Real Property Flashcards
Concurrent ownership
Co-ownership
1) joint tenancy
2) tenancy by the entirety
3) tenancy in common
Joint tenancy
Two or more people own with the right of survivorship
- alienable inter vivos = transferrable
- not devisable or descendible = passing by will or intestacy
How to create a joint tenancy
T-TIP
JT’s must take their interests:
T = at the same Time
T = by the same Title (same deed, will or other document of title)
I = with Identical, equal Interests and
P = with rights to possess the whole
Right of survivorship
deceased joint tenant’s share automatically goes to the surviving JT
Must be clearly expressed by grantor
Without clear expression, a conveyance to two or more people = PRESUMED tenancy in common
Severance of a joint tenancy
When a JT is severed, right of survivorship is destroyed, and a TIC results
SAP = Sale And Partition
Sale = voluntary conveyance by a JT of their interest destroys joint tenancy
- Transferee takes as a tenant in common
- may be done secretly (without other JT’s knowledge)
3 types of Partition:
1) voluntary agreement = peaceful end to relationship
2) partition in kind = judicial action for a physical division of property
- works best for property with sprawling acreage
3) forced sale = judicial action to sell land and divide proceeds proportionately
- works best for a single building, small plot, etc.
Mortgages and joint tenancies
A JT’s execution of a mortgage will not sever the JT in most states
Lien theory (majority) = no severance unless mortgage is foreclosed and property sold
Title theory (minority) = lien severs JT as to the encumbered share –> equivalent of transferring title to creditor
Effect of one JT’s mortgage on the other JTs
Joint tenants who did not sign the mortgage are not subject to it, regardless of their knowledge of it
If a JT takes out a mortgage and then dies, entire property still goes to other JT (right of survivorship still in tact)
Tenancy by the entirety
A protected marital interest between spouses with the right of survivorship
Arises presumptively in any conveyance to married partners
CAN’T TOUCH THIS = very protected form of co-ownership
- creditors of only one spouse cannot touch
- one spouse acting alone cannot convey to third party
- one spouse acting alone cannot execute a mortgage
Severance of a tenancy by the entirety
Death
Divorce = becomes a TIC
JOINT creditor (of both spouses)
Execution of lien by both spouses
Tenancy in Common
Co-ownership with no right of survivorship
- each co-tenant owns an individual part
- each has a right to possess the whole
- each interest is devisable, descendible and alienable (no right of survivorship!)
Multiple grantees presumed TIC
Possession of TIC
1) right to possess all portions but NO RIGHT to EXCLUSIVE possession of any part
2) Ouster = one co-tenant wrongfully excludes another co-tenant from possession of the whole or any part
- actionable wrong
Rents and profits of TIC
1) co-tenant in exclusive possession has right to retain profits from their use (unless ouster or contrary agreement)
- BUT must share profits from exploitation of land, such as mining
2) Co-tenants get their fair share of rental income if leased to third party
Adverse possession and TIC
No adverse possession by co-tenant in exclusive possession of property UNLESS there is ouster
Ouster = satisfies hostility requirement for adverse possession
Carrying costs for TIC
Each co-tenant pays their fair share of costs:
- taxes
- mortgage payments
Fair share = co-owner’s individual share in the whole
Duties to repair in TIC
Each co-tenant must contribute fair share for reasonable, necessary repairs with notice
Improvements to TIC
An improver gets credit equal to any value increase he caused and a debit equal to any decrease in value he caused
No contribution from co-tenants required for unilateral improvements
- credit or debt given/taken at partition if applicable
Duty to not commit waste in TIC
Co-tenant may bring an action for waste against another co-tenant
3 types of waste:
1) voluntary = willful destruction
2) permissive = neglect
3) ameliorative = unilateral change that increases value
Leasehold estate (and types)
An estate in land in which the tenant has a present possessory interest in the leased premises and the landlord has a future interest (reversion)
1) tenancy for years
2) periodic tenancy
3) tenancy at will
4) tenancy at sufferance
Tenancy for years
Lease for a known, fixed period of time = end date!
- no notice needed to terminate = automatically ends at its termination date
- Writing required for more than one year (SOF)
Right of entry
Reserved by landlord - allows L to terminate lease if T breaches any of lease’s covenants
- Includes failure to pay rent
Periodic tenancy
Lease which continues for successive intervals until T or L gives proper notice of termination
- continuous until properly terminated
Creation of a periodic tenancy
Express = L to T from month month
- no end date –> continues until termination
Implication/Operation of law = 3 ways:
1) no mention of duration, but rent payment set at intervals
2) oral term of years in violation of SOF –> measured by way rent is tendered
3) hold over lease = T wrongfully stays past conclusion of original lease –> measured by way rent is tendered
Termination of a periodic tenancy
Notice, usually written, must be given
Notice must be at least equal to length of the period itself
- month-to-month = one month’s notice
- week-to-week = one week’s notice
- year-to-year = 6 months at CL, but 1 month under Restatement (preferred for the Bar!)
Tenancy at will
A tenancy of no fixed period of duration
Terminable at will of either L or T
“To T for as long as L or T desires”
Creation of tenancy at will
Must be created by an express agreement that lease can be terminated at any time
If no express provision for tenancy at will, periodic tenancy will be implied
with regular payment of rent
Termination of tenancy at will
Termination by either party
Termination:
- with notice and reasonable time to vacate OR
- operation of law:
1) either party dies
2) T commits waste
3) T attempts to assign his tenancy
4) L transfers her interest in property
5) L executes a term lease to a third person
Lease gives only L right terminate = same right implied for T
Lease gives only T right to terminate = NO right implied for L
Tenancy at sufferance
Created when a T wrongfully remains in possession past expiration of the lease (holds over)
Wrongdoer has a leasehold estate to permit L to recover rent
Terminates when L:
1) evicts OR
2) elects to hold T to new tenancy
- no notice required
Hold-over doctrine
If T continues in possession after their right to possession has ended, L may:
1) evict T or
2) bind T to a new periodic tenancy
Length of new tenancy = way rent was computed under lease that has ended
- maximum tenancy created = year-to-year
- promises in original lease apply to new tenancy
Residential Ts = usually a new month-to-month tenancy
- if notice of increased rent, staying = assent to increase
Exceptions to hold-over doctrine
1) T remains in possession for only a few hours after termination or leaves a few items of personal property
2) delay is not T’s fault
L cannot bind T to a new tenancy if exception applies
Tenant’s duties
1) duty to repair
2) duty to pay rent
Silent lease (T’s duties to repair)
If lease is silent on duties to repair, T only has obligation to:
1) maintain premises
2) make routine repairs
- NOT repair for ordinary wear and tear
3) not commit waste
- voluntary = damage by overt conduct
- permissive = failing to take reasonable steps to prevent damage
- ameliorative = unilateral change by T increasing value; T liable for cost of restoration
T’s duty to repair with express covenant in lease
When expressly in lease, T must maintain the premises in good repair and condition
CL = T responsible for any destruction to property (even natural forces)
Modern:
- Residential = L remains obligated to repair under non-waivable implied warranty of habitability
- Nonresidential = covenant to repair is enforceable and includes repairs for ordinary wear and tear, unless excluded in covenant
T breaches duty to pay rent
1) T remains in possession = L can evict (still entitled to rent) or sue for rent due
- no self help for L (includes changing locks, forcibly removing T or removing T’s possessions)
2) T is out of possession = L’s options are SIR:
- Surrender = T shows by words or conduct that she wants to give up lease
- Ignore abandonment = L does nothing and holds T liable for rent until natural end of lease (only in minority of states)
- Re-let premises = hold T liable for any deficiency
Majority = L must at least TRY to re-let to mitigate (good-faith effort)
Condemnation of leaseholds
Condemnation = taken by eminent domain
Entire leasehold taken = T’s liability for rent is extinguished and lessee entitled to compensation
Temporary or partial taking = T is not discharged from rent duty but is entitled to compensation
L’s duty to deliver possession
L must put T in actual possession of premises at beginning of leasehold term
If holdover T, L has breached and new T gets damages
Implied covenant of quiet enjoyment
T has right to quiet use and enjoyment of the premises without interference from L
- applies both to residential and commercial leases
Breach of implied covenant of quiet enjoyment
1) breach by wrongful eviction
2) breach by constructive eviction
Breach by wrongful eviction
exclusion from whole or part of premises without cause
Actual eviction = exclusion from entire premises by L, paramount title holder or hold-over T
- Terminates obligation to pay rent
Partial eviction = exclusion from part of premises
- when excluded by L, terminates obligation to pay rent
- when done by a paramount title holder –> T is liable for reasonable rental value of portion T continues to possess
Breach by constructive eviction
L’s breach of duty renders premises unsuitable for occupancy
Elements = SING
- Substantial Interference = chronic or permanent problems due to L’s actions or failures
- Notice = T must notify L of the problem and L must fail to fix it
- Get out = T must vacate within a reasonable time after L fails to remediate
T who has been constructively evicted may terminate the lease and seek damages
Acts of other tenants
L is generally not responsible for other T’s wrongful acts except:
1) L has a duty to abate a nuisance on site
2) L must control common areas
Implied warranty of habitability
Non-waivable warranty requiring Ls to keep residential premises fit for human habitation
- bare living requirements must be met
- standard = based on CL and housing codes
- Breach triggered by no heat in winter, no working plumbing, no running water, etc.
T’s rights when IWH is breached
T has 3 options: MR3 (MRRR)
M = Move out and terminate the lease (not required!)
R = Repair and deduct cost from future rent
R = Reduce rent or withhold all rent until court determines fair rental value
R = Remain in possession, pay full rent and affirmatively seek money damages
Covenant of quiet enjoyment vs implied warranty of habitability
quiet enjoyment = T must vacate to successfully plead constructive eviction
Habitability = T MAY (but doesn’t have to) vacate - there are other remedial options
Retaliatory eviction
L cannot terminate T’s lease or penalize T in retaliation for T’s exercise of legal rights
Majority = retaliation presumed if L acts within 90 to 180 days after T exercises rights
Fair Housing Act
Protects Ts and potential Ts from discrimination based on race, color, religion, national origin, sex, disability, or familial status
Exemptions:
1) owner-occupied buildings with 4 or less units
2) single-family homes if owner owns no more than 3
Reasonable accommodations = L must permit disabled Ts to make reasonable modifications to existing premises at T’s own expense
Actions prohibited by Fair Housing Act
Based on a person’s race, color, religion, national origin, sex, disability, or familial status
1) refuse to negotiate, rent, sell or mortgage
2) provide different terms or conditions for sale, rent, or financial assistance
3) falsely represent that a dwelling is not available for inspection, sale or rental
4) make, print or publish any notice or ad that indicates preference (including exemptions)
Assignment vs sublease
Assignment = transfer of entire remaining term of lease
Sublease = transfer of part of remaining term of lease
Absent a prohibition in the lease, T may freely transfer their interest in whole (assignment) or part (sublease)
Prohibition of assignment and/or sublease
A covenant in the lease prohibiting assignment does not prohibit subletting and vice versa (strictly construed against L)
If T transfers interest in violation of a covenant, transfer is NOT void
BUT L usually can terminate lease or sue for damages
If L consents to one transfer by T, L waives right to object to future transfers by that T
Assignment
Transfer of entire remaining term of a lease
Assignee (T2) and L in privity of estate = both L and T2 liable to each other for covenants that run with land
Original (T1) and L in privity of contract = T1 remains liable for original lease obligations, such as to pay rent
Covenants that run with the land
1) if original contracting parties so intend AND
2) it touches and concerns the land
- benefits and/or burdens parties with respect to their interests in the property
- promises to do a physical act like maintain or repair property generally considered to run with the land
Rent covenants run with the land –> assignee (T2) owe rent directly to L
- L can sue T2 for rent (privity of estate) AND
- L can sue T1 for rent (privity of contract)
- BUT if T2 assigns to T3, T2 no longer liable to L (no privity of estate or K)
Sublease
Original T transfers less than entire interest in remaining term of lease
T2 pays rent to T1, who pays L
T2 and L ≠ privity of K OR estate (unless T2 expressly assumes covenants)
T1 and T2 = privity of K
T1 and L = Privity of K and estate
L’s remedies and sublessee’s rights
L’s remedies = terminate main lease for nonpayment of rent or other breaches of covenant
- sublease automatically terminates with main lease
Sublessee’s rights = no right to enforce any covenants made by L in main lease, EXCEPT IWH
Assignments by L (and rights and liabilities)
Usually done by deed when L1 conveys to new owner (L2)
- T’s consent not required
- T must be given reasonable notice of assignment
Rights of L2 = T must pay rent to L2 as new landlord
- all benefits run with estate to L2
Liabilities of L2 = burdens that touch and concern the land also run with estate to L2 (privity of estate)
Liabilities of L1 = L1 remains liable on all covenants in lease, unless there’s a novation (privity of K)
L’s tort liability
CL caveat lessee = Let T beware
- L has not duty in tort to make premises safe
5 exceptions = CLAPS:
Common areas = L duty of reasonable care in maintenance
Latent defects = duty to warn of hidden defects (not discoverable by reasonable inspection) that L knows or has reason to know of
Assumption of repairs = If L makes repairs, he is liable for any negligence
Public use rule = L who leases public space liable for any defects that cause injury to members of the public
Short-term lease of furnished dwelling = L is liable for ANY defective condition that proximately injures T
Modern trend in L’s tort liability
Courts now hold L owes a general duty of reasonable care to residential Ts
L is liable for injuries resulting from ordinary negligence if L:
1) had notice of a defect and
2) had an opportunity to repair it
Fixtures
Chattel that has been so affixed to land that it is no longer personal property and has become part of the realty:
1) incorporated into realty so that they lose their identity
2) removal would cause considerable damage to the premises
Passes with ownership of the land and must stay put
Common ownership case and fixtures
Person who brings chattel to land owns both chattel and land = fixture person objectively intended to make item part of realty
Intent:
1) nature of article
2) manner of attachment
3) amount of damage removal would cause
Divided ownership case and fixtures
Chattel brought to land by non-owner (like a T)
Agreement between L and T controls whether fixture or not
If no agreement, T may remove if:
1) removed by end of lease term and
2) T pays for an damage caused by removal
Easement
grant of nonpossessory property interest entitling holder to use/enjoyment of another’s land
- presumed to be of perpetual duration unless grant specifically limits the interest
Examples:
- right to lay utility lines on another’s land
- right of way over another’s land
- right to tap into a neighbor’s drain
Affirmative easement
Right to onto and so something on servient land
servient land = land that is imposed upon by the easement
- the burdened land
Negative easement
right to prevent the landowner from doing something that would otherwise be permissible
- can only be created expressly, by a writing signed by grantor
- no natural or automatic right to negative easement
4 categories = LASS
L - Light = preventing access to sunlight
A - Air = impeding access to unobstructed airflow
S - Support = excavating land that would erode another parcel’s underground support
S - Stream water from an artificial flow = impede access to stream water coming another parcel
Minority = allows easement for scenic view
Easement appurtenant
Appurtenant = relevant to, useful to, helpful to
Easement that benefits its holder in the physical use or enjoyment of his own land
Two parcels invovled:
1) dominant estate = derives the benefit
2) servient estate = bears the burden
Easement in gross
Gives its holder only some personal or commercial advantage unrelated to their use or enjoyment of their land
servient land, but no dominant –> easement benefits the holder rather than another parcel
Examples:
- right to place a billboard on another’s lot
- right to swim in another’s pond
- utility company’s right to lay power lines on another’s lot
Transferability of easement appurtenant
Dominant estate (benefit) = automatically transfers, even without mention in conveyance
- exception = conveyance of easement to the owner of the servient estate extinguishes easement
Servient estate (burden) = only passes if the new owner is BFP with notice of the easement
Transferability of easement in gross
Not transferable UNLESS for commercial purposes
Creating an easement
Created by PING
P = Prescription
I = Implication
N = Necessity
G = Grant
Easement by grant
Must be in writing and signed by the holder of the servient estate, unless it is to last for less than a year (outside SOF)
Writing = Deed of easement
Easement by implication
Created by operation of law –> exception to SOF
Implied from pre-existing use = quasi-easement
Implied without pre-existing use in 2 situations:
1) subdivision plat = buyers of lots have implied easements to use streets to access their lots
2) profit a prendre = implied easement to extract from servient property minerals or other product
Easement by necessity
Implied when landowner conveys a portion of land with no way out except over part of the grantor’s remaining land
Owner of servient land has right to locate the easement
Easement by prescription
Acquire by analogy to adverse possession
Elements required = COAH
C - Continuous and uninterrupted use for statutory period
O - Open and notorious use (discoverable upon inspection)
A - Actual use that need not be exclusive
H - Hostile use (without servient owner’s consent)
permission defeats acquisition of easement by prescription (no longer hostile)
Cannot be acquired in public land
Easement by reservation
Arises when grantor conveys title to land but reserves the right to continue to use the tract for a special purpose
Easement can only be reserved for GRANTOR –> attempts to reserve for a third party are VOID
Scope of easement
Scope is determined by terms of grant or conditions that created it
If not specified –> interpreted to accommodate holder’s present and future reasonable needs
Surcharged easement = legal scope exceeded by easement holder
- servient landowner can enjoin excessive use and sue for damages if land was harmed
- misuse does NOT terminate the easement by operation of law
Terminating an easement
If not specified in original easement grant, 8 ways to terminate an easement: END CRAMP
Estoppel = servient owner materially changes their position in reliance on oral intent to abandon easement
Necessity = expire as soon as necessity ends, unless easement was reduced to an express grant
Destruction = servient land destroyed ends easement (unless through willful conduct of servient owner)
Condemnation = of servient land by eminent domain (courts split as to whether easement holders are entitled to compensation)
Release = easement holder releases - must be in writing
Abandonment = physical action on part of easement holder demonstrating intent to never make use of the easement again (mere words are insufficient to abandon)
Merger = title to easement and title to servient land become vested in the same person
Prescription = servient owner may extinguish by interfering with elements creating it (COAH)
- nonuse of easement, without more evidence of intent, is insufficient
License
Mere privilege to enter another’s land for a narrow and delineated purpose
- not an interest in land
- personal to licensee –> inalienable
- No writing required to create –> freely revocable at will of licensor
- failed attempt to create an easement = creates a license
Revocation of license
Freely revocable at will of licensor, unless estoppel bars revocation:
1) Ticket cases = freely revocable license
2) Neighbors talking by the fence ≠ easement, but LICENSE
Estoppel = applies when licensee has invested substantial money, labor, or both in reasonable reliance on license’s continuation
- license becomes easement by estoppel and lasts until holder receives sufficient benefit to reimburse costs expended
License coupled with interest = irrevocable as long as interest lasts
- e.g., buyer of chattel may enter seller’s land to remove chattel
Profit
entitles holder to enter servient land and take some resource
Rules for creation and termination = same as for easements
May be extinguished through surcharge = profit is exploiting or otherwise unduly burdening the servient land
Covenant
written promise to do or not do something related to the land
- NOT a grant of property interest, but a promise regarding the land
Negative covenant
AKA restrictive covenant
A promise to refrain from doing something related to land
E.g., I promise not to build for commercial purposes
Affirmative covenant
A promise to do something related to land
E.g., I promise to maintain our shared fence
Less common than restrictive covenants
Covenant vs equitable servitude
Distinguished by the remedy sought:
Covenant = money damages sought
Equitable servitude = injunction sought
Running with the land
One tract is burdened by the promise, the other is benefited
Key question = when does a covenant run with the land?
Requirements for burden to run with the land
Successor in interest to the burdened estate bound by covenant IF = WITHN
Writing = original promise in writing
Intent = original parties intended that covenant would run, usually found in conveyance itself
Touch and concern = promise is of and pertaining to the land and effects the parties as landowners (use and enjoyment of land)
- includes HOA fees and covenants not to compete
Horizontal and vertical privity:
- Horizontal = connection between original parties –> succession of estate (L-T, G/or-G/ee, M/or-M/ee)
- Vertical = connection between successor in interest and originally covenanting party (NOT adverse possession)
Notice = successor had notice of promise when she took
- actual, inquiry or record notice
Requirements for benefit to run with the land
Easier for benefit to run than burden
Must have WITV:
Writing
Intent
Touch and concern
Vertical privity
Termination of covenant
Covenant may be terminated by:
1) written release
2) merger of benefited and burdened estates OR
3) condemnation of burdened property
Equitable servitude
Promise that equity will enforce against successors of the burdened land regardless of whether it runs with the land, unless successor is BFP (without notice of covenant)
Creation of equitable servitude
WITNES
Writing
Intent
Touch and concern
Notice
(Equitable Servitude)
Implied equitable servitude
AKA reciprocal negative servitude
Exception to general requirement that original promise be in writing
Courts will imply an equitable servitude if a developer subdivides land some deeds contain restrictive covenants while others do not
- binds all lots if a common scheme can be proven
Common scheme doctrine
Restrictive covenant is binding on all parcels in a subdivision if there was a common scheme:
1) subdivider had a general scheme of residential development (including D lot-holder’s land) when the sales BEGAN AND
2) D lot-holder had notice of the promise contained in prior deeds
Notice = AIR
Actual = literal knowledge
Inquiry = should have known with some investigation (“lay of the land”)
Record = search of public documents
Equitable defenses to enforcement of equitable servitudes
1) Doctrine of changed conditions = surrounding neighborhood has been irrevocably changed as to obviate the purpose for the restriction
- must demonstrate that the entire area’s essential character has been changed forever
2) Unclean hands = person seeking enforcement is violating a similar restriction on his own land
3) Acquiescence = benefited party acquiesced in a violation by a burdened party
4) Estoppel = benefited party acted in way that reasonable person would believe covenant was abandoned or waived
5) Laches = benefited party fails to bring suit against violator within reasonable time
Termination of equitable servitude
1) written release from benefit holders
2) merger of benefited and burdened estates
3) condemnation of burdened property
Adverse possession
Possession for a statutorily prescribed period of time can ripen into title if certain elements are met
COAEH:
Continuous = uninterrupted, used as an owner would use (tacking allowed)
Open and notorious = apparent to put owner on notice
Actual = physical and literal occupation
Exclusive = not sharing with true owner or the public
Hostile = without owner’s permission
Actual possession and color of title
Color of title = possession by invalid deed
If adverse possessor entered under color of title –> constructive possession of all land the deed describes, as long as actual possession of reasonable portion of that land
Exclusivity for adverse possession
Two or more people acting in concert could adversely possess = take as tenants in common
Hostility for adverse possession
Objective test = irrelevant whether possessor knew they were encroaching
Permission defeats hostility
Hostility for co-tenants
Possession of one co-tenant to exclusion of others is not adverse UNLESS:
1) co-tenant commits ouster OR
2) makes an explicit declaration that they are declaring exclusive possession
Claim of right (hostility element)
Possessor reasonably believes that property belongs to them (invalid deed)
Invalid deed ≠ permission
Claim of right = possession is hostile
Tacking
Allowed to adverse possession so long as their is privity between possessors in succession
Privity = any non-hostile relationship
- e.g., defective deed, will, K, etc.
Disabilities for adverse possession
SOL does not run against a true owner who is afflicted with a disability AT THE INCEPTION of the adverse possession
Common disabilities:
- insanity
- infancy
- imprisonment
Future interests and adverse possession
SOL does not run against a holder of a future interest until interest becomes possessory
Event or condition giving rise to a grantor’s right of entry does not trigger SOL for adverse possession UNTIL right of entry is asserted by the grantor
- before right is asserted, grantee’s possession is not hostile
Effects of covenants on adverse possessors
AP uses land in violation of covenant = takes free EVEN IF she knew about it
AP complies with covenant for statutory period = takes subject to it
Two-step process for conveyance of real estate
1) land contract = conveys equitable title
2) closing = deed passes legal title and becomes operative document
Escrow
Period between land contract and closing
Gives transferee change to get a mortgage, do requisite inspections, check integrity of title
SOF and land sale contracts
SOF applies to land sale contracts:
1) K must be in writing
2) signed by party against whom enforcement is sought (D)
3) identify parties
4) describe property
5) state consideration
Terms but be definite enough for enforcement
Remedy for an inaccurate description of land in contract
Specific performance with a pro rata reduction in price
Land is unique so the remedy for a breach is specific performance
Exception to Statute of Frauds for land contracts
Part performance = equitable doctrine allowing a buyer to enforce an oral real estate contract by specific performance if:
1) oral K is certain and clear AND
2) acts of partial performance clearly prove existence of a K
Proving acts of partial performance to prove existence of K
Second requirement for part performance doctrine met if 2/3 of following are met:
1) Buyer has taken possession of property
2) buyer paid purchase price (or significant portion of it)
3) buyer has made substantial improvements to the premises
Analyzing oral K of land sale contract in essay question
1) state general rule that SOF applies to land sale contracts (in writing and signed by party being used)
2) state that K is oral and won’t be enforceable unless it falls within an exception
3) state part performance rule and analysis
Doctrine of equitable conversion
Once land K is signed, equity regards the buyer as the owner of the real property, but seller (who has legal title) still entitled to possession until closing
K conveys equitable title to buyer
Deed at closing conveys legal title to buyer
Risk of loss in land sales
Buyer has equitable title after signing K, so BUYER bears the risk of loss unless K says otherwise
BUT if property is damaged or destroyed before closing, seller must credit any insurance proceeds they receive against the purchase price
Passage of title on death of one of land sale parties
If one party dies between land K and closing, the interests of the deceased party pass to their estate (K remains enforceable)
Buyer’s interest = real property
Seller’s interest = right to purchase price
Two promises implied in every land sale contract
1) seller will provide marketable title
2) seller will not make false statements of material fact
Marketable title
Title reasonably free from doubt and the threat of litigation
Common defects rendering title unmarketable
1) defects in record chain of title
- adverse possession = no good record title
2) encumbrances = unmarketable unless buyer has waived them
- mortgages
- liens
- easements = beneficial, visible, or known easements do NOT make title unmarketable
- restrictive covenants
3) zoning violations = zoning restrictions are fine, but existing violation renders title unmarketable
Mortgage on property and marketable title
Seller has the right to satisfy a mortgage or lien at closing with the proceeds of the sale
When title must be marketable
Title must be marketable on the day of closing
If installment land K, must be marketable when buyer has made the last payment
Once closing occurs and deed is exchanged, the K is extinguished and seller is no longer liable for implied promises in K –> only liable for express promises made in the deed
Remedy if title not marketable
K is NOT void
Buyer must notify seller and give him reasonable time to cure the defects
Remedies if seller fails to cure:
- rescission
- damages
- specific performance with abatement of purchase price
- quiet title suit
Quitclaim deed does NOT affect implied covenant to provide marketable title
False statements of material fact
Implied promise that seller will not make any false statements of material fact
Seller may be liable after closing for failure to disclose latent material defects or knowingly making a false statement that buyer relies on
Failure to disclose
Seller is liable for failure to disclose if:
1) seller knows or has reason to know of the defect
2) seller must realize that the buyer is unlikely to discover the defect AND
3) defect must be serious enough that buyer would probably reconsider the purchase
Disclaimers of liability
Seller cannot avoid liability with general disclaimer of liability like “sold as is” or “with all faults”
Seller CAN disclaim specific types of defects like “seller is not liable for any defects in the roof”
implied warranties of fitness or habitability in land sales
Caveat emptor (buyer beware) is the common law norm
- UNLESS the sale is of a new home by a builder
Timing for closing
Closing date is usually not binding, unless time is of the essence:
1) contract states it
2) circumstances indicate parties intended OR
3) one party gives the other party notice that time is of the essence
Closing
Contract merges with the deed and seller is no longer liable on promises in the K, only those in the deed
Deed = transfers legal title from seller to buyer
Requirements for passing legal title
LEAD = Lawfully Executed And Delivered
Lawful execution of a dead
Valid deed execution requires:
1) writing signed by grantor
2) unambiguous description of the land
3) identification of the parties by name or description AND
4) words of intent to transfer, such as “grant”
Deed does NOT need consideration
Effect of insufficient description of land
If description is insufficient to provide a “good lead”, title is NOT transferred
If ambiguous (not vague or inadequate) parol evidence is permitted
Name of grantee left blank in deed vs blank land description
Court presumes person taking delivery of deed has authority to fill in name of grantee –> if filled in, deed is valid
BUT if land description if blank, deed is VOID UNLESS grantee was explicitly given authority to fill it in
Delivery requirement
Deed is not effective to transfer an interest unless it has been delivered
Turns on grantor’s intent that title pass immediately
- question = did grantor have present intent to part with legal control?
- EE allowed to prove grantor’s intent to pass title
Acceptance and rejection of delivery
Acceptance is presumed BUT rejection defeats delivery
If grantee expressly rejects the deed, it is ineffective to pass title
Presumptions concerning delivery
Delivery is presumed if:
1) grantee has possession of the deed
2) deed is handed to the grantee
3) deed is acknowledged by grantor in front of a notary OR
4) deed is recorded
Delivery of a deed with conditions
Oral conditions = If deed is absolute on its face, the oral condition drops out and delivery is complete
Written conditions = generally valid when delivered
Delivery to a third party
Delivery to third party with instructions to deliver deed to intended grantee = valid delivery
Covenants for title (scope of title assurance)
1) quitclaim deed
2) general warranty deed
3) special warranty deed
Quitclaim deed
No covenants for title in this deed!
Grantor isn’t even promising that he has title to convey
Worst deed grantee could hope for
General warranty deed
Warrants against all defects in title, including those attributable to grantor’s predecessors
Contains three present and three future covenants
Present covenants
Covenant is breached, if ever, at time deed is delivered
SOL for breach of present covenant begins to run at delivery
Present covenants:
1) covenant of seisin = grantor owns the estate and is vested with ownership interest that she is entitled to transfer
2) covenant of the right to convey = grantor has the power to transfer her interest (no temporary disabilities or restraints on alienation)
3) covenant against encumbrances = no servitudes or liens on the land
- for deeds, breached even if grantee knew of encumbrance
Future covenants
Covenant is not breached, if ever, until grantee is disturbed in possession
SOL beings to run when grantee is disturbed in possession
Future covenants:
1) covenant for quiet enjoyment = no lawful third party claims of title
2) covenant of warranty = promise to defend against reasonable claims of title by a third party and compensate any loss from claim of superior title
3) covenant for further assurances = grantor will perfect grantee’s title if it later turns out to be imperfect
Special warranty deed
Contains same covenants as general warranty deed, but grantor makes promises only on behalf of himself, no his predecessors in interest
Statutory special warranty deed
If no designation of type of deed, many states have statutes providing that the deed creates by implication two limited assurances against acts of grantor only:
1) that grantor has not conveyed the same estate or any interest to anyone other than grantee
2) that estate is free from encumbrances made by grantor
Defective deeds
void deed = set aside by court even in property has passed to a BFP
- forged
- never delivered
- issued to a nonexistent grantee
- obtained by fraud in the factum (grantor was deceived and didn’t realize she was executing a deed)
voidable deed = set aside only if property has not passed to a BFP
- executed by minors or incapacitated persons
- obtained through fraud in the inducement, duress, undue influence, mistake, and breach of fiduciary duty
Bright line rules for race, notice and race-notice jurisdictions
Race = B wins, if he records properly before A does
Notice = B wins, if he was a BFP when he took, regardless of whether he records before A does
- last BFP to take wins
Race-notice = B wins if B is a BFP and he records properly before A does
Bona fide purchasers and when they prevail
Grantee who:
1) is a purchaser (didn’t take by gift, will or inheritance)
2) pays valuable consideration
3) takes without notice (AIR) of prior conveyance
Prevail over prior transferees:
1) in notice jx if last to take
2) in race-notice jxif they record first
Purchaser for value
Recording statutes protect purchasers, NOT donees, heirs and devisees who don’t give value
2 routine value questions:
1) bargain basement sale = still a purchaser for value if pay less than FMV
2) doomed donee = recording statutes do not protect donees, heirs, or devisees unless the shelter rule applies
Notice for BFP
AIR
Actual = prior to closing, B learns of A
Inquiry = B is charged with knowledge of what a reasonable inspection would have revealed
Record = B on notice of deeds properly recorded in chain of title
Types of recording acts
1) race statute = first party to record wins
2) notice statute = subsequent BFP prevails over prior grantee who failed to record
3) race-notice statute = subsequent BFP who records first prevails
“No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof, unless it is recorded.”
Typical language of a notice statute
“No conveyance or mortgage of an interest in land is valid against any subsequent purchaser whose conveyance is first recorded.”
Typical language of a race statute
“No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof whose conveyance is first recorded.”
Typical language of a race-notice statute
Trick for spotting different recording statutes
“First” only = race statute
“Notice” only = notice statute
“Notice” and “First” = race-notice statute
Chain of title
sequence of recorded documents capable of giving record notice to later takers
Proper recordation puts later buyers on record notice, thereby defeating their status as BFPs (no longer without notice!)
How is chain of title established in most states?
Through a title search of the grantor-grantee index
Three discrete chain of title problems
1) transferees from BFP - the shelter rule
2) problem of the wild deed
3) estoppel by deed
The shelter rule
Transferee “takes shelter” in the status of her transferor, who was a BFP, even though transferee otherwise fails to meet requirements of BFP status
Anyone who takes from a BFP will prevail against any interest BFP would have prevailed against
Purpose of the shelter rule
protect the BFP by making it easier for him to transfer successfully without being weighted down by grantor’s double dealings
Problem of the wild deed
Wild deed = recorded deed that isn’t connected to the chain of title
- does not impart constructive notice because a subsequent purchaser could not feasibly find it
Problem = O sells to A, who does not record. A sells to B, who records the A to B deed (not connected to chain of title = wild deed)
O then conveys to C, who has no notice of previous conveyances. C records O to C deed.
Result = A subsequent purchaser will prevail against the party with a wild deed
- So, C will prevail over B (who had the wild deed)
How to avoid the problem of the wild deed
Purchaser of any property should insist at closing that seller provide an missing deed in chain of title
Estoppel by deed
One who conveys realty in which he has no interest is estopped from denying the validity of that conveyance if he subsequently acquires title that he had previously purported to transfer
BUT if transferee records before title is validly conveyed, early recording is outside the chain of title, and a subsequent BFP will win
Judgment creditors and recording acts
Judgment creditors and lien holders are generally NOT protected by the recording acts, even if they record the lien
Mortgage, mortgagor and mortgagee
Mortgage = land financing
Mortgagor = borrower, person owing money to lender
Mortgagee = lender or creditor
- “Gee, I hope he pays me back!”
Documents in a mortgage transaction
1) promissory note = mortgagor’s personal obligation/liability for the loan
2) mortgage = agreement that if mortgagor stops paying, the land can be sold to pay it off (foreclosed)
Purchase-money mortgage vs. non-purchase-money mortgage
PMM = lender has a security interest in the real estate that their loan enables the mortgagor to acquire
Non-PMM = loan that is secured by a property that was not purchased with the loan funds
Creation of a mortgage
Union of two elements to create a mortgage:
1) debt = note
2) voluntary transfer of a lien in debtor’s land to secure the debt, in writing = legal mortgage
Writing evidencing the mortgage
1) mortgage deed
2) deed of trust
3) sale leaseback
4) security interest in land
Transfer of interest by mortgagee
Mortgagee can transfer interest by:
1) Endorsing the note and delivering it to transferee OR
2) executing a separate document of assignment
Transfer or interest by mortgagor
Buyer either:
1) assumes mortgage or
2) takes property subject to the mortgage
Assumption of mortgage vs taking subject to a mortgage
Assumption = grantee agrees to be personally liable for the mortgage
Taking subject to = grantee assumers no personal liability, but if mortgage goes unpaid, mortgagee can foreclose
Effect of assumption of mortgage vs taking subject to
Assumption:
1) Grantee signs an assumption agreement
2) Grantee becomes primarily liable to the lender
3) Original mortgagor is secondarily liable as a surety
4) Mortgagee can sue either party on the debt
Taking subjection to:
1) Grantee signs no assumption agreement
2) Grantee is not liable to lender
3) Original mortgagor remains primarily and personally liable for the debt
4) Mortgagee can still foreclose if debt unpaid
Modification of a mortgage by grantee and mortgagee
Discharges original mortgagor of all liability
Due on Sale clauses
Allows lender to demand full payment of the loan if mortgagor transfers any interest in the property without lender’s consent
What happens to the mortgage when mortgagor transfers land?
If recorded, the mortgage stays on the land
- Grantee automatically takes property subject to mortgage (unless specifically assumed) and mortgagee can foreclose on the land with default
- recording statutes protect mortgagees
Effect of recording acts on mortgages
All recording statutes apply to mortgages as well as deeds –> a subsequent buyer takes subject to a properly recorded lien
Notice state = subsequent BFP prevails over a prior mortgagee who has not yet properly recorded at the time BFP takes
Foreclosure
When mortgagor defaults, land is sold and proceeds go to satisfying the debt
Deed in lieu of foreclosure
Mortgagor tenders to mortgagee, permitting mortgagee to take immediate possession without a foreclosure sale
NOT a foreclosure = does not terminate any junior liens on the land
What happens if proceeds from foreclosure sale are less than amount of debt owed?
Mortgagee brings deficiency action against mortgagor
Effect of foreclosure on junior interests
Junior interests are paid in descending order of priority from sale proceeds and then TERMINATED
If sale proceeds to do not cover a junior mortgagee’s interest, they can proceed for a deficiency judgment
Effect of foreclosure on senior interests
Foreclosure does not affect any senior interest to the mortgage being foreclosed
Buyer takes subject to any senior mortgage
Effect on priority of modification of a senior mortgage
If agreement with senior mortgagee is modified to be more burdensome, junior mortgage will be given priority over the modification
Necessary parties to a foreclosure action
1) Debtor
2) All junior lienholders
Failure to include a necessary party to a foreclosure action results in…
the preservation of that party’s claim, despite the foreclosure and sale
If necessary party is not joined, their mortgage will remain on the land
Order of priority for foreclosure sale proceeds
1) expenses of the sale, including attorneys’ fees and court costs are paid
2) principal and accrued interest on foreclosing party’s loan
3) any junior lienholders in the order of their priority
4) mortgagor is there’s a surplus
Establishing priorty as a mortgagee
A creditor must record to have priority
Priority = first in time, first in right
Priority for purchase-money mortgage
PMM mortgagee has first priority in the land financed IF they record properly
Subordination agreement
Agreement for senior creditor to subordinate its priority to a junior creditor
Equitable redemption
Debtor has a right to redeem the land by paying off the mortgage any time prior to the foreclosure
Right to redeem is cut off by the foreclosure sale
Acceleration clause
Permits mortgagee to declare full balance due on default
How to exercise right to equitable redemption (with NO acceleration clause)
Mortgagor pays off missed payments plus accrued interest and costs
How to exercise right to equitable redemption (WITH acceleration clause)
Mortgagor must pay off entire balance owed plus accrued interests and costs
No clogging equity of redemption
Means that mortgagor cannot waive right to redeem in the mortgage itself
Statutory right of redemption
Gives the mortgagor a statutory right to redeem for some fixed period AFTER the foreclosure sale
- usually 6 months or one year
- amount to be paid is usually foreclosure sale price, rather than amount of original debt
Governmental zoning power
Pursuant to state police powers, government can enact statutes to reasonably control land use for protection of health, safety, morals and welfare of its citizens
Constitutional limits on zoning power
14th Am Due Process and Equal Protection Clauses
5th Am No Takings Without Compensation Clause
Variance
Permits a landowner to depart from the literal restrictions of a zoning ordinance
- principal means to achieve flexibility in zoning
How to obtain a variance
Proponent must show:
1) undue hardship in complying
- won’t be granted if hardship created by proponent themselves
2) no diminution to neighboring property values
Zoning board grants or denies variance
Nonconforming use
A once lawful, existing use now deemed nonconforming by a new zoning ordinance cannot be eliminate all at once unless compensation is paid
Cumulative zoning ordinance
Creates a hierarchy of uses of land
Highest use = single-family housing
Lowest use = industrial
Land zoned for a particular use may be used for the stated purpose AND any higher ranked use
-e.g., commercial zoning may include apartments and/or single-family homes
Noncumulative zoning ordinance
Land may be used ONLY for the purpose for which it is zoned
No “trading” up or down
Special use permit
Permit must be obtained even though the zoning is proper for the intended use, because the use presents certain safety or general welfare concerns
Must comport with checklist of safety-based criteria to obtain permit
Examples:
- hospitals
- drive-in businesses
- gas stations
- funeral homes
Condominiums
Each owner has fee simple ownership in their individual unit and a TIC with all other residents in the exterior and common areas
Common elements:
- walkways
- hallways
- community pool
- community room
Homeowners’ associations
Each condo owner is a member of the HOA
Members elect a board, which manages the property and oversees the common elements
Association rules
Declaration of covenants, conditions and restrictions (CC&R) = prescribes what owners can and cannot do with their property
- enforced by HOA board
HOA/condo fees
Each unit pays regular dues to HOA, which are used to maintain common elements
Special assessment fee (HOA)
One-time fee that each owner must pay if the monthly dues to not cover a necessary expense
Rights incidental to land ownership
Natural rights = an owner of real property has exclusive right to use and possess surface, airspace, and soil of the property
Lateral support
Land owners have the right to have their land supported in its natural state by adjoining land
Natural state
unadorned, pristine, unencumbered by structures
Liability if landowner’s excavation causes adjacent land to subside
1) land in natural state = strict liability
2) land improved by buildings = liable if negligent
- BUT if P can prove that buildings did not contribute to the collapse, D could be strictly liable
Riparian water rights (and liability theories)
Water belongs to those who own the land bordering the watercourse
1) Natural flow theory = riparian owner’s use is enjoinable if it results in substantial or material diminution of water’s quality, quantity or velocity
2) Reasonable use theory = All riparians share the right of reasonable use of the water:
- alteration of flow
- purpose of use
- pollution
- extent of use
- destination of water taken
Prior appropriation doctrine
Water initially belongs to the state, but right to divert and use it can be acquired through actual use of the water
- First in time, first in right
- Right can be lost by abandonment
Rights to surface waters
Surface water = water without a channel that passes over land and has not yet reached a natural watercourse or basin
Landowner can use surface water within their boundaries for any purpose
Liability theories for redirecting surface water
1) Natural flow theory = owners cannot alter natural drainage patterns
- BUT most states today allow reasonable changes
2) Common enemy theory = Owner can take any protective measures to get rid of water or combat its flow
- BUT unnecessary damage to others’ land is prohibited
3) Reasonable use theory = balances utility of the use against gravity of the harm
***No cause of action unless diversion of surface water was malicious
Right to exclude and remedies
Possessor of real property has the right to exclude others
Remedies for invasions include actions for:
1) trespass = invasion by tangible physical object
2) private nuisance = invasion by intangibles such as odors or noise
3) continuing trespass = repeated invasion by trespasser
4) ejectment or unlawful detainer = removes a trespasser or tenant
- often joined with a claim for money damages
