racial impact is not sufficient.
Occupancy restrictions under FHA
- Although the FHA prohibits discrimination based on familial status, it does exempt reasonable zoning restrictions based on maximum occupancy.
- This statutory exemption is limited to a strict numerical maximum occupancy restriction (e.g., “no more than eight persons may occupy a dwelling”); a zoning restriction that defined “family” for purposes of an area zoned for single families to permit an unrestricted number of family members to live together while restricting the number of unrelated persons who could live together did not qualify for this exemption.
Compare constitutional discrimination: Under the Fourteenth Amendment, a local occupancy restriction on unrelated individuals is only subject to the rational-basis test.
Law of the situs
Basically says the choise of law in a property dispute is the state where the property is located.
In a case involving real property, if there is a conflict as to which state’s law should be applied to resolve the issue, the general conflict-of-laws rule is that the law applied by the forum court should be determined by the conflict-of-laws rule that would be applied by the courts of the state where the property is located (i.e., the situs). Usually, the conflict-of-laws rule of the situs state directs the application of its own local law on that issue (i.e., the law of the situs) in resolving the matter.
If an instrument that conveys an interest in land or a will that devises an interest in land designates the application of a specific jurisdiction’s laws, then those laws generally apply.
If the dispute is not actually about the land interest (ex. a fraud dispute about contract that transfers land), the law of the state with the most significant interest in determining that issue (e.g., the state where contract was entered into and the fraud was committed).
Compare jurisdiction: To hear a case, the forum court must have both subject-matter jurisdiction and personal jurisdiction over the parties. If an action involves interests in land located in the state, such as an action for partition or to quiet title, then a state court has in rem jurisdiction to decide those interests, even if the court lacks personal jurisdiction over the parties claiming an interest in the property.
Four types of landlord-tenant estates
i) Tenancy for years;
ii) Periodic tenancy;
iii) Tenancy at will; and
iv) Tenancy at sufferance.
A tenancy is also known as a leasehold.
The landlord-tenant relationship is generally governed by a contract, called the lease, that contains the covenants (i.e., promises) of the parties. The promises are generally independent of each other, meaning each party must perform his promises regardless of whether or not the other party performs his promise.
Tenancy for Years
A leasehold estate measured by a fixed and ascertainable amount of time (e.g., one week, six months, five years).
Creation of a Tenancy for Years
Created by an agreement between the landlord and the tenant.
The Statute of Frauds applies to a tenancy for years that is longer than one year.
- In most jurisdictions, when a lease is to commence in the future, it is the period of the lease itself that must exceed one year for the Statute of Frauds to apply to the lease.
To comply with the SoF, the lease agreement must be in a writing that:
i) Identifies the parties;
ii) Identifies the premises;
iii) Specifies the duration of the lease;
iv) States the rent to be paid; and
v) Is signed by the party to be charged.
A lease subject to the Statute of Frauds that does not comply with it (e.g., an oral lease) is invalid unless the tenant takes possession of the premises with the acquiescence of the landlord, in which case a tenancy at will is created. If the rent is then paid by the tenant and accepted by the landlord, a periodic tenancy is created. If the tenant further makes substantial improvements to the premises and thereby indicates that the parties contemplated a lease for more than a year, the oral lease is given full effect.
Termination of a Tenancy for Years
Termination occurs automatically upon the expiration of the term; no notice is required. Any right to renew the agreement must be explicitly set out in the lease.
Termination may also occur before the expiration of the term, such as when the tenant surrenders the leasehold (i.e., the tenant offers and the landlord accepts return of the leasehold).
At common law the doctrine of independent covenants usually prevented the breach of a covenant in the lease by a tenant or landlord from giving the other party the right to terminate the lease, but most states recognize that the breach of certain leasehold covenants (i.e., the tenant’s payment of the rent and the landlord’s covenants of quiet enjoyment and implied warranty of habitability) can give rise to a right to terminate the lease.
Periodic Tenancy
A repetitive, ongoing estate measured by a set period (e.g., a month, a year) but with no predetermined termination date. It automatically renews at the end of each period until one party gives a valid termination notice.
Term of a Periodic Tenancy
The term of a periodic tenancy may be fixed by the parties (e.g., “The premises are rented on a month-to-month basis.”) or determined by their actions (e.g., the tenant pays rent each week and the landlord accept the payment).
When the lease states that the rent is a specific amount for specific period, but also states that a portion of the rent is payable at intervals throughout that period, most jurisdictions treat the term of the periodic tenancy as the longer specific period.
Ex. The lease states, “The premises are rented at an annual rate of $120,000, payable at $10,000 on the first of each month.” The lease is a year-to-year lease.
Creation of a Periodic Tenancy
A periodic tenancy can be created by express agreement, implication (e.g., the failure of an express agreement to mention a termination date), or operation of law (e.g., a holdover tenant).
The Statute of Frauds applies to a periodic tenancy only if the initial term of the tenancy exceeds one year.
Termination of a Periodic Tenancy
Because a periodic tenancy automatically renews, notice is generally required to terminate this tenancy.
TIming of Notice
- Notice of termination must generally be given before the beginning of the intended last period of the periodic tenancy.
- For a year-to-year periodic tenancy, notice must be given at least six months (rather than one year) in advance.
- Many states have further reduced the advance notice period for a periodic tenancy of more than a month (e.g., one month for a year-to-year tenancy).
- Notice that is given late is generally treated as effective to terminate the tenancy as of the end of the following period.
- A notice of termination is generally effective only as of the last day of the period (e.g., the end of the month for a month-to-month tenancy that began on the first day of the month).
Form of Notice
- Common Law: an oral notice of termination is sufficient to terminate a periodic tenancy.
- Majority of Modern Statutes: require some form of written notice. The application of these statutes varies. For example, some statutes apply only to residential leases, while others apply to all leases. In addition, some statutes place the writing requirement on the landlord only, while others place the writing requirement on both the landlord and the tenant.
May also be terminated for the breach of certian lease covenants.
Tenancy at Will
A tenancy at will is a leasehold estate that does not have a specific term and continues so long as the landlord and the tenant desire.
Creation of a Tenancy at Will
By the express agreement of the parties, or by implication if the owner permits the tenant to occupy the premises, such as when the parties are negotiating the extension of an expired lease.
Unless this tenancy is expressly created, the payment of rent by the tenant and acceptance by the landlord converts a tenancy at will into a periodic tenancy.
Termination of a Tenancy at Will
May be terminated by either the landlord or the tenant.
May also be terminated by operation of law upon the death of either party, because of waste or assignment by the tenant, or upon transfer or lease of the property to a third party by the landlord.
Notice
- Common law: could be terminated by either party without advance notice, but the tenant had to be given a reasonable time in which to vacate the premises.
- Majority of Modern Statutes: require that a party give advance notice (e.g., 30 days) in order to terminate a tenancy at will.
When the parties agree that only one party has the right to terminate, some courts do not treat the leasehold estate as a tenancy at will but instead as a determinable leasehold (e.g., a tenancy for years determinable, a periodic tenancy determinable). (Note: If the estate is measured by the life of the tenant, the estate is a determinable life estate.)
When the agreement is unconscionable, some courts treat the leasehold estate as a tenancy at will that may be terminated by either party.
Tenancy at Sufferance
a.k.a. holdover tenancy
Exists for the period after the expiration of a lease during which the tenant remains on the premises without the landlord’s permission.
Terminated if the tenant vacates the premises or the landlord evicts the tenant.
The tenant is obligated to pay the reasonable value of his use and occupancy of the premises, which typically is a daily rate determined by reference to the previous rent. In addition, the tenant is liable for reasonably foreseeable special damages that result from his holding over, such as the cost of evicting the tenant. Alternatively, the landlord can terminate the tenancy at sufferance by binding the tenant to a new tenancy.
Tenancy at Will v. Tenancy at Sufference
Tenancy at will: created by the agreement of the landlord and the tenant
Tenancy at sufferance: created by the actions of the tenant alone.
Two Major Duties of a Tenant
to pay rent and to avoid waste
- duties can be modified by contract
- tenant may have other duties or restrictions imposed by the lease, such as a duty to avoid excessive noise, a prohibition on pets, or a non-compete clause that precludes the tenant from operating a business that competes with the landlord’s business.
- tenant may face implied duties, such as a prohibition on the use of the premises for illegal purposes (e.g., drug distribution).
Exceptions to the duty to pay rent
Destruction of the premises
- If the premises are destroyed, such as by flood, as long as the tenant is not at fault for the destruction.
- Not an excuse at common law
Material breach by the landlord
- Common law: Doctrine of independent covenants usually prevented the tenant from avoiding the obligation to pay rent despite the landlord’s material breach of the lease, except the covenant of quiet enjoyment
- Today: most states give tenants various options with regard to the payment of rent if a landlord violates the implied warranty of habitability in a residential lease (e.g., establishment of an escrow account into which the rent is paid, deducting the cost of repairs incurred by the tenant from the rent paid).
Landlord completely of partially evicts the tenant
- Complete eviction: removal from the premises entirely
- Partial eviction: removal from a portion of the premises
Construction Eviction
If the landlord breaches a duty to the tenant, such as failing to make a repair, that substantially interferes with the tenant’s use and enjoyment of the leasehold (e.g., fails to provide heat or water), then the tenant’s obligation to pay rent is excused due to constructive eviction only if the tenant gives notice and adequate time to permit the landlord to fulfill his duty and vacates the property within a reasonable amount of time.
Elements
i) the premises were unusable for their intended purpose (breach of the covenant of quiet enjoyment)
ii) the tenant notifies the landlord
iii) the landlord does not correct the problem
iiii) the tenant vacates the premises after a reasonable amount of time
Not every interference with the use and enjoyment of the premises amounts to a constructive eviction. Temporary or de minimis acts do not generally constitute constructive eviction.
Implied Covenant of Quiet Enjoyment
- a promise by the landlord not to interfere with the tenant’s possession of the leased premises
- breached only when the conduct of the landlord or someone with superior title prevents the tenant from possessing the leased premises
- Every lease (both commercial and residential) contains an implied covenant of quiet enjoyment
- The landlord is not liable for acts of other tenants, but he has a duty to take action against a tenant’s nuisance-like behavior and to control the common areas. Off-premises actions of third parties will not suffice.
- Any actions by the landlord that breach this covenant may amount to an actual or constructive eviction of the tenant.
Implied Warranty of Habitability
- The landlord has an obligation to maintain the property such that it is reasonably suitable for residential use
- A condition that substantially threatens a tenant’s health or safety violates this warranty.
- Applies to residential premises, not commerical leaseholds
- Tenant cannot wave the IWH, either by express language in the lease or by taking possession of the property with knowledge of a condition that constitutes a breach.
- Most jurisdictions: a landlord’s failure to substantially comply with housing code requirements does not automatically constitute a breach of this warranty but may serve as evidence of a breach.
- Before seeking a remedy, tenant must notify the landlord and give him a reasonable oppertunity to correct the condition. Tenant is not required to leave the premises (stay and suffer).
Tenant’s Remedies for Breach
- tenant may refuse to pay rent
- may remedy the defect and offset the cost in their rent
- use as a defense against eviction
Tenant’s Duty to Avoid Waste
Same standards of waste imposed on a life tenant. Duty not to commit
i) voluntary (affirmative) waste (i.e., damage to the property),
ii) ameliorative waste (i.e., alterations to the property, even if the value of the property increases), or
iii) permissive waste (i.e., failure to prevent or repair damage, exception for normal wear and tear).
A tenant is entitled to make changes to the physical condition of the leased property that increase the property value if reasonably necessary for the tenant to use the property in a reasonable manner, unless the landlord and tenant agree otherwise.
Tenant’s Contractual Duty to Repair
Nonresidential lease
- if it specifies that the tenant must “repair and maintain” the property, then the tenant is generally liable for all damage to the property, unless the landlord caused the damage.
- if the damage is significant (e.g., structural damage due to a fire) and such damage was not caused by the tenant, then the modern trend is to narrowly read the tenant’s duty to repair and to find that it does not cover such damage.
Residential lease
- A provision that places the burden of repair on the tenant is generally void, but the tenant may be required to notify the landlord of the need for such repairs.
Landlord’s Remedies for the Tenant’s Breach
Failure to pay rent
- Common law: under the doctrine of independent covenants, a landlord could not regain possession of the premises or terminate the lease if a tenant breached a duty imposed by the lease.
- Most jurisdictions now statutorily recognize the right of a landlord to terminate a lease for nonpayment of rent.
- Most leases today contain a forfeiture clause that permits a landlord to regain possession of the premises and terminate the lease if the tenant breaches a duty owed to the landlord.
- Can also sue for damages resulting from the breach
Future Rents
- Majority rule: doctrine of anticipatory repudiation does not apply to leases and the landlord is not entitled to damages with respect to future rents that would have been due under the lease.
- Minority: doctrine of anticipatory repudiation does apply to leases; damages are generally measured by the difference between future rent that would be owed under the unexpired term and either (i) the reasonable rental value of the premises for such term or (ii) the actual rent collected on a re-letting of the premises for such term. This means that the landlord could collect, at most, the value by which the future rents would have exceeded a reasonable rental value for the property.
Late rent
- If a tenant pays the rent but fails to do so on time, the landlord is entitled to damages.
- Whether the landlord can evict the tenant depends on whether the delay constitutes a material breach of the lease.
- If a landlord accepts late payment of rent, he is treated as waiving his right to regain possession of the premises and terminate the lease at least with regard to that breach of the lease.
Other covenants
- A landlord’s ability to terminate a lease for breach of a covenant other than the payment of rent (e.g., a “no pets” provision) will depend on the terms of the lease.
- If the landlord has full knowledge of the tenant’s breach and subsequently accepts rent from the tenant, then the landlord has waived the breach and may not terminate the lease based on that breach.
Duties of the Landlord
- Give Possession
- Duty to Repair
- Warranty of Habitability
- Covenant of Quiet Enjoyment
Landlord’s Duty to give possession
Majority: a tenant is relieved of the obligation to pay rent if the landlord fails to deliver actual physical possession of the leasehold premises.
Minority: requires only that the landlord deliver legal possession.
Landlord’s Duty to Repair
Residential Leases
- **Common law: **no implied duty on the landlord to repair leased premises.
- Majority today: implied duty upon the landlord to repair under a residential lease, even when the lease attempts to place the burden on the tenant, except for damages caused by the tenant.
- Failure to make repairs may constitute a constructive eviction or violate the implied warranty of habitability.
Commercial Leases
- Courts are reluctant to imply a landlord’s duty to repair in commercial leases because the implied warranty of habitability does not apply in commercial leases.
- Absent some statutory or contractual obligation, a landlord only has a duty to make a repair if (i) the repair is so substantial that it would not ordinarily fall within the tenant’s common law repair duty, or (ii) the value of the repair would primarily inure to the landlord’s reversionary interest.
Actual Eviction
Complete Eviction
- If the landlord removes the tenant from the premises, then the total eviction terminates the lease and ends the tenant’s obligation to pay rent.
Partial eviction
- If the tenant is prevented from possessing or using a portion of the leased premises, then the tenant may seek relief for a partial actual eviction. The type of relief granted depends on who prevented the possession.
- If landlord, tenant is completely excused from paying rent for the entire premises.
- If third party with a superior claim to the property, tenant must pay the reasonable rental value of the premises occupied.
- The tenant is not excused from paying rent if a third-party adverse possessor/trespasser partially evicts the tenant.
Doctrine of Retaliatory Eviction
A landlord may not evict a residential tenant as retaliation for the tenant’s complaining, in good faith and with reasonable cause, about a housing code violation to the appropriate authorities or for refusing to pay rent when the landlord breaches the warranty of habitability.
Also prevents a landlord from retaliating against a residential tenant by refusing to renew a periodic tenancy.
Not available to a tenant whose rental payments are unjustifiably in arrears.
Security Deposit
A landlord may require a security deposit from a tenant as a guarantee of the tenant’s fulfillment of the tenant’s lease obligations. The landlord may retain some or all of a security deposit when a tenant breaches the lease, usually by failing to pay the rent. The landlord may also retain some or all of a security deposit for damage to the premises that are in excess of normal wear and tear.
Amount
- In about half of the states, the maximum amount of a security deposit is set by statute and generally ranges from one to two months’ rent.
- Some states permit an additional amount to be collected from tenants with pets, or a set a lower maximum amount if the tenant is a senior citizen.
Landlord Requirements
- Often required to maintain the security deposit in an escrow account, and, in some states, interest earned on the account belongs to the tenant, not the landlord.
- Required to promptly return a security deposit at the end of the lease or to notify the tenant of the amount retained by the landlord and the reasons for doing so.
- Monetary penalties may be imposed on the landlord for failing to comply with the statutory requirements of security deposits.
Tenant’s Abandonment
If a tenant unjustifiably abandoned the leasehold, then the tenant is treated as having made an offer to surrender his rights under the lease.
Acceptance of surrender
- If the landlord accepts this offer, the lease is terminated, and the tenant is not liable for any future rent.
- A landlord’s retaking possession of the premises coupled with the landlord’s own use of the premises or re-renting the premises to a third-party may be treated as acceptance of the tenant’s offer unless the landlord notifies the tenant otherwise.
Rejection of surrender
- The landlord who does not accept the tenant’s offer (e.g., notifies the tenant of such) retains the right to continue to enforce the lease, which means that the tenant remains obligated to continue paying the rent.
Duty to mitigate
- Majority: a landlord must mitigate damages by making a reasonable effort to re-rent the premises (treat it like the rest of their vacant properties, not better). The landlord who re-rents the premises on the tenant’s behalf may hold the tenant liable for any deficiency.
- Minority: does not require the landlord to mitigate damages. A landlord who learns of the tenant’s abandonment of the premises need not take any action.
Holdover tenant
When a tenant continues to occupy the premises without the landlord’s agreement after the original lease expires, the tenant is a “holdover tenant.”
Eviction
- landlord may evict a holdover tenant though legal action if the tenant remains after receiving a written notice to vacate the premises.
- All jurisdictions no longer allow a landlord to use self-help in a residential tenancy
- A minority of jurisdictions permit the use of self-help in a commercial tenancy. Some prohibit the use of force, while others permit the use of reasonable force to regain possession of the premises.
New periodic tenancy
- Landlord may bind the holdover tenant to a new periodic tenancy by specifically informing the tenant or by accepting rent from the holdover tenant
- Length of the new periodic tenancy is determined by the period on which rent was calculated under the prior lease.
- Commercial lease: maximum period of new tenancy is one year.
- Residential lease: maximum period is generally a month.
- Not allowed for seasonal leases
- Landlord can modify the terms of this new tenancy (e.g., increase the rent) if the landlord informs the tenant of the new terms prior to the expiration of the prior lease. The tenant who fails to object is deemed to have accepted the new terms.
A tenant is not considered to be a holdover tenant if the tenant leaves a few articles of personal property behind, the tenant’s occupation extends a few hours beyond the termination time, or circumstances out of the tenant’s control (e.g., severe illness) prevent the tenant from leaving.
Tenant’s Tort Liabilities
duty of care to invitees, licensees, and foreseeable trespassers and may be liable for dangerous conditions or activities on the leased property.
Landlord’s Tort Liabilities
Common law: landlord is responsible for injuries occurring only in common and public areas or in non-common areas under the landlord’s control, or those occurring as a result of a hidden defect or faulty repair completed by the landlord or the landlord’s agent.
Modern trend: hold landlords to a general duty of reasonable care. This means that a landlord may be liable for (i) existing defects prior to the tenant’s occupation of the premises, (ii) failure to make repairs required by a housing code, and (iii) at times, the criminal activity of third persons who injure tenants.
Life tenant’s duties
Duty to pay current charges: Life tenant must pay all current charges due during life tenancy (eg, property taxes, mortgage interest) up to financial benefit received from property
Duty to prevent waste: Life tenant must prevent affirmative waste (ie, voluntary waste), permissive waste & ameliorative waste
Duty to make ordinary repairs: Life tenant must make reasonable repairs to preserve property
The financial benefit is determined differently depending on whether the life tenant:
- occupies the property – in which case the financial benefit is measured by the fair market rental value of the property (e.g., reasonable rental value) or
- does not occupy the property – in which case the financial benefit is measured by the income derived from the land (e.g., third-party rental income, crops grown on the land)
