Bar Essays

Question 1

Lease

Answer 1

The Texas Property Code defines a lease as any written or oral agreement between a landlord and a tenant that establishes or modifies the terms, conditions, rules, or other provisions regarding the use and occupancy of a dwelling.

Question 2

Landlord failure to make repairs

Answer 2

A landlord is liable to a tenant for failure to make repairs if all of the following have occurred: (i) the tenant has given the landlord notice to repair or remedy condition by sending the notice via certified mail, return receipt requested; (ii) the condition materially affects the physical health or safety of an ordinary tenant; (iii) the landlord has had a reasonable time to repair or remedy the condition after receiving the notice to repair; (iv) the landlord has not made a diligent effort to repair or remedy the condition after receiving the notice to repair; and (v) the tenant was not delinquent in the payment of rent at the time the notice was given.

Question 3

Rule of capture

Answer 3

Under the rule of capture, a landowner need not obtain any permit or other approval in order to drill a well and begin pumping groundwater from underneath his land. However, there are three limitations under the rule of capture: (i) a landowner may not maliciously take water for the sole purpose of injuring his neighbor; (ii) the landowner may not wantonly and willfully waste the water produced; and (iii) the landowner many not negligently drill or produce from a well in a manner that causes subsidence on a neighbor’s property.

Question 4

Easement

Answer 4

A grant of an easement may set out a right or duty in general terms. In these cases, courts often state that the agreement carries with it the implied right to carry on the stated usage in a manner that: (i) is reasonably necessary to fulfill the purposes of the easement, (ii) is convenient for the easement holder, and (iii) puts as little burden as possible on the owner of the servient estate.

Question 5

Automatice stay

Answer 5

On the filing of a petition in bankruptcy, voluntary or involuntary, under chapter 7, 11, or 13 of the Bankruptcy Code, all entities are automatically and immediately stayed or federally enjoined from taking any act or continuing any legal proceeding to attempt to collect the debt from the debtor or to enforce a lien against the debtor’s property. Acts taken in violation of the automatic stay are voidable and would therefore constitute a ground for setting aside the foreclosure sale.

Question 6

Notice of foreclosure

Answer 6

The TPC establishes the minimum notice that is required to be given regarding the foreclosure of liens against real property in Texas for the protection of the debtor. The time, date, and place of sale are all required to be included in the notice of the foreclosure sale. The date may only be the first Tuesday of the month following 21 days’ notice. The time of the sale must be between 10am and 4pm. However, the notice of the sale must also include a statement of the earliest time at which the sale will occur during the 10 to 4 parameters, and the sale must be conducted within three hours of the time stated in the notice. The statute does not require the notice to state the exact time of the sale. The notice must state that the sale will be conducted at the courthouse of the county where the property is located in the area designated by the county commissioners, and if no area has been designated, then the notice must designate the area in the courthouse where the sale of the property will take place.

Question 7

SOL on liens

Answer 7

Texas Civil Practice and Remedies Code provides a four-year limitations period for enforcement of liens against real estate. The limitations period begins to run on the date of the maturity of the underlying debt.

Question 8

SOL on fraud

Answer 8

The SOL on a seller’s cause of action for fraud based on the buyer’s failure to disclose material facts does not begin to run until the fraud is discovered by the seller or should have been discovered in the exercise of reasonable diligence.

Question 9

Fraud

Answer 9

Actionable fraud justifying the cancellation of a deed consists of either a false representation of a material fact or of a promise to perform an action in the future, if the promise is material and made with the present intention not to perform. In addition, the one making the representation must either have known that the representation was false when it was made or have made it recklessly, without any knowledge of its trust, as a positive assertion. The false representation or promise must have been made with the intent that it should be acted upon by the other party. That party must have acted in reliance on the statement or promise, and as a result, have suffered injury.

Question 10

Remedy for fraud

Answer 10

Under either the common law or statutory theory for fraud in a real estate transaction, a defrauded person can recover actual damages. Typically, this means measuring the harm resulting from the fraud by either the “benefit of the bargain” method or the “out of pocket” rule, then add any special damages for consequential but foreseeable harm. However, the defrauded party may elect the equitable remedy of rescission instead of damages.

Question 11

Option contract

Answer 11

An option contract is an agreement by which the owner of property gives another the privilege or right to purchase the property at a fixed price, on specified terms, and within the time specified in the contract.

Question 12

Delivery

Answer 12

The requirement of delivery has been interpreted to mean that the grantor relinquished dominion and control over the deed with the intent to affect a conveyance of the property.

Question 13

Possibility of reverter

Answer 13

A possibility of reverter is what the grantor owns as a future interest in a determinable fee grant; it is the grantor’s right to fee ownership in the real property reverting to him if the condition terminating the determinable fee occurs. A possibility of reverter is an interest in real property that may be separately sold and conveyed without affecting the underlying fee simple determinable property interest. The possibility of reverter only becomes a present possessory interest, however, on termination of the applicable condition.

Question 14

Holder of vendor’s lien

Answer 14

The holder of a vendor’s lien and superior title in Texas does not acquire any title by virtue of the vendor’s lien but merely holds a lien to secure the debt payment of the note.

Question 15

Conveyance of one co-tenant

Answer 15

A conveyance by one co-tenant without the consent of the other co-tenant only conveys such interest as the conveying co-tenant may have.

Question 16

Adverse possession

Answer 16

For any adverse possession claim, the claimant must prove: (i) a visible appropriation and possession of the land, sufficient to give notice to the record title holder, that (ii) is exclusive, (iii) is under a claim of right hostile to the title holder’s claim, and (iv) continues for the duration specified in the applicable statute.

Question 17

Open mine doctrine

Answer 17

The open mine doctrine applies when an oil and gas lease exists on a mineral estate at the time a life estate is created, even if the lease has no producing wells on it at that time. Under the open mine doctrine, depletion of natural resources constitutes waste unless consumption of such resources constitutes normal use of the land, as in the case of a life estate in coal mine or a granite quarry.

Question 18

Implied easement based on prior use

Answer 18

The elements to establish an implied easement based on prior use are: (i) unity of ownership of the land until severed into the dominant and servient tracts; (ii) an apparent, continuous use of the servient property at the time of severance; and (iii) the use of the servient property was necessary to the use and enjoyment of the dominant estate.

Question 19

RRC approval of subdivision plot

Answer 19

A surface owner has the right to seek approval from the RRC approval of a subdivision plot of the surface for any tract under 640 acres in size for residential, commercial, or industrial uses. The RRC cannot approve the surface owner’s application for such a “qualified subdivision” unless the surface owner provides at least two acres of land for a well site for every 80 acres inside the subdivision and also provides road and pipeline easements to and from the well sites.

Question 20

Duty to restore surface

Answer 20

Under the oil and gas lease, the oil company has no duty to restore the surface that it is properly using.

Question 21

Prevention of entering

Answer 21

In a commercial lease situation, the TPC provides that a landlord may intentionally prevent a tenant who is delinquent in paying at least a part of the rent from entering the premises by changing the door locks. However, such right on the part of the landlord is restricted – upon changing the door locks, the landlord must place a written notice on the tenant’s front door stating the name and address or telephone number of the individual or company where the new key can be obtained. The new key must be provided only during the tenant’s regular business hours, and only if the tenant pays the delinquent rent.

A tenant who has been wrongfully locked out may either recover possession of the premises or terminate the lease and recover from the landlord an amount equal to the sum of the tenant’s actual damages, one month’s rent, or $500, whichever is greater; reasonable attorney’s fees; court costs, less any delinquent rents or other sums for which the tenant is liable to the landlord.

Question 22

Conveyance in oil and gas lease

Answer 22

An oil and gas lease conveys a deed to a fee simple determinable. The oil company (lessee) has the exclusive right to explore, develop, and produce from the property, as well as the obligation to pay the costs of production. The Landowner retains the rights of both the mineral interest owner and the lessor.

Question 23

Revival

Answer 23

If a lessee makes a late rental payment due to a good faith mistake or negligence and the lessor accepts it, Texas courts will hold that the lessor has revived the lease under a loose theory of estoppel.

Question 24

Temporary cessation doctrine

Answer 24

The temporary cessation doctrine states once actual production in paying quantities has been established, a “sudden stoppage of the well or mechanical breakdown of equipment, will not terminate the lease as long as the lessee acts diligently to restore production in a reasonable amount of time.

Question 25

Homestead

Answer 25

A homestead is essentially the land and improvements thereon that serve as a person’s primary residence. The Texas Constitution provides that a single adult or family can claim one homestead in either an urban or rural setting. For a single adult, the options are an urban homestead of up to 10 acres or a rural homestead of up to 100 acres. For the urban homestead, if there are multiple parcels of land they must be contiguous. In the rural setting the parcels making up the acre are not required to be contiguous. However, regardless of the urban or rural character, the person claiming homestead must reside on at least part and would have to use additional parcels in support of himself or his family.

Question 26

Refunding security deposit

Answer 26

The TPC requires a landlord to refund a security deposit to the tenant or give the tenant a written description of damages and charges within 30 days after the tenant surrenders the premises. However, the landlord’s obligation upon the tenant giving the landlord a written statement of the tenant’s forwarding address for purpose of refunding the security deposit. Failure to provide a forwarding address does not, by itself, result in a forfeiture of the right to a refund of the security deposit or to receive a description of damages and charges.

Question 27

Security devices

Answer 27

A landlord has a duty to equip a residential dwelling with security devices even in the absence of a request by the tenant. A doorknob lock or keyed dead bolt on an exterior door is considered a security device under the statute. Furthermore, the landlord must rekey such security devices not later than the seventh day after each tenant turnover date.

Question 28

Nonjudicial foreclosure process

Answer 28

The first step in triggering a non-judicial foreclosure process is that the debtor be in default. Once it is established that the debtor is in default, the next step in the process is to provide a notice of default with time to cure. For foreclosure of a lien on real property used as the debtor’s residence, the TPC requires that the lender provide notice of default in writing to the debtor allowing at least 20 days to cure the default. The notice must be sent by certified mail to all people obligated on the debt. If the Deed of Trust allows more than twenty days to cure, then the provisions of the Deed of Trust will be followed.

Question 29

Seller's disclosure form

Answer 29

A Seller’s Disclosure form is not required to be completed by a mortgagee or a beneficiary under a deed of trust who has acquired the real property at a sale conducted pursuant to a power of sale under a deed of trust or a sale pursuant to a court-ordered foreclosure or has acquired the real property by a deed in lieu of foreclosure.

Question 30

BFP

Answer 30

A person who pays valuable consideration without notice and in good faith is known as a bona fide purchaser. To be a BFP, the party must show that, before he or she had actual or constructive notice of the recoding of the prior instrument, there was a delivery of a deed and payment of the purchase price. A party can also be a bona fide mortgagee.

Question 31

IRS federal tax lien priority

Answer 31

IRS federal tax liens have priority over other liens, including consensual deed of trust liens, on a taxpayer’s property only if the IRS lien was recorded prior in time to the deed of trust lien on the property involved in the nonjudicial foreclosure proceeding. A purchaser at a foreclosure sale succeeds to the position of the mortgagee in relation to the federal tax liens.

Question 32

Constitutional and mechanic's lien

Answer 32

The constitutional lien arises if there is privity of contract between the contractor and the owner. A constitutional mechanic’s and materialman’s lien comes into existence regardless of whether the claimant has complied with the procedures required for perfection of a statutory lien. In order to obtain a perfected mechanic’s and materialman’s lien on the property, an original contractor must file a proper lien affidavit with the county clerk of the county where the property is located no later than the 15th day of the fourth calendar month after the day on which the indebtedness accrues. If the claim arises from a residential construction project, the affidavit must be filed not later than the 15th day of the third calendar month after the day on which the indebtedness accrues. A copy of the affidavit must also be sent by registered or certified mail to the owner or reputed owner of the property at their last known business or residence address within 5 days after the date the affidavit is filed with the county clerk. The contractor is entitled to rely on representations of ownership made by the parties with whom the contractor deals, and need not search title record to establish actual ownership.

Question 33

Constructive notice

Answer 33

Generally, a purchaser is charged with constructive notice of every duly recorded instrument in the purchaser’s chain of title. If the facts recited in the instruments are sufficient to put a reasonably prudent person on inquiry as to the rights or claim of another person to the property, the purchaser is also charged with notice of those facts that would be obtained by a reasonably diligent inquiry.

Question 34

Forged deed

Answer 34

A forged deed is void from the outset to those not signing it. Therefore, title to land cannot pass under it.

Question 35

Pooled units

Answer 35

The ordinary rule is that the establishment of production in paying quantities on any part of a pooled unit is sufficient to extend the lease into the secondary term for all lands covered by the leases.

Question 36

Pugh clauses

Answer 36

Landowners often insert Pugh clauses to prevent the lessee from tying up all of the land covered by the lease by pooling a small portion of the leased property.

Question 37

General warranty deed

Answer 37

A general warranty clause obligates the grantor to indemnify the grantee for loss caused by any claim against title, whether a claim of an ownership interest or a lien or other encumbrance and regardless of when or under whom the claim arose.

Question 38

"grant" "convey"

Answer 38

Historically, two implied warranties were created by the use of the terms “grant” or “convey” in a conveyance: a warranty of title and a warranty of no encumbrances. The warranty of title assured the grantee that no third party had a superior claim of title to the interest or estate conveyed by the grantor. The warranty of no encumbrances assured the grantee that at the time of the conveyance, the interest or estate conveyed by the grantor was free from all encumbrances. The Texas Property Code now codifies these common law warranties so that the use of the terms “grant” or “convey” in the granting clause of a deed will automatically include these warranties without the inclusion of an express warranty clause. A deed containing an express warranty clause creates two sets of warranties: (i) express warranties arising by virtue of the warranty provision, and (ii) implied warranties that arise by virtue of the words “grant” or “convey.”

Question 39

Homestead

Answer 39

If it is located within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision; and served by police protection, paid or volunteered fire protection, and at least three of the following services provided by the municipality or under a contract to a municipality: electric, natural gas, sewer, storm sewer, or water. All homesteads not meeting this statutory test are considered rural. A family can claim 200 acres not in a city, town, or village used for the purposes of a home together with improvements. If its just a single adult: 100 acres.

Question 40

Recordable

Answer 40

In regard to recording deeds so as to give notice of such conveyance of real property to third parties, the TPC requires that the deed must be acknowledged, sworn to, or proved in order to be recorded in the real property records.

Question 41

Home Equity Loan

Answer 41

The Texas Constitution allows a person to establish a homestead, thereby exempting certain real property from forced sale by general creditors. This is a special protection not extended to other types of property. The exemption provides protection of the homestead from all liens except those that are constitutionally permitted. A homestead may be encumbered with a lien securing a home equity loan if the property has not been designated agricultural use for property tax purposes. Home equity loans in general are authorized only on satisfaction of a number of significant constitutional safeguards and restrictions aimed at protecting homestead owners. These restrictions are nonseverable and nonwaivable. Each must be satisfied to create a valid lien. A Home Equity Line of Credit is a form of open-end account that may be debited from time to time, under which credit may be extended from time to time, and under which the borrower requests advances, repays money, and reborrows money. HELOC home equity loans are allowed if the loan meets additional constitutional requirements.