Real Property

Question 1

What is the implied warranty of fitness or suitability for the purchase of newly constructed homes?

Answer 1

Under this warranty, the seller asserts that he used adequate materials and workmanship for the residence. The warranty generally covers latent construction defects, including any problems that do not manifest themselves until after the sale.

The buyer has a duty to reasonably inspect the residence but is not required to employ an expert home inspector.

Generally, a suit for breach of the implied warranty may be brought against builders, developers, and contractors within a reasonable time after discovery of the defect.

A majority of jurisdictions permit both the initial homeowner-purchaser and subsequent purchasers who do not contract directly with the commercial developer to recover damages.

Question 2

When is a mortgagor released from liability for the loan?

Answer 2

Unless the mortgagee (lender) agrees to release the mortgagor (borrower) from liability for the loan, the mortgagor remains personally liable on the loan obligation after the transfer of the mortgaged property.

Question 3

What happens if a deed is silent or ambiguous to the transferee buyer’s liability?

Answer 3

If a deed is silent or ambiguous as to the buyer’s liability, then the transferee (buyer) is considered to have taken the property subject to the mortgage and is not personally liable upon default. The buyer takes title, which allows him to possess the land, but the land is still subject to a potential foreclosure action upon default. If there is a deficiency, only the transferor (seller) remains personally liable for it.

Question 4

What happens if a transferee buyer assumes the mortgage obligation?

Answer 4

If a buyer of the property assumes the mortgage obligation, then the buyer and the original mortgagor will be personally liable to the lender.

Most jurisdictions do not require that any agreement to assume the mortgage be in writing, but some form of agreement, such as an oral agreement, is necessary. If a buyer assumes liability under the mortgage, then generally the original mortgagor/seller is treated as a surety who is personally liable for any deficiency not paid by the buyer.

Question 5

What does the grantee of a quitclaim deed get?

Answer 5

The grantee of a quitclaim deed receives no better title than what the grantor possessed. No warranties.

Question 6

What is constructive eviction/implied covenant of quiet enjoyment?

Answer 6

When a landlord substantially interferes with the tenant’s use and enjoyment of the property by breaching a duty to the tenant, the tenant’s obligation to pay rent may be excused under the theory of constructive eviction. In order to end a lease before the end of its term by constructive eviction:

(1) the landlord must have breached a duty, which caused the loss of the substantial use and enjoyment of the premises,
(2) the tenant must give the landlord notice of the problem and reasonable opportunity to cure, and
(3) the tenant must vacate the property within a reasonable period of time.

Question 7

When does the landlord have a duty to repair in a commercial lease?

Answer 7

In contrast, 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. Here, it is not clear what language was in the commercial lease regarding repairs, but absent any specific duty in the lease to fix the air conditioner, the landlord was likely not required to make any such repairs. Moreover, the covenant of quiet enjoyment is breached only when the landlord, someone claiming through the landlord, or someone with superior title disrupts the possession of the tenant.

Question 8

When can a lease be terminated when the term of the lease has not expired.

Answer 8

Termination may occur before the expiration of the term when the tenant surrenders the leasehold, and the landlord accepts the return of the leasehold. When a tenant abandons the leasehold without justification, the landlord may treat the abandonment as an offer of surrender and could accept that surrender by retaking the premises.

Question 9

When does an easement “merge” into the title?

Answer 9

An easement is terminated if the owner of the dominant or servient estate acquires fee title to the other estate. The easement is said to “merge” into the title. The merger of property interests results in the extinguishment of the property right.

Question 10

What are the requirements for an easement by implication?

Answer 10

Created by existing use on property: (1) Common ownership, (2) b/f severance, owner uses land as if easement on it “quasi-easement”, (3) after sever, use continuous and apparent, (4) Use reasonably necessary to dominant estate’s use and enjoyment.

Question 11

What do obligatory payments under a senior future-advance mortgage do?

Answer 11

When multiple interests must be paid out of the proceeds of a foreclosure sale, generally, the earliest mortgage placed on the property has priority over the other interests. Further, obligatory payments under a senior future-advances mortgage paid out after a junior lender remits its loan amount and records its lien have priority over amounts loaned by the junior lender.

Question 12

How can an easement be terminated through abandonment?

Answer 12

Neither a statement of intent to abandon nor non-use can extinguish an easement absent affirmative conduct. An easement can only be terminated based on a theory of abandonment if the owner of the easement acts in an affirmative way that clearly shows intent to relinquish the easement right.

Question 13

What is the rule concerning priority of interest if there is no recording act?

Answer 13

Unless a recording act governs, the common law rule of “first in time, first in right” generally applies to determine priorities.

Question 14

What is a fee simple determinable?

Answer 14

A fee simple determinable is limited by specific durational language (e.g., “so long as” “until”). It terminates automatically upon the happening of the stated condition. The grantor retains a possibility of reverter.

Question 15

What is a fee simple subject to condition subsequent?

Answer 15

A fee simple subject to condition subsequent is limited in duration by specific conditional language (“provided that” “but if”). Upon occurrence of the stated condition, the present fee simple will terminate only if the grantor affirmatively demonstrates an intent to terminate. The grantor must explicitly retain the right to terminate the fee simple subject to condition subsequent in the conveyance.

Question 16

What are the majority and minority views on survivorship contingencies?

Answer 16

The majority view is that a survivorship contingency applies at the termination of the interests that precede distribution of the remainder.

The minority view interprets a survivorship contingency to require surviving only the testator and not the life tenant. If this approach applies, then Bill’s interest passed to Mary.

Question 17

What happens if a lease of more than one year fails to fulfill the Statute of Frauds?

Answer 17

The Statute of Frauds requires a lease of more than one year to be in writing. A lease subject to the Statute of Frauds is invalid unless the tenant takes possession and the landlord accepts rent from the tenant. If the tenant takes possession with the acquiescence of the landlord, then a tenancy at will is created. If the tenant then pays rent, and the landlord accepts rent, then a periodic tenancy is created. A tenancy at will may be terminated by either party without notice. A periodic tenancy requires notice of termination before the beginning of the intended last period of the periodic tenancy.

Question 18

How can a periodic tenancy be terminated?

Answer 18

In a periodic tenancy, notice of termination must be given before the beginning of the intended last period of the periodic tenancy. Thus, a periodic month-to-month tenancy can be terminated by either party with a one-month notice of termination. Notice that is given late is generally treated as effective to terminate the tenancy as of the end of the following period.

Question 19

Restrictions of Lease Assignment

Answer 19

Absent any language to the contrary, a lease can be freely assigned. When a lease prohibits the tenant from assigning the lease, the tenant may nevertheless assign; however, the landlord generally can then terminate the lease for breach of one of its covenants and recover any damages. When a lease prevents assignment without the permission of the landlord, and the lease is silent as to a standard for exercising that permission, the majority approach imposes a requirement that the landlord may withhold permission only on a reasonable ground in relation to the property being leased and not on a whim or personal prejudice. The traditional rule is that the landlord may withhold permission at his discretion.

Question 20

Surrendering a Lease

Answer 20

A tenant surrenders a lease by transferring the lease back to the landlord with the landlord accepting the return. If the landlord accepts surrender, the tenant is not obligated for future rent.

Question 21

Zoning: Grandfather Provision

Answer 21

When a zoning ordinance is enacted or modified, there are often properties within a zone that do not conform to the requirements for that zone (i.e., a nonconforming use). A zoning ordinance must generally make provision for property with an existing nonconforming use. Unless the ordinance provides otherwise, the time for testing whether the nonconforming use is protected by a grandfather provision is the date that the zoning ordinance takes effect.

Question 22

Expanding Nonconforming Use

Answer 22

Generally, a property owner whose nonconforming use has been grandfathered is not entitled to subsequently increase the nonconforming use, such as by enlarging a building that houses a nonconforming use or acquiring and developing adjacent property in accord with the nonconforming use. However, the owner may be permitted to increase the frequency of the nonconforming use to upgrade the means to accomplish the nonconforming use, so long as the nature and character of the use does not constitute a substantial change.

Question 23

Future-advance mortgages

Answer 23

A mortgage is an interest in real property that serves as security for an obligation. A future-advances mortgage is a mortgage given by a borrower in exchange for the right to receive money from the lender in the future. This type of mortgage is also known as a “line of credit.” It is often used for home-equity, construction, business, and commercial loans, and it can provide for obligatory advances or optional advances.

Question 24

Future-Advance Mortgages and Priority

Answer 24

If there is more than one interest in the property, the basic “first in time, first in right” rule is applied to determine the priority of interests. However, this rule is subject to an exception for future-advances mortgages. If the advances under a future-advances mortgage are optional, then a subsequent mortgage has priority over amounts that are actually loaned after the future-advances mortgagee has notice of the subsequent mortgage. The jurisdictions are split as to whether actual notice is required or whether constructive notice is sufficient. In a majority of states, the mortgagee must have actual notice of a subsequent interest in order for later loan disbursements to lose priority. The minority rule, on the other hand, requires only constructive notice of a subsequent interest.

Question 25

Priority: PMSI in goods other than inventory or livestock

Answer 25

A PMSI in goods other than inventory or livestock prevails over all other security interests in the collateral, even if they were previously perfected, if the secured party perfects before or within 20 days after the debtor receives possession of the collateral.

Question 26

Priority: PMSI in

Answer 26

PMSI in inventory has priority only if: (i) the PMSI is perfected by the time the debtor receives possession of the collateral; and (ii) the purchase-money secured party sends an authenticated notification of the PMSI to the holder of any conflicting security interest before the debtor receives possession of the collateral.

Question 27

Default: Disposal through Sale

Answer 27

Upon default, one of the alternatives generally available to a secured party once in possession of collateral is to dispose of the collateral at a sale, which may be public or private, in order to satisfy the obligor’s outstanding obligation. In addition to conducting the sale in a commercially reasonable manner, the secured party is generally required to send an authenticated notification of disposition to, among others, the debtor. This notice must be given sufficiently far enough in advance of the disposition (e.g., at least 10 days) to allow the notified party to act on the notification. A secured party is not required to send a notice of disposition when the collateral is perishable, threatens to decline speedily in value, or is of a type customarily sold on a recognized market. A person entitled to notification may waive the right to notification. If a secured party fails to comply with these requirements, then the debtor or other secured party may seek damages for any loss caused by the secured party’s failure to notify. There is also a rebuttable presumption that the secured party is not entitled to collect a deficiency. The secured party can rebut this presumption in whole or in part by showing that the deficiency would have existed even had the secured party complied with Article 9.

Question 28

Priority: Judicial Lien Creditors

Answer 28

In a contest between a perfected security interest and a judicial lien, a judicial lien creditor takes the collateral subject to an existing perfected security interest but generally has priority over an unperfected security interest.