SECURITY INTERESTS IN REAL PROPERTY

Question 1

3 Types of Security Interest

Answer 1

1. mortgage
2. deed of trust
3. land sale contract

Question 2

Equitable Mortgage (2)

Answer 2

1. Absolute deed by BORROWER

2. with separate promise of reconveyance by LENDER

Question 3

Sale Leaseback with Option to Purchase (2)

Answer 3

1. BORROWER delivers deed to LENDER

2. then BORROWER leases back property with option to purchase

Question 4

1. Deed of Trust (definition)

2. what happens if not paid?

Answer 4

1. given by the DEBTOR to a 3rd p TRUSTEE, who holds deed of trust until loan is paid in full
2. (i) trustee can obtain court oder for a foreclosure sale
   OR
   (ii) trustee can sell property himself at public auction

Question 5

RIGHT OF REDEMPTION

or

EQUITY OF REDEMPTION

Answer 5

debtor can redeem property AT ANY TIME right up until moment of foreclosure sale by paying (amount due plus interest) UNLESS mortgage includes “acceleration clause”

Question 6

Acceleration Clause

Answer 6

If included, Debtor must pay off the ENTIRE BALANCE to redeem property

Question 7

Land Sale Contract (installment)

Answer 7

refers to the arrangement where debtor signs promising to make payments to seller/lender

*seller keeps title until loan paid in full

Question 8

Waiver (right of redemption: mortgage or deed of trust)

Answer 8

CANNOT BE WAIVE in ORIGINAL but later be waived if SEPARATE CONSIDERATION

Question 9

Statutory Right of Redemption

Answer 9

1/2 states allow for AFTER foreclosure sale (6 mo-1 yr)

Question 10

Priorities of Payment on Multiple mortgages

Answer 10

Allocated based on COMMON LAW rule of “first in time, first in right” UNLESS changed by recording statute

Question 11

Voluntary Subordination

Answer 11

SR (earlier in time) may agree to subordinate to a JR (comes later in time)

Question 12

Purchase Money Mortgage

Answer 12

mortgage taken to BUY property

-receives priority over other mortgages executed PRIOR to PMM, even if recorded first

Question 13

Change in SR mortgage

Answer 13

M’or does anything to INCREASE a SR mortgage, the SR mortgage loses priority over JR to the extent of the change

Question 14

Foreclosure (SR vs JR)

Answer 14

Foreclosure wipes out all JRs (that came later), but does NOT wipe out SR (SR continues in place and buyer takes subject to SR)

Question 15

Protections to holders of JR mortgages

Answer 15

generally have the right to pay off any mortgage being foreclosed to keep their interest from being wiped out

1. notice
2. opportunity to bid

Question 16

Distribution of Proceeds from Foreclosure (4)

Answer 16

1. pay cost of foreclosure sale
2. pay off mortgage foreclosed on
3. pay JRs (in order of priority)
4. pay remaining to M’or

Question 17

Anti-Deficiency Statute

Answer 17

M’ee/C’or sue debtor personally for balance due on the note

Question 18

Forfeiture clause (3)

Answer 18

if debtor misses payment the seller can:

(i) cancel the contract
(ii) keep all movies paid to date AND
(iii) retake property

*seller limited to this remedy, cannot get damages or specific performance

Question 19

Due on Sales Clause

Answer 19

if the M’or transfer the property without M’ee consent, THE FULL AMOUNT OF LOAN becomes immediately due and payable

Question 20

Lateral Support (defintion)

Answer 20

Landowner has the right to have her land supported by adjoining landowners and strict liability results if land not supported

• even with use of due care
• if structure on land that caves in, ONLY IF the land would have caved regardless of structure there

Question 21

Subjacent Support (defintion) and (3)

Answer 21

surface owners have the right to have their land supported from the bottom and strict liability will result if the land not supported

1. mineral rights
2. legally severed
3. from surface rights

Question 22

Riparian rights (MAJORITY)

Answer 22

refers to property that borders lake or stream

DOMESTIC: may use ALL water for this purpose

NON(commercial/industrial): REASONABLE USE

Question 23

Prior Appropriation (MINORITY rule to riparian rights)

Answer 23

first person to make beneficial use of water

Question 24

Underground water (percolating or well water)

Answer 24

landowner entitled to reasonable use

use ON property, can’t export elsewhere

Question 25

Surface water (runoff or flood)

Answer 25

NATURAL FLOW: no changes , except reasonable means

COMMON ENEMY: can do whatever with floodwater, reasonable or not