MBE Real Property

Question 1

Remainder

Answer 1

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 or contingent.

Question 2

Vested remainder

Answer 2

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

Question 3

Contingent remainder

Answer 3

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”).

Question 4

Is personal property a chattel or a fixture?

Answer 4

If tangible personal property is attached to real property and intended to remain attached to the land 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), it’s a fixture. If any of these elements are not met (attached, intended to remain attached, use) it’s chattel. 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.

Question 5

Nuisance

Answer 5

A nuisance can be either public (interfering with a right common to the general public) OR private (interfering with a private property right—as alleged here).

Question 6

Private nuisance

Answer 6

Liability for private nuisance arises when the defendant’s interference with the plaintiff’s use and enjoyment of his/her property is both:
- substantial – offensive, annoying, or intolerable to a normal person in the community and
- unreasonable – the severity of the plaintiff’s harm outweighs the utility of the defendant’s conduct.
Anyone with possessory rights in the affected property may bring a nuisance claim

Question 7

Does execution of a lease sever a joint tenancy?

Answer 7

There is a split among jurisdictions with respect to joint tenancies when one joint tenant leases his interest. Some jurisdictions hold that the lease destroys the unity of interest and thus severs the joint tenancy, while other jurisdictions believe that the lease merely temporarily suspends the joint tenancy, which resumes upon expiration of the lease.

Question 8

Rights of co-tenants in a tenancy in common

Answer 8

Each co-tenant holds an undivided interest with unrestricted rights to possess the whole property, regardless of the size of the co-tenant’s interest. Each tenant can unilaterally transfer, devise, mortgage, or lease his interest to a third party, without affecting the interest of the other tenants.
During the lease term, co-tenants lease their interests to the leasing tenant, who has the same rights with respect to the property as the co-tenant and holds an undivided interest with unrestricted rights to the whole property.

Question 9

If one co-tenant leases their interest in property, are the other co-tenants entitled to the rental income?

Answer 9

Yes. A co-tenant must account to other co-tenants for rent received from third parties, but can deduct operating expenses, including necessary repairs, when calculating net proceeds. Third-party rents are divided based on the ownership interest of each tenant.

Question 10

What happens when a co-tenant in a joint tenancy who leases his interests dies?

Answer 10

Assuming the lease did not sever the joint tenancy, a joint tenant’s property passes automatically to the remaining joint tenants upon their death due to the right of survivorship.
The lease is then terminated.

Question 11

Easement by implication

Answer 11

If the owner of two parcels of land previously used one parcel to benefit the other, then the court may find that, upon the transfer of one parcel, the parties intended the use to continue if that use was continuous, apparent or known, and reasonably necessary to the dominant land’s use and enjoyment (as distinguished from an easement by necessity, which requires strict necessity).

Question 11

Termination of an easement by merger

Answer 11

An easement is terminated if the owner of the dominant or servient estate acquires fee title to the other estate. The easement is said to “merge” into the title. The merger of property interests results in the extinguishment of the property right.

Question 12

When does a future advances mortgage have priority over later mortgages?

Answer 12

When multiple interests must be paid out of the proceeds of a foreclosure sale, generally, the earliest mortgage placed on the property has priority over the other interests. Further, obligatory payments under a senior future-advances mortgage paid out after a junior lender remits its loan amount and records its lien have priority over amounts loaned by the junior lender.

Question 13

Required notice to other mortgagees when mortgagee seeks foreclosure conducted by a judicially supervised sale?

Answer 13

Under the method of foreclosure conducted by a judicially supervised sale, the foreclosing mortgagee:
- must give notice to the holders of any junior interests in the property so that they can participate or send a representative - otherwise, the junior-interest holder’s interest will remain after the sale
- may, but need not, join others who have an interest in the property (e.g., senior-mortgage holder) or are liable on the debt (e.g., guarantor) as proper, but not necessary parties. That is because a valid foreclosure only eliminates interests in the foreclosed property that are junior to the interest being foreclosed. It has no effect on any other interests.

Question 14

The doctrine of merger for land-sale contracts

Answer 14

TLDR: If you want to enforce a promise in a purchase contract, make sure it’s written in 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. However, obligations that are collateral to and independent of the conveyance (e.g., the seller’s obligation to remove his/her personal property prior to closing) are usually not subject to the doctrine of merger.

Question 15

Due-on-sale clause in a mortgage loan agreement

Answer 15

When a due-on-sale clause appears in a mortgage loan agreement, the mortgagee (the thrift institution) can demand payment in full of the remaining mortgage debt if the mortgagor (the homeowner) transfers the mortgaged property without the mortgagee’s consent. If the mortgagor cannot pay, then the mortgagee can foreclose on the mortgaged property to satisfy the unpaid debt.

Question 16

Common exceptions to enforceability of a due on sale clause affecting residential property

Answer 16

• Devise, descent, or transfer to joint tenant upon death
• Transfer to spouse or child
• Transfer to ex-spouse in divorce
• Transfer to borrower’s living trust
• Creation of subordinate lien without occupancy rights
• Granting leasehold interest of less than 3 years without option to purchase

Question 17

Express easement

Answer 17

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.

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.

Question 18

fee simple subject to a condition subsequent

Answer 18

A fee simple subject to a condition subsequent (FSSCS) is created through specific conditional language—e.g., “but if,” “unless,” “provided that.” Upon the occurrence of the condition, the grantor (or his/her successor in interest) has the right to enter and terminate the estate if the grantor explicitly retained this right of entry* in the conveyance. In most jurisdictions, the right of entry is freely alienable during life, and it is devisable by will, or, alternatively, descendible through intestate succession upon death.

Question 19

What interests are eliminated when property subject to mortgage is sold at foreclosure sale?

Answer 19

• the mortgagor’s interest in the property
• the mortgage interest being foreclosed upon
• any junior interests attached to the property.
  Note that senior interests are generally not affected by a foreclosure sale and will remain attached to the property

Question 20

Can an assignee-landlord enforce promises in a lease?

Answer 20

Yes, unless the lease states otherwise, a landlord may assign his/her rights under the lease to a third party (i.e., assignee-landlord) without the tenant’s consent. The assignee-landlord can then enforce covenants (i.e., promises) in the lease that run with the land.* A covenant runs with the land when:
(1) the original parties intended to bind successors in interest (e.g., assignee-landlord)
(2) the covenant touches and concerns the land—i.e., affects the land’s use or value and
(3) the assignee-landlord is in privity of estate with the tenant—i.e., a mutual or successive relationship in the same property interest.
When a lease covenant does not run with the land, the original landlord retains the right to enforce it.

Question 21

Application of RAP to right of first refusal

Answer 21

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. 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.

Question 22

Seller’s duty to disclose - modern (majority) rule

Answer 22

In a majority of jurisdictions (including this one), the seller of a residence has a duty to disclose all material physical defects that are known to the seller and cannot be reasonably discovered by the buyer. A defect is material if it:
(1) substantially affects the value of the residence
(2) impacts the health or safety of a resident or
(3) affects the desirability of the residence to the buyer.
If the seller fails to make such disclosures, then the buyer may rescind the sale or seek damages.

Question 23

Doctrine of equitable conversion

Answer 23

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.

Question 24

Can someone who assumes a mortgage assert the same defenses (i.e., duress) against enforcement of the mortgage as the person who gave them the property?

Answer 24

Yes, if the property is transferred to a donee (gift). No, if transferred to a purchaser and the mortgage is reflected in the purchase price. A mortgage is subject to the same defenses (e.g., mistake, duress, fraud) as the underlying obligation or debt secured by that mortgage. So when mortgaged property is transferred to a donee, the donee is entitled to assert the donor-mortgagor's defenses against the mortgagee-lender. However, a purchaser who assumes an existing mortgage obligation as part of the purchase price may not assert the donor-mortgagor's defenses. The reason is that the purchaser would be unjustly enriched by being permitted to avoid the assumed obligation.

Question 25

The doctrine of tacking - proving continuous ownership to acquire title through adverse possession

Answer 25

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). If the successive adverse possessor is using the property for their own benefit, not pursuant to an agreement with the prior possessor (i.e., renting adjacent property from a prior possessor and adversely possessing the same property wouldn't allow the renter/successive possessor to tack the prior possessor/landlord's years bc they're separate possessions - no privity. The contract is to rent the owner's space, not to adversely possess).

Question 26

Uniform Vendor and Purchaser Risk Act

Answer 26

Minority rule for which party assumes risk of loss during the executory period (the period between the execution of the real-estate contract and closing). Under this act, the risk of loss remains with the seller until the buyer takes possession of or receives legal title to the property. Note: most jurisdictions follow the logic of the doctrine of equitable conversion and shift the risk of loss to the buyer, regardless of whether they take possession

Question 27

Mortgage alternatives

Answer 27

Absolute deed Deed of trust Installment land contract Sale-leaseback Equitable vendor's lien

Question 28

Equitable mortgage established by an absolute deed

Answer 28

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.

Question 29

Deed of trust (mortgage alternative)

Answer 29

Debtor gives deed of trust to third-party trustee as collateral for debt, & creditor can instruct trustee to foreclose upon default Note: treat the same as mortgage on MEE

Question 30

Installment land contract (mortgage alternative)

Answer 30

Debtor agrees to buy land through installment payments & gets immediate possession, but seller keeps legal title until paid in full

Question 31

Sale-leaseback (mortgage alternative)

Answer 31

Seller leases property from buyer immediately after sale, & seller's rental payments function as repayments on loan

Question 32

Equitable vendor's lien (mortgage alternative)

Answer 32

Seller finances buyer's purchase with equitable vendor's lien when seller transfers title to buyer but purchase price not fully paid

Question 33

When is a deed void?

Answer 33

A deed is void if: (1) the grantor's signature on the deed is forged (2) the deed itself is forged—i.e., falsely made or materially altered with the intent to defraud or (3) the grantor is deceived about the nature of the executed document (e.g., when the grantor believes that he/she is signing something other than a deed). A void deed is invalid at its inception and conveys no title to the grantee. As a result, a void deed is unenforceable even if it is relied upon by a bona fide purchaser—i.e., one who purchases a property interest without notice of another's prior interest in the property.

Question 34

When is a deed voidable?

Answer 34

Transfer of deed is valid until set aside & may be enforced by bona fide purchaser if: (1) it's procured by fraudulent inducement or (2) either party lacks capacity to execute deed (eg, infancy, lack of capacity)

Question 35

Rule Against Perpetuities

Answer 35

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 (i.e., validating life) when the interest was created. Common law = interest void Majority rule (modern approach) = wait & see for 90 years

Question 36

Contingent future interests subject to RAP

Answer 36

- Contingent remainder - Vested remainder subject to open - Executory interest - Power of appointment - Right of first refusal - Option

Question 37

Fair Housing Act

Answer 37

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). Prohibits discriminatory actions in sale/renting of dwelling based on race, color, religion, sex, handicap, national origin, or familial status—including: (1) refusing bona fide offer (2) discriminating in terms, conditions, privileges, or services of purchase/rental (3) advertising preference for or discrimination against buyer/renter (4) falsely representing dwelling's availability for inspection, sale, or rental (5) inducing sale/renting with discriminatory representations about neighborhood (5) denying reasonable modifications to accommodate handicap at occupant's expense

Question 38

Fair Housing Act exceptions

Answer 38

Act does not apply to: (1) religious organizations (2) private clubs that incidentally provide lodging to members (3) familial status for senior housing (4) owner of ≤ 3 single-family dwellings* (4) owner-occupied dwellings with ≤ 4 units* (5) 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.

Question 39

Duty to repair and maintain easement

Answer 39

Easement holder must repair & maintain easement to extent necessary to: (1) prevent unreasonable interference with enjoyment of servient estate (2) protect servient-estate owner from liability to third parties Duty to contribute: Other easement holders and/or servient-estate owner who share easement must contribute to reasonable costs of repairs & maintenance

Question 40

Liquidated damages in real-estate contracts

Answer 40

Real-estate contracts usually require the buyer to make a deposit of a portion of the purchase price (i.e., an "earnest money" deposit). A liquidated damages clause is also often included, which allows the seller to retain the buyer's deposit if the buyer breaches the contract and refuses to purchase the property. This clause is generally enforceable when the amount of liquidated damages is reasonable—e.g., no more than 10 percent of the purchase price. But when evaluating reasonableness, courts may also consider: (1) the sophistication of the buyer (2) the nature of the transaction (commercial v. residential) and (3) whether the seller suffered an actual loss (if not, courts may refuse to enforce the clause).

Question 41

What happens when the mortgagor abandons the mortgaged property?

Answer 41

Regardless of the applicable mortgage theory (lien or title), the mortgagee is entitled to take possession of the property. A mortgagee who does so incurs liability as if they were the owner (e.g., tort liability to anyone injured on the property).

Question 42

fixture

Answer 42

A fixture is tangible personal property attached to real property in such a manner that it is treated as part of the real property when determining its ownership (e.g., the sculpture). However, absent an agreement to the contrary, a fixture that the tenant has attached to the leased property may be removed if: (1) the leased property can be and is restored to its former condition and (2) the removal and the restoration are made within a reasonable time.

Question 43

What is a reasonable time to remove a fixture?

Answer 43

A reasonable time for removal generally does not extend beyond the termination of the lease. However, it does so when (1) the termination was not due to a breach by the tenant and (2) the date of termination was not foreseeable by the tenant sufficiently far enough in advance to permit removal before the lease terminates

Question 44

Rule in Shelley's Case

Answer 44

A present interest in the grantee and contingent remainders in the grantee's heirs becomes a fee simple interest in the grantee

Question 45

Can co-tenants in common encumber their separate interests in property?

Answer 45

Yes, co-tenants can freely encumber their separate interests in property without consent of the other tenants (except in a tenancy by the entirety). This means that a tenant can use their share of the property to secure repayment of a debt, and creditors will only have a lien on that tenant's property interest.

Question 46

What happens to a lien on a co-tenant's property interest in case of partition?

Answer 46

When a co-tenancy is divided in an action for partition by sale, any lien on a tenant's property interest will stay attached to that interest if the creditor is not a party to the action. But if the creditor is a party, then the lien will attach to the sale proceeds attributable to that interest.

Question 47

Lapse (doctrine affecting conveyance by will)

Answer 47

Under the common-law doctrine of lapse, a devise of real property will fail if the beneficiary dies before the testator and no alternate beneficiary is named—unless the testator indicates a clear intent that the devise is to survive the beneficiary's death. If the devise fails, the lapsed gift will become part of the residuary estate. However, all jurisdictions have anti-lapse statutes, which prevent a gift from lapsing when: (1) the gift is made to parties specified by the statute (usually the testator's immediate relatives)* and (2) those parties leave children or other descendants (i.e., issue) who survive the testator. *In most jurisdictions, the anti-lapse statute is limited to grandparents or a descendant of a grandparent of the testator (e.g., aunts, uncles, parents, siblings, children).

Question 48

Exoneration (doctrine affecting conveyance by will)

Answer 48

Allows beneficiary of specifically devised real property to use estate's remaining assets to pay off any encumbrances on that property

Question 49

Ademption (doctrine affecting conveyance by will)

Answer 49

Causes devise to fail by either: (1) extinction: specifically devised property not owned by testator (or destroyed or fundamentally changed) at death (2) satisfaction: beneficiary received devised property (or other asset intended to satisfy devise) during testator's life

Question 50

Abatement (doctrine affecting conveyance by will)

Answer 50

(1) reduces devises that cannot be satisfied by assets remaining after testator's debts are paid (2) residuary devises abated first, followed by general & then specific devises

Question 51

Real covenants: elements for the benefit to run with the land

Answer 51

writing, intent to run, touch and concern, limited vertical privity no notice required

Question 52

Real covenants: elements for the burden to run with the land

Answer 52

writing, intent to run, touch and concern, horizontal and vertical privity, notice

Question 53

Easement appurtenant

Answer 53

An easement appurtenant is a nonpossessory right to use another's land (servient estate) that benefits the easement holder's land (dominant estate). Unless otherwise stated, an easement appurtenant cannot be used for the benefit of property other than the dominant estate. It doesn't matter if the same person or corporation owns both properties because the easement appurtenant benefits the property, not the person. If a person subsequently acquires property after an easement is granted, they can't use the easement for the benefit of the new property.

Question 54

Effect of notice recording act

Answer 54

subsequent BFP without notice of earlier property interest will prevail, even if not recorded

Question 55

Effect of race recording act

Answer 55

interest holder who records first will prevail

Question 56

effect of race-notice recording act

Answer 56

subsequent BFP (1) without notice of earlier property interest (2) who records first will prevail Must have both or the prior owner wins

Question 57

Is a right of first refusal subject to RAP?

Answer 57

Yes unless it's granted in a lease. Under the common-law Rule Against Perpetuities (RAP), specific future interests are valid only if they must vest or fail by the end of a life in being plus 21 years. A right of first refusal is one type of future interest that is subject to common-law RAP unless the right was granted in a lease to a current leasehold tenant.

Question 58

Landlord's ability to sue for rent as remedy for tenant's failure to pay rent

Answer 58

(1) can sue for rent as it comes due, several accrued rents, or entire amount at end of lease term (2) Majority rule: cannot recover future rents unless lease contains acceleration clause (3) minority rule: can recover future rents minus (1) reasonable rental value of premises for remainder of lease or (2) actual rent collected on re-rental

Question 59

Landlord's ability to terminate & evict as remedy for tenant's failure to pay rent

Answer 59

(1) majority rule: must give tenant notice & opportunity to cure before terminating lease or evicting tenant (2) minority (common law) rule: cannot evict tenant for failure to pay rent

Question 60

termination of easement

Answer 60

Easements can terminate by written release, prescription, estoppel, condemnation, and abandonment. Neither a statement of intent to abandon nor non-use can extinguish an easement absent affirmative conduct. An easement can only be terminated based on a theory of abandonment if the owner of the easement acts in an affirmative way that clearly shows intent to relinquish the easement right.

Question 61

priority of interests under common law

Answer 61

Unless a recording act governs, the common law rule of “first in time, first in right” generally applies to determine priorities.

Question 62

wild deed

Answer 62

A recorded deed that is not within the chain of title is a “wild deed.”