Real Property Flashcards
1
Q
Types of Estates
A
- present estates
- future estates
2
Q
Present Estates
A
owner has present right of possession and right to use and enjoy the property.
3
Q
Types of Present Estates
A
- fee simple absolute
- defeasible estate
- life estate
- fee tail
4
Q
Fee Simple Absolute
A
infinite in duration; cannot be cut short; devisable and descendible
5
Q
Defeasible Estate
A
may be cut short upon occurrence of event; devisable and descendible.
Types:
- fee simple determinable
- fee simple subject to a condition subsequent
- fee simple subject to an executory limitation
6
Q
Defeasible Estate: Fee Simple Determinable
A
created using durational language (so long as during, while)
automatically terminates
held in the grantor (possibility of reverter)
7
Q
Defeasible Estate: Fee Simple Subject to a Condition Subsequent
A
created using conditional language (provided that, but if) and requires EXPRESS language reserving future interest (right of reentry)
Claim of ownership must be asserted when condition is broken
8
Q
Defeasible Estate: Fee Simple Subject to an Executory Limitation
A
created using durational OR conditional language.
requires EXPRESS language reserving the future interest in another grantee.
estate automatically terminates upon occurrence of stated condition
9
Q
Life Estate
A
limited in duration by life of a person.
automatically terminates and transfers to the future interest holder upon the person’s death
can be conveyed with a condition (i.e., determinable)
can be conveyed by the life tenant to another (i.e., pur autre vie)
10
Q
Fee Tail
A
created when conveyance confined the transfer of the property to the issue (children) of the first taker.
no longer recognized
11
Q
Future Estates
A
not presently possessory but may become so in the future
types:
- future interests held by grantor
- remainders (future interests held by subsequent grantees)
- executory interest
12
Q
Future Interests Held By Grantor: Reversion
A
grantor conveys less than grantor’s entire estate, vests upon the expiration of the preceding estate, and does not need to be expressly reserved.
freely alienable
13
Q
Future Interests Held By Grantor: Possibility of Reverter
A
grantor transfers a determinable estate to the grantee that automatically reverts to the grantor once the condition occurs.
alienable
14
Q
Future Interests Held By Grantor: Power of Termination / Right of Reentry
A
grantor transfers a fee simple subject to a condition subsequent to a grantee and requires the grantor to exercise the power of termination in order to terminate the estate when the condition is broken
15
Q
Remainders
A
become immediately possessory at the natural termination of a preceding estate and will not cut short the preceding estate
types:
- vested remainder
- contingent remainder
- alternative contingent remainders
16
Q
Vested Remainder
A
given to an ascertainable person and is not subject to any condition precedent.
alienable and classified as
- indefeasible (not subject to divestment)
- subject to partial divestment (size of interest diminishes if others enter the class) or
- subject to complete divestment (conditions can lead to termination of the estate)
17
Q
Contingent Remainders
A
either:
- transferred to an unascertained person or
- subject to a condition precedent
alienable
18
Q
Alternative Contingent Remainders
A
pair of remainders that have opposite conditions precedent in which one person will make if a condition is met and another person will take if the condition fails
not transferable
19
Q
Executory Interest
A
future interest held by someone other than grantor that divests the preceding interest or follows a gap that existed after termination of preceding interest
classified as either:
- shifting (divesting another grantee) OR
- springing (divesting a grantor)
20
Q
Doctrine of Worthier Title
A
presumption that grantor did not intend to convey a future interest to grantor’s own heirs but intended to retain interest.
applies when grantor conveys property to a grantee and creates a remainder in grantor’s own heirs
abolished in most states
21
Q
Rule in Shelley’s Case
A
prevents creation of a remainder interest in heirs of a grantee or devisee and instead has the remainder vest in the grantee
applies when grantor conveys property to a grantee and creates a remainder in the grantee’s heirs
abolished in most states
22
Q
Destructibility of Contingent Remainders
A
destroyed if:
- prior estate terminates before remainder vests or
- same person holds a present estate and future interest (intervening contingent remainders are destroyed)
abolished in most states
23
Q
Conditions of Survivorship
A
if grantor has placed an express condition of survivorship in the transfer, then the future interest may not be alienable by the grantee
24
Q
Class Gift
A
transfer that is made to a class of people
if class gift for which some members have qualified but for which others may qualify in the future, the vested remainder is classified as subject to partial divestment or subject to open
25
Class Gift: Rule of Convenience
future interest will not become possessory until the class naturally closes, but if the jurisdiction applies this rule, it can close the class when any of its members is entitled to that member's share of the class gift
26
Rule Against Perpetuities
no interest is valid unless it vests, if at all, within 21 years of some life in being at the creation of the interest
only applies to future interests held by persons other than grantor (contingent remainders, vested remainders subject to partial divestment, executory interests).
life in being = person who was alive/in gestation when interest was created
27
Cy Pres Doctrine
RAP does not apply to charitable trusts.
some jurisdictions have applied this to non charitable transfers.
court has discretion to reform conveyance in a way that most closely meets the transferor's intent
28
Waste
life estate holders and tenants in possession must not commit waste.
Types:
- voluntary
- permissive
- ameliorative
29
Voluntary Waste
person causes property damage.
includes permanent impairment, depletion of natural resources (unless already being put to that use at time of conveyance - open mines doctrine)
30
Permissive Waste
person's failure to make minor repairs leads to substantial issues.
excludes ordinary wear and tear
31
Ameliorative Waste
person makes improvements to property that increase the property's value
but it is permitted when the improvements reflect a substantial change that has occurred in the character of the surrounding area
32
Restraints on Alienation: Types
If a restraint is void, grantee takes the interest without the intended restraint
- disabling: no right to transfer any interest
- forfeiture: if attempts transfer, grantor permitted to reenter and retake land or property goes to 3P
- promissory: promise not to transfer
- against public policy or unconstitutional: prohibited by law (based on race, ethnicity, religion, or gender)
33
Total Restraints on Alienation
on fee simple estates, almost always void
34
Partial Restraints on Alienation
may be valid if:
- restraint qualified so as to permit alienation to some possible alienees and
- reasonable under the circumstances (like right of first refusal)
35
Cotenancy Types
- tenancy in common
- joint tenancy
- tenancy by the entirety
36
Tenancy in Common
presumed unless conveyance states otherwise
no right of survivorship and freely transferable
37
Joint Tenancy
conveyance includes words of survivorship and four unities are met:
- possession: right to possess entire property
- interest: same interest in property
- time: take title at same time
- title: take title in the same document
Right of Survivorship: when one dies, interest automatically transfers to other covenants. Not devisable or inheritance
38
Joint Tenancy: Severance
occurs if joint tenant:
- conveys interest to another by deed
- signs contract to sell an interest in the property
- takes a mortgage out on the interest in a title theory jurisdiction
- in some states, lease can
Severance results in tenancy in common and destroys right of survivorship
39
Tenancy by the Entirety
Four unities (possession, interest, time, and title) are met and tenants are legally married.
Each covenant has equal and undivided interest with right of survivorship
40
Tenancy by the Entirety: Severance
- one spouse dies
- covenants divorce
- mutual agreement between the spouses
41
Partition
destroys cotenancy.
available to tenants in common and joint tenants.
occurs if:
- parties voluntarily execute a writing agreeing to physically divide or jointly sell OR
- file court action to force division or sale
42
Partition: Accounting
cotenants entitled to accounting upon partition. enables adjustments based on expenses or improvements that one of the covenants has paid
43
Types of Partitions
- partition in kind (physical division)
- partition by sale (sold and proceeds split equitably). Available only if partition in kind is impossible, impracticable, or results in substantial injury to one of the cotenants
44
Rights and Obligations of Cotenants: Possession
each cotenant has right to possess all of the property
cotenant in exclusive possession of the property does not have to pay rent
45
Rights and Obligations of Cotenants: Ouster
if cotenant in possession refuses to grant other cotenants access, then non possessing cotenant will receive fair rental value of property at time access became impossible
46
Rights and Obligations of Cotenants: Expeness
share necessary / beneficial expenses (taxes) but cotenant in exclusive possession may not seek contribution unless expenses exceed fair rental value
47
Rights and Obligations of Cotenants: Rent or Profits
may not collect rent from cotenant unless ouster. But rents / profits from 3P are shared
48
Rights and Obligations of Cotenants: Repairs
necessary expense shared by cotenants. cotenant in exclusive possession may not seek contribution but can seek reimbursement in an accounting or partition action
49
Rights and Obligations of Cotenants: Improvements
are an unnecessary expense.
cotenant may seek reimbursement for this type of expense only in an accounting or partition action
50
Types of Tenancy
- term of years
- periodic tenancy
- tenancy at will
- tenancy at sufferance
51
Term of Years
fixed duration and not subject to statute of frauds if less than a year
notice of termination not required
automatically terminates at end of tenancy unless:
- parties agere to end lease early or
- material breach of the lease
52
Periodic Tenancy
default tenancy
runs for specified duration and continues in successive intervals until notice of termination from either landlord or tenant
- common law: notice measured by length of period; year-to-year = 6 mos.
- modern law: for residential, if month or longer, 30 days; if commercial, common law rule
statute of frauds does not apply unless lease expressly created for more than a year
53
Tenancy at Will
must be expressly created
no specific term
continues until party terminates
- common law: can terminate without notice
- modern law: requires advance express or implied notice
54
Tenancy at Sufferance
when tenant remains in possession without permission when lease ends.
landlord can either
- accept a new lease (periodic tenancy established by rental payments) or
- evict tenant and claim damages (NO SELF-HELP)
Exceptions: not created if
- time associated with the holdover was minor or
- tenant is not at fault in creating the circumstances that led to holdover
55
Landlord's Duties
- deliver possession
- covenant of quiet enjoyment
- implied warranty of habitability
- duty to mitigate
56
Deliver Possession
must deliver legal and actual possession.
minority require delivery of only legal right of possession.
if violated, tenant can terminate the lease and seek damages OR enforce lease and seek relief
57
Covenant of Quiet Enjoyment
landlord or someone acting under landlord's control cannot interfere with tenant's right of possession
if tenant improperly evicted (actual or constructive), then tenant may terminate lease and seek damages
58
Implied Warranty of Habitability
must provide and maintain a premises fit for human habitation in residential leases
cannot be waived
after tenant gives notice of substantial defect, if landlord does not repair within reasonable amount of time, tenant can either:
- terminate lease
- remain in possession and withhold rent
- repair and deduct the cost from future rent
59
Duty to Mitigate
take reasonable steps to attempt to relet
if still cannot relet, tenant liable for remaining rent. If does, tenant liable for past-due rent and difference between rent obligation and amount of new rent (so long as reletting was in good faith)
60
Tenant's Duties
- pay rent
- repair
- not to commit waste
61
Pay Rent
primary duty of tenant.
if surrenders premises and landlord accepts surrender, relieved of future rent obligations. If fails to pay, tenant can evict or sue for rent.
62
Abandonment
tenant no longer in possession and improperly abandoned.
landlord may take possession and accept abandonment
63
Surrender
if landlord retakes, can be acceptance of surrender, which relieves the tenant of future rent obligations
but reentering to make repairs, accepting keys, or attempting to relet may not constitute acceptance.
if no acceptance, tenant must still pay rent
64
Tenant Duty to Repair
must make ordinary, minor repairs of damage caused by tenant (intentionally or negligently) and other repairs agreed upon by the parties
65
Types of Eviction
- actual eviction
- partial actual eviction
- constructive eviction
- partial constructive eviction
66
Actual Eviction
landlord, or someone under their control, ousts tenant
tenant can terminate lease and seek damages
67
Partial Actual Eviction
landlord deprives tenant of use of a portion of premises.
tenant can terminate lease ore remain in possession and withhold rent.
modern approach: only rent abatement
68
Constructive Eviction
tenant moves out because landlord, or someone under their control, substantially interfered with use and enjoyment of premises.
may terminate and withhold rent if abandons premises within a reasonable time
69
Partial Constructive Eviction
allows tenant only a rent abatement
70
Transfers by Landlord
may transfer landlord's interest unless agreement says otherwise.
new owner obligated to abide by terms of existing lease unless tenancy at will
71
Transfers by Tenant
tenant may transfer tenant's interest unless agreement says otherwise. landlord can enforce agreement if in privity of contract or estate with that party
restrictions on transfer strictly construed against landlord
traditionally, landlord could withhold consent for any reason but modern trend is cannot be unreasonable.
72
Assignment v. Sublease
assignment - lessee transfers lessee's interest for entire duration of lease.
sublease: anything less than entire duration
73
Transfers By Tenant: Privity of Contract
original tenant in privity of contract unless novation.
74
Transfer by Tenant: Privity of Estate
if tenant sublets, tenant remains in privity of estate with landlord. Subtenant not in privity of contract or privity of estate.
If tenant assigns, subtenant in privity of estate with landlord
75
Sublease: Assumption
tenant subletting a property is in privity of contract or estate only if tenant expressly assumes obligations of original lease
if so, then landlord could sue subtenant as 3P beneficiary
76
Fair Housing Act
prohibits discrimination in housing against members of certain protected classes who are engaging in housing-related activities
discriminatory advertising always prohibited
protected classes = race, color, national origin, religion, sex, disability, family status
77
Real Covenants
agreements or promises that run with land and can be affirmative or negative. enforced by actions at law (money damages)
78
Real Covenants: Requirements for Burdens to Run with Land
- written document (statute of frauds)
- horizontal privity (shared interest in property at time covenant created)
- vertical privity (original party transferred entire estate to subsequent owner)
- intent: original parties must intend for it to run with land
- touches and concerns the land
- notice (actual, inquiry, or constructive)
79
Real Covenants: Requirements for Benefits to Run with Land
- written document (statute of frauds)
- vertical privity (OG party transferred entire estate or any lesser estate to subsequent owner)
- intent
- touches and concerns the land
80
Equitable Servitudes
identical to real covenants, except that they are enforced in equity (injunction)
requirements:
- intent
- touches and concerns the land
- written document (sometimes)
no writing required if:
- purchaser has partly performed agreement or
- party seeking to enforce has proof of detrimental reliance
81
Implied Reciprocal Servitude
courts can provide injunctive relief even if plat filed without inclusion of servitude if:
- intent to create a servitude on all the lots
- servitude benefits and burdens each parcel
- servitude is negative and
- owner subjected to the servitude has notice of it
82
Equitable Servitude: Defenses
- estoppel
- laches
- unclean hands
- acquiescence
83
Estoppel
- benefitted landowner made statements or committed conduct indicating servitude will be released or abandoned
- burdened landowner detrimentally relied on those statements / conduct
- would be inequitable to enforce servitude
84
Laches
benefitted landowner has unreasonably delayed bringing an enforcement action
85
Unclean Hands
benefitted landowner violated the same/similar restriction that is the subject of the enforcement action or committed wrongful conduct related to action
86
Acquiescence
benefitted landowner has indicated that he does not object to an ongoing violation of the restriction
87
Covenant / Servitude: Termination
- release: subsequent writing that complies with SoF and expressly releases right
- abandonment: owner of right (a) intends to terminate and (b) acts in a way to terminate
- merger: owner is the same for benefitted and burdened land
- prescription: holder of right fails to protect it
- condemnation (eminent domain)
- changed circumstances: substantial change that affects all benefitted properties (lost usefulness, no longer possible)
88
Common Interest Communities
individually owned lots/units burdened by servitude that imposes obligation:
- to pay for the use or maintenance of the property held or enjoyed in common by individual owners OR
- pay dues or assessments to an association that provides services or facilities to the common property or to the individually owned property or that enforces other servitudes burdening the property in the development or neighborhood
89
Easements
can be negative or affirmative, appurtenant (two parcels of parcel) or in gross (particular person or entity)
90
Easements: Types and Creation
- express
- by implication
- by necessity
- by prescription
- by estoppel
91
Express Easement
may be created:
- when servient estate owner expressly grants easement to another party (easement by grant) OR
- when party transferred, transferor expressly reserves easement (easement by reservation)
92
Express Easement: Writing Requirements
- identifies parties
- adequately describes property (if no location stated, burdened owner selects reasonable location)
- expresses grantor's intent to create easement
- signed by grantor (servient estate holder)
93
Easement by Implication
created when easement reasonably necessary to access dominant estate and:
- common ownership (prior unity) in two parcels of land
- prior use of land consistent with easement
- use was continuous and apparent at the time of sale of one of the parcels and
- use is reasonably necessary to the use and enjoyment of the dominant estate
94
Easement by Necessity
created when:
- common ownership (prior unity) in two parcels of land
- severance of the parcels created the necessity for the easement and
- easement is strictly necessary (landlocked)
95
Easement by Prescription
created when the use is:
- open and notorious
- hostile
- continuous
- for the statutory period
Use at conclusion of prescriptive period establishes the scope of the easement granted.
96
Easement by Estoppel
created if:
- permission to use the servient estate
- reasonable reliance on that permission to the party's detriment and
- would be equitable to recognize the existence of an easement
easement by estoppel are subject to the usual equitable defenses (estoppel, laces, unclean hands, acquiescence)
97
Easements: Scope
if scope not expressly defined, scope of easement is determined by:
- intent of the parties
- reasonableness of the use (development and character of the property over time)
overuse enjoined but will not terminate the easement
98
Easements: Transferability
burden of easement in gross is always transferred if burdened property is sold. Traditionally, benefit could not but today courts look at intent of parties and usually allow commercial easements in gross.
easement appurtenants run with land ad always transfer upon sale
99
Easements: Termination
duration is indefinite unless expressly stated or terminated. can terminate by:
- release
- abandonment
- merger
- prescription
- condemnation
- necessity ends (if created by necessity)
- no longer equitable (if created by estoppel)
- estoppel: (a) dominant estate holder makes statements/acts in a way that causes servient estate holder to reasonably believe easement abandoned and (b) servient estate holder reasonably relies to his detriment
- destruction: physical destruction will not normally terminate an easement but if tied to structure on property destroyed by extraordinary natural event, terminated
100
Licenses
- not subject to statute of frauds so can be created by oral agreement
- personal in nature so only licensor can transfer license (not licensee)
101
Licenses: Revocability
revocable unless:
- licensor expressly declares an intent to make irrevocable
- license coupled with another interest or
- there is estoppel
102
Profits
rights to enter another's property to remove natural resources.
can be created expressly or by prescription.
can be terminated or transferred in same manner as easements but can be terminated by overuse
103
Fixtures
chattel that has become so attached to a structure as to become real property.
Elements:
- intent for chattel to become a fixture
- chattel permanently attached to real property and
- removal of chattel would cause substantial damage to property
104
Fixtures: Real Property Sales
all fixtures transfer with sale.
for seller to retain fixture, must expressly reserve it in contract of sale or deed
105
Fixtures: Life Estates
if life tenant intends for fixture to be removed, life tenant may remove at any time before estate terminates or within a reasonable time after estate ends
106
Fixtures: Residential Tenants
traditionally, must avoid making changes
modern trend: focuses on intent of tenant and if property can be restored to former condition
107
Fixtures: Commercial Tenants
trade fixture can be removed by tenant during or at termination of lease BUT must restore premises to original condition
108
Fixtures: Liens
party with security interest in personal property may obtain priority over real property owner or a mortgagee by making a fixture filing
109
Zoning: Nonconforming Use
new ordinance must allow nonconforming use (use that existed before zoning ordinance) to continue for reasonable amount of time (otherwise = taking).
Reasonable amount of time depends on circumstances but typically last until use ceases or is substantially destroyed or title transferred to new owner.
cannot extend or intensify nonconforming use in a way that constitutes a substantial change. Any doubts about whether substantial are resolved against change
110
Zoning: Special-Use Permit
required when person seeks a use that is not zoned for that area and is allowed if
- not incompatible with zoned area and
- beneficial to the public health, safety, or welfare
111
Zoning: Variance
created when gov't grants exception to ordinance and is allowed only if denying would create a hardship that is:
- unnecessary
- unique and
- not created by the applicant
Must not be detrimental to public welfare or character of the neighborhood
112
Spot Zoning
single parcel of land or relatively small group of parcels are rezoned in an area and is presumptively unconstitutional because does not further public health, safety, or welfare
generally benefits landowner at expense of surrounding landowners
113
Watercourse
person who owns land that contains watercourse does not own it but has rights to use.
Three theories
- natural flow doctrine
- reasonable use doctrine
- prior appropriation doctrine
114
Watercourse: Natural Flow Doctrine
upstream landowner whose land abuts watercourse has absolute right to use for natural purposes but cannot use for artificial purpose if would reduce water supply for downstream owners
115
Watercourse: Reasonable Use Doctrine
all riparian landowners entitled to make reasonable use, whether for natural or artificial purposes
downstream owners cannot enjoin upstream owner's use unless reasonably interferes with their own use
116
Watercourse: Prior Appropriation Doctrine
right to use water is given to first person to use it for a beneficial purpose
117
Underground Water
landowner may pump as much groundwater as can be used to benefit land above (reasonable use).
but if want to use in different way, cannot unreasonably interfere with rights of other landowners.
other theories:
- absolute ownership (entitled to any amount of water)
- correlative rights (proportion of land ownership)
- prior appropriation (first to use)
118
Surface Waters
Three theories:
- natural flow: prohibited from altering natural flow
- common enemy: permitted to divert or alter flow of surface water, even if it means that surface water flows onto another's land
- reasonable use: permitted to divert or alter flow if it would be reasonable
119
Airspace
landowner has rights to airspace above the surface to the extent that the owner can reasonably make use of it and may build a tall structure on the land
BUT no right to sunlight
120
Lateral Support
adjacent landowner strictly liable for damages caused to land in natural state. any liability to developed land based on negligence unless building owner can show activities on adjacent land would have building owner's land to collapse even if in natural statute (in which case, strictly liable)
121
Subjacent Support
subsurface landowner strictly liable for damages caused to undeveloped land but any liability to developed land based on negligence
122
Real Estate Broker
representatives for either buyer or seller and has authority to make or accept offers, negotiate terms of sale, and help facilitate the sale
123
Broker's Compensation
entitled to reasonable fee or commission.
modern law: entitled to fee upon completion of sale.
Some states may allow seller's broker to collect fee if the seller prevents the sale
124
Broker: Fiduciary Duties
must act for benefit of party the broker represents. Should not represent both unless sufficient disclosures to show parties gave informed consent
Broker must disclose all relevant and material info that pertains to sale of property
125
Seller's Broker: Duty to Disclose
must disclose to the seller:
- all offers to purchase the seller's property
- identity of all potential purchasers
- any facts affecting the value of the property
- information concerning the ability or willingness of the buyer to complete the sale or to offer a higher price
- broker's relationship to, or interest in, a prospective buyer
- buyer's intention to subdivide or resell the property for profit
- any other information that might affect the seller's ability to obtain the highest price and best terms in the sale
Must disclose any known, material physical defects in the property to the buyer
126
Buyer's Broker: Duty to Disclose
must reveal to buyer:
- willingness of the seller to accept a lower price
- any facts relating to the urgency of the seller's need to dispose of the property
- broker's relationship to, or interest in, the seller
- any facts affecting the value of the property
- length of time the property has been on the market and any other offers or counteroffers that have been made relating to property
- any other information that would affect buyer's ability to obtain the property at the lowest price and on the most favorable terms
127
Transaction Broker
broker who offers real estate services to both buyer and seller but does not represent either.
legally neutral role - facilitator for transaction.
owes similar duties to that of an agent but no duty of loyalty.
128
Sale of Real Property
contract for transfer of interest in real property must comply with SoF unless part performance or estoppel
129
Sale of Real Property: Statute of Frauds
contract must:
- be in writing
- include an adequate description of the parties (do not need to use legal names)
- identify or adequately describe the property to be sold (do not need full legal description but must contain sufficient particulars and distinguish sold property)
- include language the reflects parties' intention to transfer title in land
- include consideration for the sale of the land (generally the purchase price)
- be signed by the party to be charged
130
Sale of Real Property: Part Performance Exception to SoF
requires an oral agreement and at least TWO of the three following factors:
- buyer is in open and notorious possession of the property
- all or part of the purchase price has been paid to and accepted by the seller
- substantial improvements made to property
131
Sale of Real Property: Estoppel Exception to SoF
party must show:
- other party made a statement/committed conduct indicating a land sale contract
- party reasonably and detrimentally relied on that statement or conduct, and
- serious or irreparable harm would result if specific performance not granted
132
Sale of Real Property: Time for Performance
implied in every contract is duty to act in good faith and timely perform terms.
timing (closing date) not an essential term. If no date, infer a reasonable time. Even if closing date, no breach for failing to close by then (still reasonable time).
133
Sale of Real Property: Time Is of the Essence Clause
time not presumed to be of the essence unless expressly stated. If contain this provision, breach if party does not perform when specified
134
Remedies for Sales Contract
specific performance, monetary damages (expectancy, consequential, reliance, and liquidated), and rescission
135
Marketability of Title
implied in every contract for sale of real property unless otherwise stated.
breached if title encumbered at time of deed's delivery (closing), regardless of seller's knowledge of encumbrance
if encumbrance exists, buyer can rescind.
waivable
136
Marketability of Title: Definition of Encumbrance
- burden on title that a reasonable buyer would not have accepted if had known before signing the contract OR
- risk of litigation over possible title defect
137
Equitable Conversion
once parties enter into valid land sale contract, seller has a legal interest (personal property/sale proceeds) and buyer has equitable interest in land.
Death of party does not rescind land sale contract - estate must perform.
If structures destroyed through no fault of seller, buyer bears risk of loss unless parties agree otherwise
138
Land Sale Contract & Deed: Merger
once a deed has been delivered and accepted, cannot sue for breach of sales contract and can only sue for covenants in deed.
modern courts generally only apply merger doctrine when use carries out likely intent of the parties
139
Disclosures Concerning Fitness and Suitability of the Property
traditionally, seller did not have duty to disclose defects in property to buyer.
today, seller should disclose defects that would be of interest to the buyer, but in some jurisdictions a seller may disclaim this duty so long as disclaimer is clear and specific
140
Sellers' Duties
- duty to disclose latent defects in property
- duty to make no fraudulent assertions concerning the property
- duty to make full disclosure when there is a special relationship giving rise to a fiduciary duty
141
Implied Warranty of Fitness and Suitability
exists in sale of new home and warrants that home was skillfully constructed and is free from defects in workmanship, structural integrity, or installation of utilities that fail to meet standards of construction trade.
recognized in almost all states. extends to latent defects but generally doesn't require buyer to prove defect rendered home uninhabitable - only needs to be major defect.
some states allow clear and conspicuous waiver
buyer must raise breach within a reasonable time and give seller notice and opportunity to cure defect.
if used home, cannot bring claim against seller for breach but some courts will allow buyer to recover against original builder when defect is latent at time of sale
142
Option Contract
real property owner gives another the right to buy property within a certain or by a future date.
unilateral contract (optionee does not have to buy it). transfers into bilateral contract when exercise option
generally transferrable.
unless part of a lease, subject to RAP
143
Right of First Refusal
owner of real property may not transfer interest in that property to another without allowing person/entity that holds right to match any offer received.
must exercise right within a reasonable time after receiving notice of intended transfer.
generally not transferable.
144
Mortgage
mortgage is an interest in real property used to secure repayment of a loan or other debt and is typically created by executing two documents:
- promissory note, which makes mortgagor-borrower personally liable for loan if not paid in full and
- mortgage document, which runs with land and allows mortgagee-lender to foreclose by selling it to recover loan balance
145
Title Holder Theories
three theories to determine if mortgagor-borrower or mortgagee-lender holds title to real property during mortgage term:
- lien theory: mortgagor-borrower retains title to property unless foreclosure occurs
- title theory: provides that mortgagee-lender gains legal title and retains title as long as there is a balance on the mortgage, but the mortgagor-borrower remains in possession of the property
- intermediate theory: provides that the mortgagor-borrower retains title to property unless and until mortgagor-borrower defaults on loan; after default, title automatically transfers to mortgagee-lender
146
Absolute Deed as Security
aka equitable mortgage
transaction in which a real property owner gives the lender a deed, rather than a mortgage, as security for a loan.
not subject to SoF
clear and convincing evidence needed to show deed was intended to be a mortgage
parol evidence rule does not bar party from presenting evidence to show parties intended to create a security interest and not a transfer of title to property
147
Mortgage: Transfers
mortgage runs with land, which means that if land is transferred to another before mortgage debt paid in full, new owner takes title to land subject to mortgage or other security interest
148
Due-on-Sale Clause
presumptively valid
if mortgagor-borrower transfers real property securing the mortgage, balance of mortgage is accelerated (must be paid in full)
149
Due-on-Encumbrance Clause
presumptively valid
requires senior mortgage to be paid in full if property encumbered by a subordinate lien
150
Mortgage: Liability
absent novation, borrower liable for debt.
If transferee assume mortgage, transferee primarily liable and borrower secondarily liable.
If transferee takes subject to mortgage, transferee not obligated to pay mortgage but can lose property if mortgage not paid
151
Mortgage: Novation
if mortgage not repaid, lender may relieve borrower of personal liability through understanding that transferee will assume obligation.
lender must agree to discharge original obligation in exchange for new obligation between lender and transferee.
most jurisdiction require the novation to be express (either orally or in writing). minority of states will infer lender released borrower based on clear evidence of parties' subsequent dealings that support such a finding
152
Discharge of Mortgage
mortgagor pays off debt
express release (like novation)
- if state follows title theory, generally require compliance with SoF. if follow lien theory, generally do not.
153
Discharge of Mortgage: Prepayment
traditionally, could not prepay in advance of due date without penalty.
today, if mortgage silent on prepayment, allowed without penalty but a majority of states will prohibit unless:
- promissory note or mortgage allows for prepayment without penalty OR
- mortgagee-lender subsequently consents to prepayment without penalty
154
Deed in Lieu of Foreclosure
borrower who wishes to default on mortgage without incurring personal liability on promissory note may give mortgagee-lender a deed in lieu of foreclosure
borrower will transfer title in release of obligations.
release should in writing that reflects intent of parties (but some jurisdictions will uphold oral agreements)
155
Foreclosure
if mortgagor-borrower defaults on mortgage, mortgagee-lender can:
- renegotiate terms of mortgage
- sue the borrower based on promissory note OR
- foreclose on lien on real property
156
Mortgagee-Lender's Pre-Foreclosure Rights
- acceleration of loan if acceleration clause
- right to take possession of property prior to foreclosure (if title theory)
- right to protect security interest against waste by seeking injunction / damages
157
Mortgage: Priority
purchase money mortgages have first priority. priority of other mortgagees and judgment lien holders will be in the order in which interests created unless:
- subsequent mortgagee or judgment lien holder can claim protection under recording act OR
- loan modification agreement that makes first mortgagee's priority subordinate to that of a junior mortgagee
158
Purchase Money Mortgages
include loans used to pay for all or part of purchase price.
to have priority:
- proceeds must be used for purchase of property
- mortgagor-borrower must take title and execute mortgage simultaneously and
- purchase money mortgage must be properly recorded immediately after deed
159
Future Advance Mortgages
include loans where a party other than seller creates an agreement that lender will disburse loan funds to borrower in installments
if obligatory, mortgagor-borrower entitled to receive entire loan amount before subsequent lenders receive proceeds from foreclosure sale
if optional disbursements, future disbursements made only if mortgagor-borrower requests on contractual dates and mortgagee-lender concludes in good faith that underlying construction project met any satisfactory-progress condition. If foreclosure sale, will receive only disbursements requested and paid. If mortgagee-lender has notice when it makes advance that subsequent lender has acquired interest in property, advance loses priority to that creditor (most states require actual notice)
160
Necessary Parties to Foreclosure
parties subject to mortgage and parties who acquired an interest in the property after the execution of the mortgage being foreclosed
161
Junior and Senior Mortgagees
foreclosure eliminates all junior mortgages and liens but purchaser of property takes it subject to interests of any senior creditors
162
Distributing Foreclosure Sale Proceeds
proceeds applied in following order:
- costs associated with sale
- balance and interest of foreclosed mortgage
- mortgage obligations owed to junior interest holders, in order of priority
if surplus, goes to borrower
163
Foreclosure Sale: Deficiency
if results in deficiency (price does not cover mortgage), lender who brought foreclosure action and junior lien holders may seek deficiency judgments under promissory note by filing separate judicial actions
164
Redemption
if mortgagor-borrower defaults, may exercise right of redemption to retain title to property
types:
- equitable redemption
- statutory redemption
165
Equitable Redemption
mortgagor-borrower must pay off mortgage BEFORE foreclosure sale.
right waived if lender proves:
- waiver agreement made after existence of mortgage
- right was exchanged for good and valuable consideration AND
- transaction not fraudulent or otherwise unfair
166
Statutory Redemption
mortgagor-borrower must pay amount paid for property at foreclosure sale within a set period of time
167
Mortgage: Assignment
if mortgagee-lender transfers mortgage but not note, some states presume not also transferred. Other states treat transfer as void
if transfer note but not mortgage, majority rule is that mortgage will be deemed to transfer
168
Mortgage: Recording Assignment
majority rule is that assignment by mortgagee-lender should be recorded. some jurisdictions allow assignee to have prio over others under theory that original mortgage's recording provided notice
once recorded, assignee-lender will have priority as assignor-lender
169
Subrogation
equitable doctrine that applies when, following a default, a 3P who has interest in property pays mortgage in full and becomes subrogee
subrogee obtains original creditor's rights against the debtor / junior creditors.
subrogee cannot be person primarily liable for debt
170
Installment Land Contract
seller of real property retains deed to property while granting possession of property to intended buyer
buyer makes payments toward purchase price.
when buyer pays total amount due, seller executes a deed and delivers it to buyer. If buyer defaults, seller need not bring a foreclosure action because seller holds title to property
171
Recording Acts: Common Law
if owner sellers same property twice, first buyer takes title
172
Recording Acts: Recording Statutes
if jurisdiction has recording statute, second buyer might have superior title if second sale meets requirements of recording statute.
Types:
- race
- notice
- race-notice
173
Recording Statute: Race
first purchaser to record interest prevails, even if purchaser knows of prior conflicting interest
174
Recording Statute: Notice
subsequent purchaser of property who takes without notice of a prior claim prevails over prior grantee.
can be actual, constructive, or inquiry notice
175
Actual Notice
subsequent purchaser has actual knowledge of interest
176
Constructive Notice
instrument conveying interest in real property is properly recorded and indexed
177
Inquiry Notice
purchaser knows of some fact that would prompt a reasonable person to conduct a further investigation into a potential issue involving a superior interest
178
Recording Statute: Race-Notice
purchaser must record first and have no notice of prior claim
179
Parties Protected by Recording Statutes
usually include:
- bona fide purchasers (purchaser who paid value for interest in property)
- mortgagee-lenders
- grantees under the shelter rule
- purchasers who take without notice of a wild deed
- grantees protected by estoppel by deed
180
Shelter Rule
party that takes from someone protected under recording statute will be protected by grantor's status
181
Wild Deed
deed that is recording in such a way that it cannot be found in title search
182
Estoppel by Deed
if seller does not have title to property at time the parties execute contract but later acquires title, that seller must transfer it per terms of contract
183
Parties Not Protected by Recording Statutes
- heirs, devisees, donees
- judgment or tax lien holders
- bona fide purchasers against an adverse possessor
- transferees of owners who obtained title by forged deed
184
Adverse Possessor and Recording Statutes
party that acquires title by adverse possession has superior title to those protected by a recording statute
185
Adverse Possession
to claim title, possession must be:
- actual
- open and notorious
- hostile
- exclusive
- continuous
- and for the statutory period
186
Adverse Possession: Actual
may claim title only to portion of land actually possessed UNLESS enters land under color of title in which case title to whole property given
187
Adverse Possession: Open & Notorious
use of land must be so obvious that if a reasonable owner were to inspect the property, the owner would have notice of an adverse claim
188
Adverse Possession: Hostile
must occupy land without owner's permission.
adverse possessor's intent irrelevant in majority of jurisdictions
189
Adverse Possession: Exclusive
possession cannot be shared with owner or general public
190
Adverse Possession: Continuous
must exercise control over property in same way a reasonable owner would for the prescribed period of time
191
Adverse Possession: Statutory Period
varies by state. begins running once enters and physically occupies property
192
Tacking - Possessors
for series of possessors to tack time together, need:
- privity of possession (consensual and voluntary transfer by contract, deed, or will) and
- no gaps in time from transfer to another (continuous use)
193
Tacking - Owners
if property owner conveys property to another, period of adverse possession does not reset with regard to new owner but tacking cannot be used if one person holds a present possessory interest and another holds a future interest
194
Adverse Possession: Disability
if take possession while owner disabled, clock will not start to run
but if enter property when not disabled and owner becomes disabled later, statutory period continues to run
195
Transfer by Deed
requirements:
- deed must comply with SoF (writing that describes property with reasonable certainty that is signed by grantor, includes words of transfer, and names parties)
- grantor must have immediate, present intent to transfer title
- deed must be delivered (dominion and control released) and
- grantee must accept deed
196
Transfer by Deed: 3P Delivery
transfer made to uninterested 3P deemed to show grantor's intent to transfer title if:
- grantor does not retain power to reclaim deed from 3P
- terms for delivering deed to grantee are in writing and
- all conditions on transfer of title satisfied
197
Transfer by Deed: Grantee's Agent
delivery presumed if instrument transferred to grantee's agent but transfer to grantor's agent will not satisfy delivery element
198
Deed Covenants and Warranties
merger once deed delivered.
types of deeds:
- general warranty deed
- special warranty deed
- quitclaim deed
199
General Warranty Deed
includes six covenants:
- seisin
- right to convey
- against encumbrances
- quiet enjoyment
- warranty of title
- further assurances
200
Seisin
warrants that grantor owns estate that grantor is transferring and has good title
201
Right to Convey
warrants that grantor has legal right to convey land
202
Covenant Against Encumbrances
warrants that title is free of encumbrances at time of transfer
203
Covenant of Quiet Enjoyment (Deeds)
warrants that another party will not disturb grantee's use or enjoyment of land
204
Warranty of Title
obligates grantor to either defend title claims from 3P or otherwise compensate grantee for losses the grantee might incur from 3P claims
205
Further Assurances
warrants that grantor will do whatever is reasonably necessary to help grantee perfect title
206
Special Warranty Deed
contains same covenants of title as a general warranty deed, but it warrants against only defects that were caused by, through, or under grantor or by acts allowing transfer of interest in property
207
Quitclaim Deed
promises no covenants of title.
grantee of a quitclaim deed receives no better title than grantor's title
208
Indexes
Grantor-grantee index: provides vehicle for searching a property's chain of title by searching grantors' and grantees' last names
Tract index: files all recorded documents by property location
209
Title Insurance
parties not protected under recording acts or who risk a monetary loss may purchase title insurance.
protects parties, including both owners and lenders, from monetary loss due to title defects or other lien problems
210
Conflicts of Law
traditional: law of situs of land. occasionally, considered contractual and will apply law of place where contract made. parties may also specify applicable law
modern: state that has more significant relationship to facts of case or a greater interest in outcome. Factors:
- where contract negotiated
- where parties entered into contract
- where parties to contract are domiciled
If determining validity of contracts to convey land, will most likely apply situs state's law
