REAL PROPERTY MBES Flashcards

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1
Q

MBE REAL PROPERTY: Titles; Delivery and Recording of Deed; Notice Statute

Define what a notice statute is in recording a deed.

A

When there is a notice statute in place, this means that a purchaser need only purchase the property without notice of the prior interest to prevail.

If a reasonable investigation would have disclosed the existence of prior claims, then the grantee is considered to possess inquiry notice, and cannot prevail against those claims.

First in time, first in right.

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2
Q

MBE REAL PROPERTY: Land Sale Contract; Formation

What is necessary for a land sales contract to be valid? Does the Statute of Frauds apply to these types of transactions?

A

Yes, the Statute of Frauds applies. In order to satisfy the Statute of Frauds, a land sale contract must be in writing, signed by the party to be charged and contain all the essential terms.

An oral agreement will not suffice to enforce the agreement.

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3
Q

MBE REAL PROPERTY: Doctrine of Part Performance

Explain the doctrine of part performance in a land sale contract.

A

Under the doctrine of part performance, either party to a land sale contract may seek specific performance when the acts of performance constitute persuasive evidence of the existence of a contract.

Such acts include payment of all or part of the purchase price, possession by the purchaser, or substantial improvement of the property by the purchaser. Most jurisdictions require at least two acts to establish sufficient part performance.

Specific performance may be permitted when the party seeking enforcement has reasonably relied on the contract and would suffer such hardship that the other party will be estopped from asserting the Statute of Frauds as a defense to the contract.

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4
Q

MBE REAL PROPERTY: Ownership; Present Estates

What is a fee simple determinable?

A

A fee simple determinable is a present fee simple estate that is limited by specific durational language. Common durational language includes “so long as”, “while”, or “during”. Upon the happening of the stated condition, the present estate is automatically terminated and full ownership is returned to the grantor (or his successor in interest). The grantor’s retained future interest is called a POSSIBILITY OF REVERTER which is freely alienable by the grantor during life and at death.

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5
Q

MBE REAL PROPERTY: Disputes about use of land; Easements

Explain what easements are and the scope of an easement.

A

Easements are presumed to be appurtenant (i.e. tied to the land), unless there are clear facts to the contrary.

An easement appurtenant is transferred with the land to which it relates.

If the easement was previously used on the servient estate by an earlier owner, then the court may find that the parties intended the easement to continue IF
the easement use was apparent (open and obvious); and reasonably necessary to the dominant land’s use and enjoyment.

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6
Q

REAL PROPERTY MBE: Ownership; Concurrent Estates

Explain tenancy by the entirety. What is it?

A

Tenancy by the entirety is a joint tenancy between married persons with a right of survivorship. The same rules for joint tenancy apply to tenancy by the entirety.

Property can be owned in a tenancy by the entirety only if the owners are married at the time that the property was acquired.

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7
Q

REAL PROPERTY MBE: Ownership; Present Estates

What is a life estate?

A

A life estate is a present possessory estate that is limited in duration by a life. Upon the end of the measuring life, the title reverts to the grantor or specified remainderman. This future interest is known as a reversion.

Unless otherwise specified, the measuring life is the life of the grantee.

An owner’s will cannot revoke a prior valid transfer of a life estate in the land by a warranty deed to another party.

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8
Q

REAL PROPERTY MBE: Ownership; Present Estates

What type of estate is created when a deed, through the use of the phrase, “provided that” is part of the deed language?

A

The deed, through the use of the phrase, “provided that” creates a FEE SIMPLE SUBJECT TO A CONDITION SUBSEQUENT, and the landowner retains a right of reentry.

Upon violation of the condition subsequent, the landowner has the right to terminated the interest conveyed. The owner can now exercise this right, regain ownership of the property and even prevent any sale of the property.

Although the owner may waive the right to terminate a fee simple subject to a condition subsequent, the mere failure to assert it does not constitute a waiver.

Rule against perpetuities does not apply to a reversionary interest, such as the right of entry.

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9
Q

REAL PROPERTY MBE: Disputes about the Use of Land; Easements

What interest is created when an owner makes an oral promise to someone that allows the person to make use of a driveway?

A

The owner’s oral promise to another party constitutes a license , which is a non-possessory right to enter the land of another for some delineated purpose.

Generally. a license is revoked upon the transfer of the servient estate. While the license cannot be revoked if detrimentally relied upon, the other party must show evidence that he expended money or otherwise relied on the owner’s promise to his detriment.

Easements, presumed to be appurtenant, are connected with the land, and must be in writing to be valid. Licenses are not required to be in writing.

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10
Q

REAL PROPERTY MBE: Titles; Adverse possession

How can a party acquire title to land by adverse possession?

A

An individual may gain title to land by adverse possession by possessing the land in a manner that is continuous, open and notorious, actual, exclusive, and hostile.

An adverse possessor may take on his predecessor’s time as long as there is privity between the successive possessors. Privity is satisfied if the possessor takes by any non-hostile means (such as descent, devise, contract or deed).

The majority of jurisdictions do not require that the possession be hostile in the sense that the possessor purposefully seeks to defeat the owner’s title. Instead, the possessor, by possessing the land, must objectively demonstrate an intent to claim the land as his own.

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11
Q

REAL PROPERTY MBE: Ownership; Concurrent Estates

What are the rights of each party that each hold an interest in property as tenants in common?

A

Tenants in common have the unrestricted righty to possess the whole property. Further, co-tenants are entitled to the land’s natural resources in proportion to their share of the property. Accordingly, each tenant in common is entitled to the natural resources on the entirety of the land.

No right of survivorship with a tenancy in common. As a tenant in common, each tenant can freely transfer his interest in the land.

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12
Q

REAL PROPERTY MBE: Mortgages and Security Interests; Transfers

Where there is a mortgage obligation on a property that is transferred, what are the rules to determine what the transferee-buyer’s liability on the mortgage?

A

If a deed is silent or ambiguous about the transferee-buyer’s liability on the mortgage, then the buyer is considered to have taken the property subject to the mortgage obligation. If the buyer take title subject to the mortgage, he is not personally liable upon default, but the property may be sold at a foreclosure sale to satisfy the outstanding mortgage loan obligation.
If there is a deficiency after distribution of the sale proceeds, only the transferor-seller is personally liable for it.

If, on the other hand, the buyer ASSUMES the mortgage, then upon default, the buyer is personally liable for any deficiency.

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13
Q

REAL PROPERTY MBE: Titles; Delivery and Recording of Deed

Where there is a race-notice statute in the jurisdiction, what does this mean for a subsequent purchaser?

A

Where there is a race-notice statute in the jurisdiction, this means that in order for the subsequent purchase to prevail, he would have to take without notice (of any mortgage or encumbrance) and also be the first to record.

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14
Q

REAL PROPERTY MBE: Disputes about the Use of Land; Easements

Explain when and how an easement by necessity is created?

A

An easement by necessity is created when property is virtually useless without the benefit of an easement across neighboring property.

Both the dominant and servient estates must have been under common ownership in the past. The necessity of the easement must have arisen when the unified property was severed in the dominant and servient estates.

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15
Q

REAL PROPERTY MBE: Easements by prescription

Explain when and how an easement by prescription is created?

A

An easement by prescription requires the use to be continuous, actual, open, and hostile for the statutory period. Unlike adverse possession, the use need not be exclusive.

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16
Q

REAL PROPERTY - MBE - RESTRAINTS ON ALIENATION

WHEN IS THE RIGHT OF FIRST REFUSAL ENFORCEABLE?

A

A restraint on alienation is a provision that restricts the transferability of real property. An unreasonable restraint is disfavored because public policy encourages the free transfer of property interests; therefore, direct (or absolute) restraints on alienation are void. However, a partial restraint—one that is for a limited time and a reasonable purpose—is generally valid.

A right of first refusal is a partial, promissory restraint on alienation that gives its holder a preemptive right to acquire property prior to its transfer to another party. This right is generally reasonable if the holder of the right can purchase the property under the same terms offered to another. If so, the right of first refusal is valid and enforceable by an injunction. As a result, the organization can compel the owner to sell the building to the organization at the below-market price.

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17
Q

REAL PROPERTY - COVENANT OF MARKETABLE TITLE

DOES THE IMPLIED COVENANT OF MARKETABLE TITLE CARRY OVER TO THE DEED?

A

Unless otherwise stated, an implied covenant of marketable title is part of a land-sale contract, regardless of the type of deed created. Under this covenant, the seller promises to deliver title that is reasonably free from doubt and under no threat of litigation, such that a reasonable person would accept and pay for it. However, under the merger doctrine, any obligations contained in the land-sale contract merge into the deed and are extinguished at closing.* As a result, these obligations are enforceable only if they are contained in the deed.

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18
Q

REAL PROPERTY MBE - FORECLOSURE RIGHTS AND JUNIOR INTERESTS

A

A mortgagor (debtor) may convey all interest in the mortgaged property to the mortgagee (lender) in lieu of foreclosure so long as both parties agree. This “deed in lieu of foreclosure” allows the mortgagee to take immediate possession of the property without the formalities of a foreclosure sale.

However, the mortgagee takes the property along with any junior interests attached to the property—e.g., the savings and loan association’s second mortgage. And if the mortgagee accepts a deed in lieu of foreclosure without reserving the right to foreclose (as seen here), then its mortgage is extinguished. As a result, the house remains subject only to the savings and loan association’s mortgage.

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19
Q

REAL PROPERTY MBES - VESTED vs CONTINGENT REMAINDERS AND CONDITIONS

A

A remainder is a future interest in real property that is capable of becoming possessory upon the expiration of a life estate or term of years. Remainders are either:

vested – not subject to any condition precedent AND held by an identifiable living person (e.g., “then to my son and daughter”) or

contingent – subject to some condition precedent (other than the natural termination of the prior estate) OR held by an unknown or unborn person (e.g., “then to my heirs, but only if they survive my friend”).

A vested remainder is subject to complete divestment if the occurrence of a subsequent condition will eliminate the remainder interest (e.g., “then to my heirs; but if none survive my friend, then to my lawyer”).

Here, the accountant conveyed a life estate to the friend and a remainder to his heirs. The** remainder was contingent while the accountant was alive because his heirs were unknown. But it vested once the accountant died and his heirs (the son and the daughter) became known** (Choice A). That vested remainder, however, is subject to complete divestment if neither survives the friend. As a result, the son holds a vested remainder subject to complete divestment.

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20
Q
A

https://www.themisbar.com/learners/index.php?service=multipleChoice&id_task=463939#:~:text=A%20fixture%20is,deed)%20provides%20otherwise.

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21
Q
A

A fixture is tangible personal property (i.e., chattel) that is

attached to real property in such a manner that it is treated as part of the realty and
used for some larger component or function of the land (e.g., to separate adjoining properties).
Fixtures are considered an integral part of the land to which they are attached. Consequently, a fixture automatically transfers with the land unless the conveying instrument (e.g., deed) provides otherwise.

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22
Q

REAL PROPERTY MBES - SUBJECT TO MORTGAGES

A DEBTOR CAN FREELY TRANSFER MORTGAGED LAND TO A GRANTEE UNLES THE MORTGAGE STATES OTHERWISE. CAN THE LENDER FORECLOSE ON THE PROPERTY HELD BY THE NEW GRANTEE? IS THE GRANTEE HELD PERSONALLY LIABLE FOR THE DEBT?

A

A mortgage is an interest in land that a debtor (mortgagor) gives to a lender (mortgagee) as security for a debt. The debtor can freely transfer mortgaged land to a grantee unless the mortgage states otherwise. After the conveyance, the mortgage remains attached to the property and the debtor remains personally liable for the debt secured by the mortgage. But the grantee’s obligations depend on whether the grantee:

took subject to the mortgage (presumed) – in which case the grantee does not agree to pay and is not personally liable for the debt or

assumed the mortgage – in which case the grantee expressly agrees to pay and becomes primarily liable for the debt, and the debtor becomes secondarily liable as a surety.

In either instance, the lender can foreclose on the mortgage if the debtor defaults on the loan (Choice B). However, the grantee will only be liable for any deficiency resulting from a foreclosure sale if the grantee assumed the mortgage.

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23
Q

REAL PROPERTY MBES - NOTICE REQ AND RECORDING STATUTE

WHAT IS REQUIRED FOR A SUBSEQUENT PURCHASER FOR VALUE TO PREVAIL OVER A PRIOR GRANTEE’S INTEREST?

A

Recording acts create a framework for prioritizing competing property interests to ensure certainty of title. There are three types of recording statutes.*** A race-notice statute can be identified by the words “without notice” and “first record” (as seen here). Under this type of statute, a good-faith purchaser for value (i.e., a bona fide purchaser or BFP) has priority over an earlier-acquired interest in the property if the BFP:

lacked notice (actual, record, or inquiry) of the earlier interest at the time the BFP acquired an interest in the property and

recorded that interest before the earlier interest was recorded.
**
Here, the buyer purchased the property without notice of the mother’s prior transfer to the daughter (Choice C). But the buyer will not prevail because the daughter recorded her deed first.

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24
Q

REAL PROPERTY MBES - TERMINATION OF AN AT WILL TENANCY

WHO CAN TERMINATE AN AT WILL TENANCY?

A

Tenancy at will

Creation

Express agreement
Implied when person allowed to possess premises without paying rent
Duration

Indefinite period
Termination

At any time with reasonable notice (unless otherwise agreed)
A tenancy at will is a leasehold estate that has no specific term and continues so long as the landlord and the tenant desire. This tenancy can generally be terminated by the landlord or the tenant. But if only one party is expressly given the right to terminate the leasehold, the arrangement may be deemed unconscionable if, for example, the arrangement is unfair due to one party’s superior bargaining power. In such a case, both parties are given the ability to terminate the lease.

Here, the landlord owned the only commercial shopping center in town, so he had superior bargaining power over the tenant. And the landlord insisted on an at-will tenancy for a minimum of 10 years that gave him the sole right to terminate the lease. Given these circumstances, the court will likely deem the lease unconscionable and find that both parties had the right to terminate it (Choice C). Therefore, the landlord is unlikely to prevail in the breach-of-lease action.

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25
Q

REAL PROPERTY MBES - FORECLOSURE

CAN AN JUNIOR INTEREST FORECLOSE ON THE MORTGAGOR’S PROPERTY WHEN THERE IS A SENIOR INTEREST LIEN ON THE PROPERTY?

A

A mortgage is a lien on real property used to secure repayment of a debt. A lender (mortgagee) may generally foreclose on a mortgage if the debtor (mortgagor) defaults on the mortgage loan. A foreclosure terminates any interest in the foreclosed property that is junior (lower in priority) to the interest being foreclosed but does not affect any senior interest (higher in priority). When no recording act is provided (as seen here), the “first in time, first in right” rule is used to prioritize interests.

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26
Q

REAL PROPERTY MBES - DELIVERY OF DEED

WHEN DOES A DEED BECOME EFFECTIVE VERSUS A WILL? IS DELIVERY TO A PERSON WHO IS GIVEN INSTRUCTIONS VALID DELIVERY?

A

Transfer of deed to third party

Grantor’s agent

Transfer treated as if grantor retained deed, even when grantor instructs agent to deliver deed to grantee at some future time or upon happening of some event
Grantee’s agent

Transfer treated as if it was made directly to grantee
Independent third party

Transfer made with condition placed on transfer to grantee:
if grantor retains absolute right to recover deed, no transfer
if grantor does not, present transfer treated as present gift that cannot be voided OR conditional transfer creates future interest in grantee
Transfer conditioned on death of grantor (death escrow):
effective if grantor intends to make present gift
ineffective if grantor intends that gift be effective only upon grantor’s death
A deed is a legal instrument that transfers an interest in real property from the owner (grantor) to another (grantee). To be valid, the deed must be signed by the grantor, identify the grantor and the grantee, contain words of transfer, and identify the land with reasonable certainty—as the farmer’s document does here. A property interest may then be transferred by delivering the deed to the grantee, and acceptance is presumed if the transfer is beneficial to the grantee.

A grantor can deliver the deed to the grantee through an independent third party. But if the third party’s transfer to the grantee is conditioned on the grantor’s death, then the grantor’s delivery of the deed to the third party must evidence the intent to make a present gift to be effective. This typically occurs when the grantor relinquishes the right to take back the deed by placing it beyond the grantor’s control.

Here, the farmer’s deed expressed his present intent to “now transfer my farm” because it was delivered to the neighbor (independent third party) with no right to take it back. The son is presumed to have accepted this beneficial gift, so the transfer was effective when the deed was delivered to the neighbor (Choice A). This means that the deed took effect before the farmer’s will became effective upon his death (Choice D). The son is therefore entitled to ownership of the farm.

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27
Q

REAL PROPERTY MBES: DELIVERY OF A DEED

WHAT ARE THE REQUIREMENTS FOR AN EFFECTIVE TRANSFER OF PROPERTY BY A DEED?

A

A deed is a legal instrument that transfers ownership of real property from the owner (grantor) to another (grantee). But for a transfer by deed to be effective, the deed must be:

delivered by the grantor – demonstrates the grantor’s present intent to convey ownership to the grantee and

accepted by the grantee – presumed if the transfer is beneficial to the grantee.

**Delivery is presumed when the deed has been recorded in the county land records since the recording creates a rebuttable presumption that the deed is intended to be presently operative. Physically handing over a deed is not required and does not conclusively prove a grantor’s present intent to convey property **(Choice C).

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28
Q

REAL PROPERTY MBES - TERMINATION OF A REAL COVENANT

WHAT IS NEEDED TO ENFORCE A COVENANT IN A DEED? CAN THE COVENANT IN THE DEED EVER BE TERMINATED?

A

A real covenant is an agreement between parties to do or not do something on land (e.g., maintain a retaining wall) that is enforced by an action for money damages. The promising parties are bound to the covenant under contract law, but their successors in interest are bound only if the covenant runs with the land. This occurs when the following elements are met:

Writing – covenant is in a writing that satisfies the statute of frauds (purchasers’ deeds)

Intent to run – promising parties intend for the covenant to run to their successors in interest (deeds say “the owners, their heirs, and their assigns”)

Touch and concern – covenant relates to the use, enjoyment, or occupation of the land (maintain the retaining wall)

Horizontal privity – promising parties simultaneously transfer the land and create the covenant (covenant was created when the man sold the parcels to the purchasers)

Vertical privity – successors have an unbroken chain of ownership from the original parties (the purchasers’ successors have the same ownership interest)

Notice – person to be bound had notice of the covenant (deeds containing the covenant were recorded)

Therefore, the covenant can be enforced by the purchasers’ successors in interest—so long as it was not terminated (Choice C).

A covenant can be terminated in the same manner as an easement, including by abandonment. Abandonment occurs when an affirmative act—something more than neglect or nonuse—shows a clear intent to relinquish the covenant. This occurred 15 years ago, when the previous owners jointly decided to dismantle the wall. Therefore, the covenant no longer exists and cannot be enforced by the new owner.

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29
Q

REAL PROPERTY MBES: ASSUMPTION OF A MORTGAGE

WHEN THE BUYER PURCHASES THE PROPERTY FROM THE SELLER AND ASSUMES THE MORTGAGE, CAN HE RAISE ANY OF THE DEFENSES AGAINST THE LENDER THAT HAD BEEN AVAILABLE TO THE ORIGINAL DEBTOR?

A

The owner of an interest in real property may give that interest to a lender (mortgagee) to secure a debt—usually through a mortgage or a deed of trust.* The debtor (mortgagor) can freely transfer the mortgaged property to a buyer unless the lender and the debtor had agreed otherwise. After the transfer, the mortgage remains attached to the property and the debtor remains personally liable for the mortgage debt. But the buyer’s obligations depend on whether he/she:

took subject to the mortgage – in which case the buyer does not agree to pay and is not personally liable for the debt or

assumed the mortgage – in which case the buyer expressly agrees to pay and becomes primarily liable for the debt, while the debtor becomes secondarily liable as a surety.

A buyer who assumed a mortgage as part of the purchase price may not raise defenses—e.g., duress, statute of limitations, lack of legal capacity—that the debtor could have raised to avoid the mortgage obligation. Otherwise, the buyer would be unjustly enriched.

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30
Q

REAL PROPERTY MBES: AVAILABLE NEGATIVE EASEMENTS

A

Available negative easements

Common law

Modern view
View
Solar access
Conservation

Light - old common law - not applicable
Air
Support
Water access
View
Solar access
Conservation

The English common-law Doctrine of Ancient Lights enabled landowners to protect their right to light by preventing neighbors from building any structure that blocked the landowner’s access to sunlight. This doctrine has been rejected in the United States. As a result, landowners can only restrict another’s blockage of light if they are protected by statute or enter into an agreement with the neighboring landowner to create a negative easement—neither of which is seen here. The court should therefore hold in favor of the dentist.

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31
Q

REAL PROPERTY MBES: OPTION CONTRACTS

WHEN DOES THE OPTION HOLDER’S ACCEPTANCE OF THE OPTION BECOME EFFECTIVE? DOES THE MAIL BOX RULE APPLY?

A

Types of option contracts

Option to purchase

Gives exclusive right to purchase property at specified price, usually within specified time

Right of first refusal

Gives first opportunity to purchase property if it ever goes up for sale

An option contract for the purchase of real property is formed when one party (the option holder) receives the exclusive right to purchase the property (i.e., “exercise the option”) during a specified time period in exchange for consideration. Under an option contract:

the grantor cannot revoke the option during the specified time period.

the option does not terminate upon the death or incapacity of the grantor (Choice A) and

the option holder can make a “counteroffer” without losing the right to exercise the option (Choice B).

The option holder must exercise the option pursuant to the terms of the contract. However, the mailbox rule—which treats the acceptance of an offer as valid when mailed—does not apply to option contracts. Instead, the grantor must receive the option holder’s decision to exercise the option within the time period specified in the contract. Otherwise, the option holder loses the option and any consideration that was paid.

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32
Q

REAL PROPERTY MBES: COVENANTS AND EQUITABLE SERVITUDES

WHAT IS REQUIRED FOR AN EQUITABLE SERVITUDE TO BE IMPLIED FROM A COMMON SCHEME?

A

A covenant is a promise to do or not do something on the land. When an injunction is sought to enforce a covenant (as seen here), it is called an “equitable servitude.” ** An equitable servitude can be expressly created in a written agreement**. But here, no express equitable servitude was created because the two-story height restriction was not written in the couple’s deed, the speculator’s deed, or the recorded subdivision plan.

An equitable servitude can also be implied from a common scheme* if three elements are met:

Intent to create common scheme – the owner intended to impose a servitude on all lots in the subdivision (here, the deeds to most of the lots contained a two-story height restriction)

Restrictive servitude – the intended servitude is a promise not to do something on land (here, a promise not to build a three-story residence)

Notice – the person to be bound by the servitude had actual, record, or inquiry notice of the servitude (here, the speculator received actual notice through the rancher’s letter, and the couple had inquiry notice because no three-story residences were on the other lots) (Choices C & D)

Nevertheless, if the common scheme arose after some of the lots were already sold, then the previously sold lots will not be incorporated into the common scheme or subject to the implied equitable servitude. Since the rancher’s scheme was created after the lot was sold to the speculator, neither the speculator nor the couple is subject to the implied equitable servitude. As a result, the court will likely rule for the couple.

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33
Q

REAL PROPERTY MBES: ASSUMPTION OF MORTGAGES

WHO IS LIABLE ON A MORTGAGE DEBT WHEN THE GRANTEE AGREES TO PAY (ASSUME) THE DEBT?

A

Obligations upon debtor’s transfer of mortgaged property

Subject to mortgage

Grantee does not agree to pay & is not personally liable for debt
Original debtor remains personally liable for debt
Upon default, lender can collect unpaid debt from original debtor only
Assumption of mortgage

Grantee expressly agrees to pay & becomes primarily liable for debt
Original debtor becomes secondarily liable for debt. Upon default, lender can collect unpaid debt from original debtor OR grantee

Original debtor can recover any amount paid from grantee

The following mortgage documents are used to convey an interest in real property to a lender (i.e., mortgagee) to secure repayment of a debt:

Promissory note – a formal “IOU” in which the borrower promises to repay the debt according to the listed terms

Mortgage deed – a document that gives the lender a security interest in the property until the note is paid

These documents may contain a “due on sale” clause, which allows the lender to demand full payment of the remaining mortgage debt if the debtor transfers the mortgaged property without the lender’s written consent. The lender may waive this clause, but the debtor is still liable on the note unless the lender releases the debtor from that obligation (Choice A).

This is true even when, as here, the debtor transfers mortgaged property to another (the grantee) who assumes the mortgage. A grantee who assumes the mortgage expressly agrees to pay and becomes primarily liable for the debt, while the original debtor becomes secondarily liability as a surety. This gives the lender the right to sue either party upon default, and the original debtor can recover any amount paid from the grantee.

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34
Q

REAL PROPERTY MBES - UNMARKETABLE TITLES

WHAT ARE THE DEFECTS WHICH RENDER A TITLE UNMARKETABLE?

A

Defects rendering title unmarketable

Future interest if future-interest holder has not agreed to transfer title

Private encumbrance (eg, mortgage, covenant, option, easement)

Significant physical defect (eg, incurable encroachment)
Title acquired by adverse possession & not quieted by judicial decree

Zoning-ordinance violation

All land-sales contracts have an implied warranty that the seller will convey marketable title to the buyer upon closing unless otherwise stated. Title need not be perfect to be marketable, but it must be free from an unreasonable risk of litigation such that a reasonable person would accept and pay for it. Therefore, title can be rendered unmarketable by a future interest if the holder of that interest does not agree to the transfer. If the seller cannot convey marketable title by the time of closing, then the buyer can refuse to close.

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35
Q

REAL PROPERTY MBES: LIFE ESTATES AND REMAINDERS

EXPLAIN A DEFEASIBLE LIFE ESTATE AND WHAT IS THE FUTURE INTEREST IN THIS TYPE OF ESTATE?

A

A defeasible life estate is a present possessory interest that terminates upon the end of the measuring life or the happening of a stated event. If title passes to someone other than the grantor when the present interest terminates, then the estate is followed by a remainder and an executory interest.

A life estate is a present possessory interest that terminates upon the death of an individual (e.g., “to my companion for life”). The future interest that follows a life estate is called a reversion (if title reverts to the grantor) or a remainder (if it passes to someone other than the grantor). A remainder is vested if the interest is not subject to a condition precedent and is created in an ascertainable grantee.

In contrast, a defeasible life estate is a life estate that may be terminated upon the death of an individual OR by the occurrence of a stated event (e.g., “to my companion for life or until she vacates the premises”). A defeasible life estate is followed by a reversion (if the estate reverts to the grantor) or an executory interest (if the estate passes to a third party). These future interests may be transferred during life or upon death.

Here, the owner devised her residence to the companion “for life or until she vacates the premises, and then to my nephew.” This means that the companion received a defeasible life estate and the nephew received two future interests in the residence—a vested remainder and an executory interest.

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36
Q

REAL PROPERTY MBES: ADVERSE POSSESSION

AS TO ADVERSE POSSESSION, CAN THE COURT CONSIDER THE POSSESSOR’S SUBJECTIVE INTENT?

A

A person can acquire title through adverse possession by possessing the property in a manner that is:

Open and notorious – apparent or visible to a reasonable owner
Continuous – uninterrupted for the statutory period
Exclusive – not shared with the owner
Actual – physical presence on the land
Nonpermissive – hostile and adverse to the owner
In most jurisdictions, possession is hostile if the possessor objectively demonstrates an intent to claim the land—regardless of the possessor’s subjective intent. However, a minority of jurisdictions does consider the possessor’s subjective intent. Some of these jurisdictions require that the intent be based on the possessor’s good-faith belief that he/she has the legal right to possession, while others require that the intent be based on bad faith (i.e., aggressive trespass).

If the jurisdiction here considers the homeowner’s subjective intent, then his possession was not hostile and the land on which the shed was located would belong to the buyer—not the son. This is the buyer’s best argument because the following arguments do not defeat the homeowner’s adverse possession:

37
Q

REAL PROPERTY MBES: MERGER DOCTRINE

IF THERE IS A PROMISE OR WARRANTY INCLUDED IN THE SALES CONTRACT, HOW DOES THE BUYER ENFORCE THE WARRANTY IF THERE IS A BREACH AFTER CLOSING?

A

Under the merger doctrine, a contract for the sale of land merges with the deed, and any obligations contained in the contract can only be enforced if they are incorporated into the deed.

The doctrine of merger provides that all obligations contained within a land-sale contract merge into the deed once the deed is delivered to and accepted by the buyer. Any obligations contained within the land-sale contract can be enforced thereafter only if they are incorporated into the deed.*

38
Q

REAL PROPERTY MBES: EASEMENTS AND TERMINATION OF EASEMENT

WHEN CAN A TRANSFEROR TERMINATE AN EASEMENT THAT HE TRANSFERRED TO THE TRANSFEREE?

A

An easement is a nonpossessory right to use another’s land (i.e., the servient estate) for a specific, limited use. An express easement arises when it is affirmatively created by the parties in a writing that complies with the statute of frauds (e.g., a deed). And unless limited by the easement’s express terms, the easement holder has the right to use the servient estate in any manner that is reasonably necessary to use and enjoy the easement—here, to accommodate vehicles attending the company’s meditation retreats.

**An easement also anticipates reasonable and natural development of the easement holder’s land (i.e., the dominant estate). ** Therefore, the easement holder may increase the manner, frequency, and intensity of the easement’s use—so long as that increase does not unreasonably damage or interfere with the use or enjoyment of the servient estate.

Here, the company reasonably expanded the use of its land by offering yoga classes, which caused an increase in traffic across the easement. However, the increased use was not excessive because there is no evidence that it unreasonably damaged or interfered with the owner’s servient estate (Choice C). Even if it did, available remedies include self-help abatement (e.g., blocking off the easement), damages, or an injunction—not termination of the easement. Therefore, the court should not allow the owner to terminate the easement.

39
Q

REAL PROPERTY MBES: MORTGAGES

WHAT IS A MORTGAGE?

A

A mortgage is an interest in real property that serves as security for the repayment of a debt or other obligation. If the loan secured by the mortgage goes into default, then the mortgage holder (i.e., the mortgagee, typically a bank) may foreclose on the property and use the proceeds from the foreclosure sale to satisfy the outstanding debt.

Here, the bank received a mortgage on the parcel of land to secure the limited partnership’s repayment of the loan. Since the limited partnership defaulted on the loan, the bank has the right to foreclose on its mortgage.

40
Q

REAL PROPERTY MBES: RIGHTS OF FIRST REFUSAL

IS THE RIGHT OF FIRST REFUSAL SUBJECT TO RAP?

A

A right of first refusal is a contractual right to purchase property before any other person if the owner later decides to sell, so it is a contingent future interest that is generally subject to the Rule Against Perpetuities (RAP).* RAP renders such interests void if there is any possibility that they could vest or fail more than 21 years after the end of some life in being at the creation of the interest (here, the grandmother’s life). Therefore, RAP will help determine whether the grandmother will be able to enforce the right-of-first-refusal clause.

*RAP does not apply to a right of first refusal (1) granted in a lease to a current leasehold tenant or (2) in most jurisdictions, created in a commercial transaction.

41
Q

REAL PROPERTY MBES: FEE SIMPLE AND DEFEASIBLE FEES

WHAT IS THE DIFFERENCE BETWEEN THE FEE SIMPLE ABSOLUTE AND A DEFEASIBLE FEE?

A

Fee simple absolute (FSA) is absolute ownership of property for a potentially infinite duration and has no future interest. Like an FSA, a defeasible fee is ownership of potentially infinite duration. But unlike an FSA, a defeasible fee can be terminated by the occurrence of a stated event. Defeasible fees are limited by specific durational or conditional language (e.g., “so long as,” “but if”). However, language that limits only the purpose of the transfer (e.g., “for the purpose of”) creates an FSA.

Here, the man’s deed to the local church did not include conditional or durational language. Instead, he conveyed the building “for the purpose of using the building to further religious education.” This conveyance created an FSA—not a defeasible fee. As a result, the church had absolute ownership of the building, and the man had no interest in the building to devise to the friend (Choice A). Since the church later conveyed all of its interest in the building to the investor, the court should find that proper title is vested in the investor.

42
Q

REAL PROPERTY MBES: RACE NOTICE JURISDICTION

A

Under a race-notice recording statute (as seen here), a subsequent property interest has priority over an earlier interest if the subsequent interest-holder was a bona fide purchaser (BFP)—i.e., a person who paid value and lacked notice of the prior interest—and the first to record. There are three types of notice:
V
Actual – when the purchaser has personal knowledge of a prior interest

Inquiry – when a reasonable investigation would have disclosed the existence of prior claims (e.g., someone other than the seller is obviously using the property)

Constructive (i.e., record) – when a prior interest was properly recorded in the land records and appears in the property’s chain of title

43
Q

REAL PROPERTY MBES - DOCTRINE OF EQUITABLE CONVERSION

EXPLAIN THE DOCTRINE OF EQUITABLE CONVERSION.

A

The answer you selected is not the best choice in this situation. Answer choice A is correct

**Under the doctrine of equitable conversion, a buyer receives equitable title to real property upon entering a land-sale contract. In contrast, the seller retains legal title and acquires the equitable right to receive the purchase price upon closing. As a result, a judgment obtained against the seller after the execution of the land-sale contract is not enforceable against the real property—even if the claim arose before the contract was executed.
**
Here, the owner incurred a debt to a creditor prior to entering into a land-sale contract with the couple for the owner’s house. But since the creditor obtained a judgment against the owner after the land-sale contract was executed, that judgment cannot be enforced against the house. That is because the couple’s equitable interest in the house is protected under the doctrine of equitable conversion. Therefore, the couple will likely prevail.

44
Q

REAL ESTATE MBES: NONEXISTENT GRANTEE

WHEN A DEED NAMES A NONEXISTENT GRANTEE, WHAT IS THE RESULT?

A

A deed is a legal instrument that transfers an ownership interest in real property. To be valid, a deed must:

be in writing and signed by the grantor (but not the grantee)*
unambiguously identify the grantor and the grantee
unambiguously describe the land and
include words of transfer.
A deed that names a nonexistent grantee is void as to that nonexistent grantee. So if a nonexistent grantee was conveyed an interest in a tenancy in common, then the grantor would retain the nonexistent cotenant’s interest and have a tenancy in common with the other cotenant(s) named in the deed.

45
Q

REAL PROPERTY MBES: MARKETABLE TITLE

CAN A SELLER REFUSE TO TRANSFE THE PROPERTY IF THERE IS A MARKETABLE TITLE ISSUE?

A

All contracts for the sale of land have an implied warranty that the seller will convey marketable title to the buyer upon closing unless otherwise stated. To be marketable, title must be reasonably free from doubt and under no threat of litigation, such that a reasonable person would accept and pay for it.

I**f the seller cannot convey marketable title (e.g., due to a zoning violation), the buyer can rescind the contract and refuse to close. The buyer can also choose to accept the land with the defect and enforce the contract—as the buyer seeks to do here (Choice B). If the seller refuses to perform, then the buyer can:

rescind the contract and seek restitution
seek specific performance with an abatement of the purchase price* or
sue for damages.
Specific performance is only available when money damages are inadequate. Since land is considered unique and money damages cannot compensate for the loss of unique property, this remedy is generally available to buyers of land. And since the seller refused to transfer title u**pon closing, the buyer will likely prevail in this suit for specific performance.

*For example, the buyer can seek a price adjustment to compensate for the defect.All contracts for the sale of land have an implied warranty that the seller will convey marketable title to the buyer upon closing unless otherwise stated. To be marketable, title must be reasonably free from doubt and under no threat of litigation, such that a reasonable person would accept and pay for it.

If the seller cannot convey marketable title (e.g., due to a zoning violation), the buyer can rescind the contract and refuse to close. The buyer can also choose to accept the land with the defect and enforce the contract—as the buyer seeks to do here (Choice B). If the seller refuses to perform, then the buyer can:

rescind the contract and seek restitution
seek specific performance with an abatement of the purchase price* or
sue for damages.
Specific performance is only available when money damages are inadequate. Since land is considered unique and money damages cannot compensate for the loss of unique property, this remedy is generally available to buyers of land. And since the seller refused to transfer title upon closing, the buyer will likely prevail in this suit for specific performance.

*For example, the buyer can seek a price adjustment to compensate for the defect.

46
Q

REAL PROPERTY MBES: RQUIREMENTS FOR VALID TRANSFER OF PROPERTY

WHAT ARE THE REQUIREMENTS FOR VALID TRANSFER OF REAL PROPERTY?

A

A deed is a document that transfers an interest in real property from the owner (grantor) to another (grantee). To effectively transfer an interest in real property, the deed must be:

delivered by the grantor – evidenced by the grantor’s intent to presently convey ownership to the grantee and

accepted by the grantee – presumed when the conveyance is beneficial to the grantee.

The grantor’s intent to transfer is presumed in certain instances (see image above)—but not when the grantor keeps the deed. In that situation, the outward and visible acts of the grantor must evidence an intent to make a present transfer of the property interest.

47
Q

REAL PROPERTY MBES: EQUITABLE MORTGAGE

WHAT IS AN EQUITABLE MORTGAGE?

A

An equitable mortgage can be established when a debtor gives an absolute deed—i.e., a deed that is free of encumbrances and transfers unrestricted title to property—to a lender with the intent to secure a loan. The debtor-grantor must prove by clear and convincing evidence that the deed was intended as security for a loan—not as an outright transfer. The deed recipient, like any other lender, may then bring a foreclosure action if the debtor defaults.

48
Q

REAL PROPERTY MBES: FUTURE ADVANCES MORTGAGE

HOW MUCH PRIORITY WHEN IT COMES TO PRIORITY WITH REGARD TO FORECLOSURE PROCEEDS DOES A HOLD OF A FUTURE ADVANCES MORTGAGE HOLDER HAVE?

A

A future-advances mortgage (i.e., “line of credit”) is a mortgage given by a debtor (mortgagor) in exchange for the right to receive money from the lender (mortgagee) in the future. Priority with regard to proceeds from a foreclosure sale depends on whether the advances are:

optional – in which case, the future-advances mortgage has priority with respect to amounts loaned before the future-advances mortgagee received notice of a subsequent mortgage or

obligatory – in which case, the future-advances mortgage has priority with respect to amounts loaned before and after the future-advances mortgagee received notice of a subsequent mortgage.

49
Q

REAL PROPERTY MBES: RULE AGAINST PERPETUITIES AND CONTINGENT REMAINDERS

EXPLAIN HOW RAP AFFECTS CONTINGENT REMAINDER INTERESTS. HOW DOES IT WORK?

A

Under the Rule Against Perpetuities, a contingent future interest must vest or fail within 21 years after the end of a relevant life in being when the interest was created. If not, then the interest is void ab initio under the common law.

The Rule Against Perpetuities (RAP) applies only to **contingent future interests—i.e., future interests that are held by unknown/unborn persons or subject to a condition precedent. **Under the common law, RAP renders a contingent future interest void ab initio (i.e., from the beginning) unless the interest must vest or fail within 21 years after the end of a relevant life in being when the interest was created.

Here, the woman conveyed land to her son for life, then to his widow for her life, and the remainder to his children. The son was only five years old at the time of the conveyance, so his widow and children were unknown or unborn persons. As a result, the widow and children held contingent future interests that are subject to RAP. However, the identity of the son’s widow and children would be immediately identifiable upon the death of the son—the relevant life in being when the interests were created—so their interests do not violate RAP.

50
Q

REAL PROPERTY MBES: FEDERAL FAIR HOUSING ACT

EXPLAIN THE PARAMETERS OF THE FEDERAL FAIR HOUSING ACT.

A

Fair Housing Act

Applicability

Prohibits discriminatory actions in sale/renting of dwelling based on race, color, religion, sex, handicap, national origin, or familial status—including:

refusing bona fide offer

discriminating in terms, conditions, privileges, or services of purchase/rental

advertising preference for or discrimination against buyer/renter

falsely representing dwelling’s availability for inspection, sale, or rental

inducing sale/renting with discriminatory representations about neighborhood

denying reasonable modifications to accommodate handicap at occupant’s expense

Exceptions

Act does not apply to:

religious organizations

private clubs that incidentally provide lodging to members

familial status for senior housing

owner of ≤ 3 single-family dwellings*

owner-occupied dwellings with ≤ 4 units*

sale/rental of single-family home by private owner

*These exceptions do not apply to discriminatory advertisements or when owner is assisted by a real estate agent, broker, or salesman.
The federal Fair Housing Act (FHA) prohibits discrimination in the sale, rental, and financing of homes as well as other housing-related transactions (e.g., advertising, homeowner’s insurance, zoning). Among other protected classes, the FHA prohibits discrimination on the basis of familial status, which includes having custody of children under the age of 18 and being pregnant.

Here, the man’s application was rejected based on his status as a custodial parent of a minor child. Therefore, he will likely prevail in his suit against the developer for violating the FHA.

51
Q

REAL PROPERTY MBES: BUYER REMEDIES WHEN SELLER REFUSES TO CLOSE

WHAT DAMAGES OR REMEDIES ARE AVAILABLE TO A BUYER OF REAL PROPERTY WHEN THE SELLER REFUSES TO CLOSE?

A

Buyer’s remedies

Rescission & restitution

Rescind (ie, cancel) agreement
Seek return of paid deposits & other restitution
Specific performance

Seek injunction ordering seller to transfer title with abatement of purchase price
Generally available since property is considered unique (ie, money damages would not make buyer whole)
Damages

Loss of bargain = market value at time of breach − contract price
Liquidated damages = amount designated in sales contract as compensation for breach
Incidental & consequential damages that were contemplated during sales contract or reasonably foreseeable
In a land-sales contract, the buyer promises to pay the purchase price and the seller promises to transfer marketable title at the time of closing. When, as here, the seller refuses to perform, then the buyer can:

rescind the contract and seek restitution
seek specific performance or
sue for damages.
Specific performance—i.e., court-ordered performance of a contractual obligation—is available only when money damages are inadequate. Since land is considered unique and money damages are inadequate to compensate for the loss of unique property, this remedy is generally available to buyers. Therefore, specific performance is the principle that will permit the first buyer to obtain the seller’s performance of the contract.

52
Q

REAL PROPERTY MBES: ASSUMPTION OF A MORTGAGE

WHEN IS THE ORIGINAL BORROWER RELEASED FROM LIABILITY ON A MORTGAGE THAT HAD BEEN ASSUMED BY THE PURCHASER OF THE PROPERTY?

A

A mortgage is an interest in real property given to a lender (mortgagee) to secure repayment of a debt. The debtor (mortgagor) can freely transfer the mortgaged property to a grantee unless the mortgage states otherwise. After the conveyance, the mortgage remains attached to the property and the debtor remains personally liable for the debt secured by the mortgage. In contrast, the grantee’s obligations depend on whether the grantee:

took subject to the mortgage – then the grantee does not agree to pay and is not personally liable for the debt or

assumed the mortgage – then the grantee agrees to pay and becomes primarily liable for the debt, and the debtor becomes secondarily liable as a surety.

However, the debtor is relieved of personal liability for the mortgage debt if the lender releases or impairs the mortgaged property.* In some states, a release completely discharges the debtor’s personal liability. In other states and under the Restatement, the debtor’s personal liability is discharged only to the extent of the value of the released property.

53
Q

REAL PROPERTY MBES: FEE SIMPLE DEFEASIBLES

WHAT IS A DEFEASIBLE FEE? WHAT FUTURE INTERESTS FOLLOW A FEE SIMPLE DETERMINABLE?

A

A defeasible fee is an ownership interest in real property that has the potential to last forever but can be cut short if a specified event or condition occurs. One type of defeasible fee is a fee simple determinable (FSD), which is created with durational language (e.g., “so long as,” “during,” “until”). The future interest that follows an FSD is either:

a possibility of reverter – in which case, the estate automatically reverts back to the grantor when the specified event occurs (presumed if not expressly stated) or

an executory interest – in which case, the estate automatically passes to a third party when the stated event occurs.

Here, the owner’s will conveyed an FSD in the building to the religious organization (to the religious organization “for so long as it is used for religious purposes”), and he did not pass the accompanying future interest to a third party. As a result, the owner retained a possibility of reverter, which was freely alienable by the owner during life and upon death. The owner devised his possibility of reverter, along with his remaining real property interests, to the companion by will—leaving no real property interest for the son to inherit.

54
Q

REAL PROPERTY MBES: COMMON INTEREST COMMUNITIES AND BOARDS

WHAT IS A COMMON INTEREST COMMUNITY AND WHAT IS THE AUTHORITY OF BOARDS IN THESE COMMUNITIES?

A

A common-interest community is a real-estate development in which individually owned lots or units are burdened by a covenant that imposes an obligation to pay dues to an association. The association is typically governed by a board, which exercises the association’s power to manage common property, administer the covenants, and carry out functions set forth in the declaration or granted by statute. But the board must act reasonably when exercising its discretionary powers.

55
Q

REAL PROPERTY MBES: CONFLICT OF LAW ISSUES REGARDING REAL PROPERTY

A

In cases involving real property, law applied by forum court should be determined by conflict-of-laws rule that would be applied by state where property is located

Exceptions

Document specifies application of specific jurisdiction’s laws
Issues regarding effect of marriage on interest in land
Collateral issues (eg, whether transferor perpetrated fraud)
Issues regarding mortgage note (eg, validity of note)
Foreclosure-related issues that do not affect interest in land (eg, mortgagee’s right to sue mortgagor for underlying debt before foreclosure)

Conflict-of-laws issues arise when significant aspects of a legal action are divided between two or more states, creating a conflict as to which state’s law applies. If the conflict involves real property, then the general rule is that the law applied by the forum court should be determined by the conflict-of-laws rule that would be applied by the courts of the situs state (i.e., the state where the property is located) (Choice A). The conflict-of-laws rule of the situs state typically calls for the application of its own local law (i.e., law of the situs).

56
Q

REAL PROPERTY MBES: TENANTS IN COMMON

WHEN MAY PARTIES WHO HOLD TITLE TO PROPERTY AS TENANTS IN COMMON OWE A FIDUCIARY DUTY TO ONE ANOTHER?

A

Cotenants owe a duty of fair dealing—but generally not a fiduciary duty—to each other. However, a fiduciary duty may be imposed on cotenants who:

jointly purchase property in reliance on each other or
acquire their interests at the same time from a common source (e.g., by gift, will, or inheritance).
This duty primarily arises when the co-owned property is sold at a tax or mortgage foreclosure sale and purchased by a cotenant. The other cotenants then have the right to reacquire their original interests by paying their share of the cost paid to acquire the property (based on the cotenant’s ownership interest) within a reasonable time.

57
Q

REAL PROPERTY MBES: CONTINGENT REMAINDERS

A

Absent contrary language, all land-sale contracts have an implied warranty that the seller will convey marketable title to the buyer upon closing. Title is marketable if it is reasonably free from doubt and unreasonable risk of litigation, such that a reasonable person would accept and pay for it. One defect that renders title unmarketable arises when a future interest is held by person(s) who have not agreed to the transfer.

The future interest following a life estate is called a remainder when held by someone other than the grantor. Remainders (as with life estates) are transferable during life, devisable by will, and descendible by inheritance (Choice B). This is true in most jurisdictions* regardless of whether the remainder is vested or contingent.

58
Q

REAL PROPERTY - LIFE ESTATE TENANT OBLIGATION

IS A LIFE TENANT OBLIGATED TO PAY TAXES ON THE REAL PROPERTY AND IF SO TO WHAT EXTENT?

A

A life tenant has the obligation to pay ordinary taxes on the real property, but only to the extent that the life tenant receives a financial benefit from the property. When the life tenant occupies the land, the financial benefit is measured by its fair rental value.

59
Q

REAL PROPERTY - ASSIGNMENT OF A LEASE

WHEN THE ORIGINAL TENANT TRANSFERS ALL HIS RIGHTS TO AN ESTATE TO ANOTHER PERSON - DOES THIS CONSTITUTE AN ASSIGNMENT? IF SO, WHAT ARE THE DUTIES TO THE LANDLORD?

A

A landlord and tenant have a legal relationship based on both:

privity of contract – their shared interest in the lease agreement and

privity of estate – their successive right to possess the property (i.e., the tenant’s current right of possession is immediately followed by the landlord’s future right of possession).

Unless the lease states otherwise, either party can freely transfer his/her interest under the lease. Assignment is a complete transfer of a tenant’s interest to a third party (assignee) for the remainder of the tenant’s lease term (as seen here), so:

the original tenant retains privity of contract and remains liable for all covenants in the lease (e.g., rent)and

the assignee gains privity of estate and becomes liable to the landlord for the rent and any other covenants in the lease that run with the lease.

Because of this privity, the original tenant (the student) and the assignee (the employee) are jointly and severally liable for the landlord’s entire harm arising from a breach of the lease (e.g., failure to pay rent).* This means that the professor could recover $3,000 in unpaid rent from the student and/or the employee. Therefore, the employee can be held liable to the professor.

*However, if the landlord is able to mitigate the harm (e.g., by finding another tenant), damages will be reduced accordingly.

60
Q

REAL PROPERTY - MARKETABLE TITLE AND THE QUIT CLAIM DEED

WHAT HAPPENS WHEN ANY OBLIGATIONS CONTAINED IN THE LAND SALES CONTRACT AT CLOSING? DO THESE OBLIGATIONS NEED TO BE SPECIFIED IN THE DEED?

A

Unless otherwise stated, an implied covenant of marketable title is part of a land-sale contract, regardless of the type of deed created. Under this covenant, the seller promises to deliver title that is reasonably free from doubt and under no threat of litigation, such that a reasonable person would accept and pay for it. However, under the merger doctrine, any obligations contained in the land-sale contract merge into the deed and are extinguished at closing.* As a result, these obligations are enforceable only if they are contained in the deed.

61
Q

REAL PROPERTY: WAYS TO AVOID FORECLOSURE

WHEN THE DEBTOR MORTGAGOR CONVEYS ALL INTEREST IN THE MORTGAGED PROPERTY TO THE MORTGAGEE (LENDER), WHAT RIGHTS, IF ANY, DO THE JUNIOR INTERESTS HAVE?

A

Ways to avoid foreclosure

Equitable redemption*

Mortgagor pays full amount of outstanding debt (as increased by acceleration clause) plus any accrued interest

Deed in lieu of foreclosure

Mortgagor conveys all interest in mortgaged property to mortgagee

Renegotiating debt

Parties renegotiate terms of promissory note & mortgage

*Many states also recognize a statutory right of redemption that permits a mortgagor to reclaim the property after a foreclosure sale.

A mortgagor (debtor) may convey all interest in the mortgaged property to the mortgagee (lender) in lieu of foreclosure so long as both parties agree. This “deed in lieu of foreclosure” allows the mortgagee to take immediate possession of the property without the formalities of a foreclosure sale.

However, the mortgagee takes the property along with any junior interests attached to the property—e.g., the savings and loan association’s second mortgage. And if the mortgagee accepts a deed in lieu of foreclosure without reserving the right to foreclose (as seen here), then its mortgage is extinguished.

62
Q

REAL PROPERTY - VESTED REMAINDER SUBJECT TO COMPLETE DIVESTMENT

When is a vested remainder subject to complete divestment?

A

A vested remainder is subject to complete divestment if the occurrence of a subsequent condition will eliminate the remainder interest (e.g., “then to my heirs; but if none survive my friend, then to my lawyer”).

63
Q

REAL PROPERTY - FIXTURES

DOES A FIXTURE AUTOMATICALLY TRANSFER WITH THE LAND WHEN IT IS SOLD?

A

A fixture is tangible personal property (i.e., chattel) that is

attached to real property in such a manner that it is treated as part of the realty and
used for some larger component or function of the land (e.g., to separate adjoining properties).
Fixtures are considered an integral part of the land to which they are attached. Consequently, a fixture automatically transfers with the land unless the conveying instrument (e.g., deed) provides otherwise.

Here, the wall became part of the woman’s land, which was then sold to the buyer. Since the wall is a fixture, it was included in the valid sale to the buyer. Therefore, the man cannot prevent the buyer from tearing down the wall

64
Q

REAL PROPERTU - MORTGAGES AND SECURITY FOR A DEBT

A mortgagor can freely transfer mortgaged land to a grantee but remains personally liable for the debt thereafter.

The grantee takes the land subject to the mortgage obligation without personal liability for the debt unless the grantee expressly agrees to assume the mortgage.

A

A mortgage is an interest in land that a debtor (mortgagor) gives to a lender (mortgagee) as security for a debt. The debtor can freely transfer mortgaged land to a grantee unless the mortgage states otherwise. After the conveyance, the mortgage remains attached to the property and the debtor remains personally liable for the debt secured by the mortgage. But the grantee’s obligations depend on whether the grantee:

took subject to the mortgage (presumed) – in which case the grantee does not agree to pay and is not personally liable for the debt or

assumed the mortgage – in which case the grantee expressly agrees to pay and becomes primarily liable for the debt, and the debtor becomes secondarily liable as a surety.

In either instance, the lender can foreclose on the mortgage if the debtor defaults on the loan (Choice B). However, the grantee will only be liable for any deficiency resulting from a foreclosure sale if the grantee assumed the mortgage.

65
Q

REAL PROPERTY - TENANCY AT WILL

HOW DOES A TENANCY AT WILL WORK AND WHAT HAPPENS WHEN ONLY THE LANDLORD HAS A RIGHT TO TERMINATE?

A

Tenancy at will

Creation

Express agreement
Implied when person allowed to possess premises without paying rent
Duration

Indefinite period
Termination

At any time with reasonable notice (unless otherwise agreed)
A tenancy at will is a leasehold estate that has no specific term and continues so long as the landlord and the tenant desire. This tenancy can generally be terminated by the landlord or the tenant. But if only one party is expressly given the right to terminate the leasehold, the arrangement may be deemed unconscionable if, for example, the arrangement is unfair due to one party’s superior bargaining power. In such a case, both parties are given the ability to terminate the lease.

66
Q
A

A deed is a legal instrument that transfers an interest in real property from the owner (grantor) to another (grantee). To be valid, the deed must be signed by the grantor, identify the grantor and the grantee, contain words of transfer, and identify the land with reasonable certainty—as the farmer’s document does here. A property interest may then be transferred by delivering the deed to the grantee, and acceptance is presumed if the transfer is beneficial to the grantee.

A grantor can deliver the deed to the grantee through an independent third party. But if the third party’s transfer to the grantee is conditioned on the grantor’s death, then the grantor’s delivery of the deed to the third party must evidence the intent to make a present gift to be effective. This typically occurs when the grantor relinquishes the right to take back the deed by placing it beyond the grantor’s control.

67
Q
A

A deed is a legal instrument that transfers ownership of real property from the owner (grantor) to another (grantee). But for a transfer by deed to be effective, the deed must be:

delivered by the grantor – demonstrates the grantor’s present intent to convey ownership to the grantee and

accepted by the grantee – presumed if the transfer is beneficial to the grantee.

Delivery is presumed when the deed has been recorded in the county land records since the recording creates a rebuttable presumption that the deed is intended to be presently operative. Physically handing over a deed is not required and does not conclusively prove a grantor’s present intent to convey property (Choice C).

68
Q
A

Joint tenancy is a concurrent estate in which each cotenant has an equal, undivided interest in property with a right of survivorship. This means that a joint tenant’s interest disappears at death and the remaining joint tenants’ interests automatically expand proportionally to absorb it. As a result, a joint tenancy cannot be devised by will or inherited through intestate succession.

To create a joint tenancy, the property must be conveyed with the express intent to create survivorship rights and four unities must coexist (PITT):

Possession – tenants share an equal right to possess or use the property
Interest – tenants have an equal interest in the property
Time – property interests simultaneously vest in all tenants
Title – property interests received in the same instrument of conveyance
A conveyance that meets some but not all of these requirements creates a tenancy in common, in which each tenant has an equal right to possess the entire property but no survivorship rights. As a result, a tenant in common’s interest can be devised or inherited.

69
Q
A

A buyer who assumed a mortgage as part of the purchase price may not raise defenses—e.g., duress, statute of limitations, lack of legal capacity—that the debtor could have raised to avoid the mortgage obligation. Otherwise, the buyer would be unjustly enriched.

Here, the owner executed the deed of trust under duress after the supplier threatened to falsely report health code violations to the health department. However, the chef assumed the obligation to pay the promissory note as part of the purchase price for the restaurant, so the chef cannot raise duress as a defense to the enforcement of the deed of trust (Choices C & D). Therefore, the chef cannot assert duress against the trustee to avoid foreclosure.

*Some states use a deed of trust in place of a mortgage. For most purposes, a deed of trust is treated the same as a mortgage.

70
Q

REAL PROPERTY - ACCESS TO SUNLIGHT

Absent a negative easement or statute, a landowner has no legal right to prevent neighbors from blocking his/her land from access to natural light.

A

he English common-law Doctrine of Ancient Lights enabled landowners to protect their right to light by preventing neighbors from building any structure that blocked the landowner’s access to sunlight. This doctrine has been rejected in the United States. As a result, landowners can only restrict another’s blockage of light if they are protected by statute or enter into an agreement with the neighboring landowner to create a negative easement—neither of which is seen here. The court should therefore hold in favor of the dentist.

71
Q
A

A covenant is a promise to do or not do something on the land. When an injunction is sought to enforce a covenant (as seen here), it is called an “equitable servitude.” An equitable servitude can be expressly created in a written agreement. But here, no express equitable servitude was created because the two-story height restriction was not written in the couple’s deed, the speculator’s deed, or the recorded subdivision plan.

An equitable servitude can also be implied from a common scheme* if three elements are met:

Intent to create common scheme – the owner intended to impose a servitude on all lots in the subdivision (here, the deeds to most of the lots contained a two-story height restriction)

Restrictive servitude – the intended servitude is a promise not to do something on land (here, a promise not to build a three-story residence)

Notice – the person to be bound by the servitude had actual, record, or inquiry notice of the servitude (here, the speculator received actual notice through the rancher’s letter, and the couple had inquiry notice because no three-story residences were on the other lots) (Choices C & D)

72
Q
A

The following mortgage documents are used to convey an interest in real property to a lender (i.e., mortgagee) to secure repayment of a debt:

Promissory note – a formal “IOU” in which the borrower promises to repay the debt according to the listed terms

Mortgage deed – a document that gives the lender a security interest in the property until the note is paid

These documents may contain a “due on sale” clause, which allows the lender to demand full payment of the remaining mortgage debt if the debtor transfers the mortgaged property without the lender’s written consent. The lender may waive this clause, but the debtor is still liable on the note unless the lender releases the debtor from that obligation (Choice A).

This is true even when, as here, the debtor transfers mortgaged property to another (the grantee) who assumes the mortgage. A grantee who assumes the mortgage expressly agrees to pay and becomes primarily liable for the debt, while the original debtor becomes secondarily liability as a surety. This gives the lender the right to sue either party upon default, and the original debtor can recover any amount paid from the grantee.

Here, the bank waived the “due on sale” clause when the investor sold the mortgaged land to the developer. This means that the remaining loan debt did not need to be paid in full at that time, but it did not release the investor from liability on the note. Instead, the investor became secondarily liable when the developer assumed the mortgage (Choice B). As a result, the bank can sue the investor for the default on the note.

73
Q
A

A defeasible life estate is a present possessory interest that terminates upon the end of the measuring life or the happening of a stated event. If title passes to someone other than the grantor when the present interest terminates, then the estate is followed by a remainder and an executory interest.

74
Q

REAL PROPERTY MBES - REAL COVENANTS

WHAT ARE THE REQUIREMENTS FOR A REAL COVENANT TO BE ENFORECEABLE AGAINST A SUCCESSOR OWNER?

ARE PERSONS WHO INHERIT PROPERTY REQUIRED TO HAVE NOTICE OF A COVENANT FOR THEM TO BE BOUND BY IT?

A

A real covenant is an agreement between parties to do or not do something on land (e.g., maintain a stone wall) that is enforceable by an action for money damages. The promising parties are bound under contract law, but their successors in interest are bound only if the covenant runs with the land. This occurs when the following elements are met:

Writing – covenant is in a writing that satisfies the statute of frauds (here, the owner’s deed to the farmer)

Intent to run – promising parties intend for the covenant to run to their successors in interest (“The parties intend a covenant running with the land”)

Touch and concern – covenant relates to the use, enjoyment, or occupation of the land (maintaining the stone wall)

Horizontal privity – promising parties simultaneously transfer the land and create the covenant (the covenant was created when the owner conveyed a farm to the farmer)

Vertical privity – successors have an unbroken chain of ownership from the original parties (the successors acquired, by purchase or other means, the same ownership interests as the original parties) (Choice D)

Notice – person to be bound had actual, record, or inquiry notice of the covenant (required only if the person to be bound was a purchaser)

Here, the son likely had no notice of the covenant requiring the owner’s successors (the son) to pay half of any reasonable expense incurred in repairing the stone wall because it was never recorded. But since the son inherited the farm, he is not a purchaser who required notice of the covenant to be bound by it (Choice A). Therefore, the court most likely will rule for the son because the horse breeder’s expenditures were not incurred for a reasonable repair.

75
Q

REAL PROPERTY MBES - STATUTORY PERIO FOR ADVERSE POSSESSION AND TACKING

EXPLAIN THE DOCTRINE OF TACKING. WHAT IS REQUIRED FOR A POSSESSOR TO TACK ON A PREDECESSOR’S ADVERSE POSSESSION TIME ON THE PROPERTY?

A

The statutory period in this jurisdiction is 10 years, but the childcare center’s manager has used the playground for only 4 years. **However, under the doctrine of tacking, an adverse possessor may tack on the predecessor’s time if there is privity between successive adverse possessors. Privity is satisfied if the possessor takes by nonhostile means (e.g., by descent, devise, contract, deed).

Here, there is no privity between the successive adverse possessors because the childcare center’s manager was operating the business for her own benefit—not pursuant to an agreement with the daycare owner or other nonhostile means. **

76
Q

REAL PROPERTY MBES - EQUITABLE CONVERSION AND RISK OF LOSS

WHO BEARS THE RISK OF LOSS IF THERE IS DAMAGE TO OR DESTRUCTION OF THE PROPERTY PRIOR TO CLOSING? GIVE THE MAJORITY AND MINORITY RULE.

A

The primary issue in this case is which party bears the risk of loss. Most states follow the logic of the doctrine of equitable conversion and place the risk of loss on the buyer during the executory period—i.e., the period between the execution of the real-estate contract and closing. This is true regardless of whether the buyer takes possession of the property during that period.

However, a minority of jurisdictions have adopted the Uniform Vendor and Purchaser Risk Act. Under this act, the risk of loss remains with the seller until the buyer takes possession of or receives legal title to the property. Since the owner (seller) had possession of the warehouse at the time it was destroyed, the most important issue in awarding judgment is whether the jurisdiction has adopted the Uniform Vendor and Purchaser Risk Act.

77
Q

REAL PROPERTY MBES - FUTURE ADVANCE MORTGAGES

WHAT IS THE DIFFERENCE BETWEEN A FUTURE ADVANCE MORTGAGE THAT IS OPTIONAL VS ONE THAT IS OBLIGATORY?

A

If a future-advances mortgage is optional, then the future-advances mortgagee has priority with respect to amounts loaned before receiving notice of a subsequent mortgage. But if the advance is obligatory, then the future-advances mortgagee has priority with respect to amounts loaned before and after receiving notice.

A future-advances mortgage (i.e., “line of credit”) is a mortgage given by a debtor (mortgagor) in exchange for the right to receive money from the lender (mortgagee) in the future. Priority with regard to proceeds from a foreclosure sale depends on whether the advances are:

optional – in which case, the future-advances mortgage has priority with respect to amounts loaned before the future-advances mortgagee received notice of a subsequent mortgage or

obligatory – in which case, the future-advances mortgage has priority with respect to amounts loaned before and after the future-advances mortgagee received notice of a subsequent mortgage.

78
Q

REAL PROPERTY MBES - CONCURRENT ESTATES

EXPLAIN THE TYPES OF CONCURRENT ESTATES AND THEIR DIFFERENCES.

A

There are three types of concurrent estates (i.e., cotenancies):

Tenancy in common – a tenancy in which each cotenant has a separate and possibly unequal interest in the property with no right of survivorship

Joint tenancy – a tenancy in which each cotenant has an undivided and equal interest in the property with the right of survivorship

Tenancy by the entirety – a joint tenancy between married persons that is recognized in about half of the jurisdictions

Tenancies in common are devisable (by will) and inheritable (by intestate succession)—but joint tenancies and tenancies by the entirety are not. And though all three concurrent estates are alienable during a tenant’s lifetime, a tenancy by the entirety can only be conveyed with the other tenant’s consent.

79
Q

REAL PROPERTY MBES - DELIVERY OF MARKETABLE TITLE

WITH REFERENCE TO A CLOSING DATE FOR A REAL ESTATE TRANSACTION, WHEN IS PERFORMANCE DUE AND WHEN WOULD A LATER CLOSING BE CONSIDERED A BREACH?

A

A land-sales contract is executed when the seller promises to deliver marketable title—i.e., title free from unreasonable risk of litigation—and the buyer promises to pay the purchase price. These promises must be performed on the closing date set forth in the contract if the parties set a strict closing deadline, which occurs when:

express language in the contract makes time of the essence
the circumstances strongly suggest that the parties intended it to be or
one party gives the other party notice that time is of the essence.
But when time is not of the essence, strict adherence to the closing date is not required in equity. Instead, performance is due upon closing or a reasonable time thereafter. And so long as performance can be rendered within a reasonable time after the closing date, the delay does not provide grounds to rescind the contract and the other party must perform.*

80
Q

REAL PROPERTY MBES: EASEMENTS

WHAT IS REQUIED FOR AN EXPRESS EASEMENT TO BE ENFORCEABLE?
ALSO WHAT IS NECCESARY FOR AN EASEMENT BY IMPLICATION TO EXIST?

A

The Statute of Frauds requires that an express easement, as a real property right, be in writing. Answer choice C is incorrect. Generally, in order for an easement by implication to exist, there must be a prior existing use (i.e., a quasi-easement). Here, the path across the daughter’s lot only came into existence after the lot was deeded to his daughter.

81
Q

REAL PROPERTY MBES: COMMON INTEREST COMMUNITIES

CAN A MEMBER OF A COMMON-INTEREST COMMUNITY, SUCH AS A CONDO, WITHHOLD PAYMENT OF ASSESSMENTS TO OFFSET A DEFAULT BY THE ASSOCIATION?

A

A member of a common-interest ownership community, such as a condominium, is not entitled to withhold payment of assessments to set off against a default by the association in fulfilling its duties to the member.

82
Q

REAL PROPERTY MBES - ASSIGNMENTS

A

The privity of estate held by the original tenant terminates upon a successful assignment by the tenant to the assignee (but does not terminate upon a sublease). However, because the original tenant remains in privity of contract with the landlord (both are parties to the lease agreement), the original tenant remains liable for all the covenants in the lease—even after a successful assignment. Absent an agreement by the landlord to release the original tenant from liability (i.e., a novation), the original tenant remains liable to the landlord for the entire duration of the lease. Here, the individual, the original tenant, remains liable to pay the five months of rent due under the lease that has not been paid. Answer choice B is incorrect. The Statute of Frauds does not make the oral assignment by the individual of his leasehold interest to his friend unenforceable because the lease of property for one year or less is not subject to the Statute of Frauds.

83
Q

REAL PROPERTY MBES - RESCINDING A LAND SALES CONTRACT

IS A RESCISSION OF A LAND SALES CONTRACT REQUIRED TO BE IN WRITING?

A

The buyer gave her assent to terminate the contract by permitting the seller to withdraw from the contract. Consequently, the contract was rescinded by mutual consent and could not be reinstituted by the buyer unilaterally. Answer choice B is incorrect because, although the inter vivos transfer of a joint tenancy interest severs the joint tenancy and creates a tenancy in common, such a transfer is permitted. Answer choice C is incorrect because, although a contract to transfer an interest in land must be in writing pursuant to the Statute of Frauds, the majority rule is that the rescission of such a contract may be oral.

84
Q

REAL PROPERTY MBES - RESCISSION OF A LAND SALES CONTRACT - ORAL

WHEN THE TWO PARTIES AGREE THAT SELLER WILL SELL HIS HOME AND BUYER WILL BUY IT, BUT IT IS DONE ORALLY, CAN THE BUYER ENFORCE THIS AGREEMENT IF THE SELLER CHANGES HIS MIND REGARDING THIS ORAL CONTRACT? WHAT IF BUYER GOES OUT AND SELLS HIS HOME WHEN HE THINKS HE HAS A DEAL FOR THE NEW HOME?

A

A land sales contract must generally be in writing, signed by the party to be charged, and contain all the essential terms, in order to be enforceable. However, even if there is no writing involved, a party may be entitled to specific performance if she has detrimentally relied on the oral contract. In this case, the buyer detrimentally relied on the sale when she accepted an offer for the sale of her own home. This reliance would likely subject the buyer to such hardship so as to estop the seller from asserting the Statute of Frauds as a defense.

85
Q

REAL PROPERTY MBES: - SPECIAL WARRANTY DEED AND COVENANTS

WHAT IS COVERED WITH A SPECIAL WARRANTY DEED?

A

The covenant against encumbrances guarantees that the deed contains no undisclosed encumbrances. A special warranty deed contains this covenant but only warrants against defects arising during the time the grantor has title.

86
Q

REAL PROPERTY MBES: LATERAL SUPPORT

A LANDOWNER HAS THE RIGHT TO HAVE THE LAND SUPPORTED IN ITS NATURAL STATE. WHAT DOES THAT ENTAIL IF THERE IS A STRUCTURE NOW ON THE LAND?

A

A landowner has a right to lateral support from adjoining land. If the adjoining land has been improved (i.e., is not in its natural state), the excavating landowner is strictly liable for any damage caused by the excavation only if the land would have collapsed in its natural state (regardless of the improvement).

87
Q

REAL PROPERTY MBES: PROFITS A PRENDRE

DOES A PROFIT NEED TO COMPLY WITH THE STATUTE OF FRAUDS? WHAT ABOUT THE RECORDING ACT?

A

The agreement between the farmer and the owner of the woodlands created a profit à prendre, which is a nonpossessory right to enter another’s land and remove specific natural resources. As a property right, a profit is subject to the applicable recording act.

88
Q

REAL PROPERTY MBES: EQUAL DIGNITIES RULE

WHAT IS THE EQUAL DIGNITIES RULE?

A

Under the “equal dignities” rule, when the act performed by an agent on behalf of the principal is required by law to be in writing, the agent’s authority must also be established in writing. Consequently, when an agent signs a deed, the agent’s authority must also generally be in writing.

89
Q

REAL PROPERTY MBES: ASSIGNMENTS AND SUBLEASES

WHEN THE LANDLORD HAS A PROVISION PROHIBITING AN ASSIGNMENT, IS A SUBLEASE PERMISSIBLE?

A

An assignment is a complete transfer of the tenant’s remaining lease term. Any transfer for less than the entire duration of the lease is a sublease. Here, the agreement between the retailer and the distributor is a sublease, not an assignment, because it extends for only two years of the remaining five years of the lease. As such, it is not covered by the lease provision that requires the owner’s permission before rights under the lease can be assigned.