Flashcards in Property 2 - Competing Claimants Deck (84):
Adverse Possession - Definition
Legally sanctioned stealing of title to land away from the rightful owner. The law favors land use.
Components of Adverse Possession
Adverse Possession - Physical Component
Must actually, openly, notoriously, and exclusively occupy the property. You must occupy in a way that could put the true owner on notice of your adverse possession if they bothered to check, can't hide it.
(Minority rule - you have to pay taxes on the land too.)
Adverse Possession - Mental Component
Must have hostile intent. (Aka intent that is adverse to the true owner.) 2 ways to satisfy:
(1) Claim of Right - AP claims that he's the owner of the land.
(2) Color of Title - AP enters on the land under a belief that he has received a good deed to the property but that belief is incorrect.
Adverse Possession - Permission
Permission to be on the land will always destroy hostile intent.
But mere knowledge does not imply permission.
Adverse Possession - Co-Tenancy
Only time one Co-T can Ap the property is if there has been an ouster. A says to B, 'don't set food on this land' and then A occupies the land for the statutory period, then AP works.
Hostile Intent - Split of Authority
Majority - any encroachment, even an innocent one, is sufficient for hostile intent.
Minority - an innocent encroachment will not suffice, must be shown that the encroachment was willful, intentional, or would have been had the adverse possessor known the true facts.
Adverse Possession - Time Component
Has to possess the land continuously for the statutory period.
Common law was 20 years, nowadays ever state has a different statutory period. Continuously is a question of fact (i.e. mountain resorts are normally only used 6 months out of the year)
Adverse Possession - Tacking
Combines AP periods to meet the statutory requirement. There must be some transfer of interest from one AP to the other.
Adverse Possession - Scope
General can only claim that portion of the land actually occupied. EXCEPTION: color of title situation, the AP occupies a significant portion of the land then the end of the AP period, the AP can claim the entire parcel described in the flawed deed, not just the portion occupied.
AP only gets whatever the true owner had. If true owner sold sub-surface rights, AP doesn't get them.
Adverse Possession - Future Interests
"A to B for life, remainder to C." B has life estate, but during B's life he chooses not to use the property, an AP comes and AP's it against B. He only acquires B's life estate but cannot get the remainder interest of C.
Adverse Possession - Disability
Disability can suspend the running of the statute of limitations. Disability only counts if it exists at the time the AP commences, and AP period will begin once the disability ends.
Disabilities in the majority of jurisdictions include:
(1) Minority - if the true owner is a minor.
(2) Insanity - if the true owner is insane.
(3) Imprisonment - if the true owner is in prison.
Rights of Adverse Possessor and True Owner
(1) Up until the time the AP period has run, true owner is still the owner and can have the AP removed from the land and sue for damages.
(2) As soon as statute time runs, AP's ownership relates back to the date of entry and is now the true owner of the land as to everyone else.
Land Sale Contract Analysis
X ---- Closing ---- Y
X is the date on which the land sale contract was formed.
Closing is the date which the seller hands over the deed and the buyer hands over the money.
Y is sometime after the date of closing.
When a land sale contract is formed, there is a bifurcation of title:
(1) equitable title - passes to the buyer at the point the K is formed.
(2) legal title - remains with the seller until the date of closing.
Risk of Loss - Majority Approach
Risk of loss follows equitable title. Buyer has risk of loss between contract and closing.
Risk of Loss - Uniform Vendor and Purchaser Risk Act
Risk of loss doesn't follow equitable title. Remains with seller until:
(1) there has been a change of possession of the property; or
(2) Legal title has been transferred to the buyer (closing)
Title that is reasonably free from defect. Implied into every land sale contract unless expressly stated otherwise, is a promise that the seller will deliver marketable title to the buyer.
Marketable Title - Defects
(1) Encumbrances e.g. unpaid mortgaged or lien.
(2) Easement or restriction that reduces the use and enjoyment of the land.
(3) Title acquired by adverse possession. The only was an AP can get marketable title is to get a judicial decree that they are the true owner of the land.
(4) An existing zoning or other statutory violation.
Marketable title - Timing
Only manifests itself at the time of closing. Don't have to have marketable title at the time of contract as long as they get it by closing date.
Majority of jrdx allow seller to arrange that a portion of the purchase price is to be used to remove a cloud on title, thereby making it marketable. The buyer MUST allow the seller to do this.
On the closing of the deal, the seller hands the deed to the buyer, and the land sale contract merges into that deed. So if we're at some point after the deal has closed and the buyer discovers a problem, the buyer can't sue on the contract because the K has merged into the deed; can only sue on the deed.
The buyer is screwed. A quitclaim deed is an as-is deed.
Buyer has the possibility of a suit. A warranty deed contains certain covenants of title. The buyer can sue for breach of those covenants of title.
General Warranty Deed
Contains all 6 covenants of title. Covers any problems that arose during all previous owners of the property.
Special Warranty Deed
Only covers problems that arose during the ownership of the grantor.
6 Covenants of Title
Present Covenants (run with land - breach must have occurred on the date of closing)
(1) Seisin - implied promise by the grantor that he actually does own the property.
(2) Right to Convey - implied promise by grantor that he has right to convey the property.
(3) Encumbrances - implied promise that there are no encumbrances on this property.
Future Covenants (Run with land, breach can be on closing or after)
(4) Quiet Enjoyment - implied promise that grantee will not be disturbed by a 3rd party asserting title to the property.
(5) Warranty - implied promise that the grantor will defend the grantee against any such third party claims.
(6) Further Assurances - implied promise that the grantor will do anything reasonably necessary to perfect the grantee's title
Competing Claimants - STRATEGY
Take potential claimants in chronological order and establish their claims to the property. Then take subsequent claimants and see if they can take title away via: adverse possession; land sale contract; conveyance.
3 Requirements for Conveyance of Real Property by Deed
1. Must be in writing
2. Delivery of the deed
3. Acceptance by the buyer
4 Requirements for a Valid Deed
1. An adequate description of the parties.
2. Words indicating present intent to transfer.
3. An adequate description of the property to be transferred.
4. Signature of the grantor.
Delivery of a deed
Delivery exists if the grantor has the present intent that the property should transfer to the grantee. (Doesn't have to be physically delivered.)
3 Types of Delivery of a Deed
1. Give the deed to a grantee. (Creates presumption of delivery that can be rebutted by extrinsic evidence that shows the grantor did not intend a present transfer of the property under any circumstance.)
2. Hold on to the deed an keep it. (Creates a presumption of no delivery that can be rebutted by extrinsic evidence that shows the grantor did intend a present transfer to the grantee.)
3. Hand the deed to a third party e.g. escrow. (The effective date of the transfer relates back to the date the grantor handed the deed to the 3rd party.)
Delivery of a Deed w/ Conditions
The more conditions placed on the conveyance, the more likely the conveyance is to fail. Courts will generally allow 1 condition and still allow relation back, multiple conditions the court is less likely to relate back.
Grantor gives the deed to a 3rd party and says give this deed to grantee when I die. Generally, nothing takes precedence of will except JT, so here the courts say that when grantor hands deed to the 3rd party, he's creating a life estate in himself and giving the remainder to the grantee.
Grantor of deed expressly retains right to reclaim the deed from the 3rd party holder
Defeats the relation back doctrine. The grantor must expressly reserve that right.
Acceptance of Deed by Buyer
So long as the conveyance is beneficial to the grantee, acceptance is presumed. If grantee refuses to accept, it will negate the conveyance, but it has to be an express refusal.
3 Types of Recording Acts
1. Race Statute
2. Notice Statute
3. Race-Notice Statute
First person to record.
Bona Fide Purchaser get it.
An unrecorded conveyance is invalid against a subsequent BFP who records first.
Bona Fide Purchaser
One who pays value for the property and takes without notice of competing claims.
BFP - Paying Value
Don't have to pay full market value for the property. Only means you must pay some substantial amount that is more than nominal consideration.
BFP - Mortgagees
A mortgagee is deemed to have paid value provided that the mortgage is issued for a new debt as long has the mortgage is given at the time of the loan.
BFP - Judgment Creditor
A judgment creditor is someone who wins a judgment against another party and then to collect the judgment attaches property.
In a majority of jrdx, a judgment creditor is considered NOT to have paid value and is therefore not a BFP.
3 Types of Notice
1. Actual Notice
2. Constructive Notice
3. Inquiry Notice
Something that you actually know. Any facts you learn, anything you are aware of.
Comes from recordation. If a deed is properly recorded within chain of title, it gives constructive notice to the world.
Where there's enough info that a reasonable person would have inquired further to see if there were any competing claims. If the grantee fails to inquire further, the grantee is charged with any notice such a reasonable inquiry would have revealed.
Minority. The recordation books in the jrdx have a page for every parcel of land and every conveyance associated with that parcel is recorded on that same page.
2 sets of books, 1 for grantor, 1 for grantee. Conveyance is recorded in both books.
Estoppel by Deed
Applies when grantor transfers to grantee property that he doesn't own.
Estoppel by Deed - Minority Rule
If you transfer title to property that you don't own, then subsequently acquire that property, it automatically transfers by law to the person you granted it to before.
Estoppel by Deed - Majority Rule
Personal estoppel theory. It's up to the previous grantee to go into court and assert the claim. If the previous grantee does that, then the grantor is estopped from denying it to them.
Is an interest in real property which is designed to secure performance of an obligation which is usually always a repayment of a debt.
The debtor. The person who owes the money or must perform the obligation. They're the person who issues the mortgage.
The creditor. The one who is owed the money. They receive the mortgage.
2 Instruments that Make up Mortgage
1. Mortgage - the document that represent the interest in the land.
2. Note - the document that represents the personal obligation of the debtor.
The mortgage follows the note. Whoever has the note has the benefit of the mortgage unless there's an express agreement otherwise.
Deed of Trust
Type of trust relationship. Borrower borrows money, lender wants security for repayment of the debt. The debtor makes out a deed to property and hands it to a 3rd party selected by the lender. The 3rd party will retain control of the deed until the debt is paid. The lender's security is that the debtor cannot get back the deed to the property until the debt is paid. In jrdx where it's allowed, a private sale happens when the debtor falls into default, the lender calls up the 3rd party and tells them to sell the deed, and the money from the sale is used to pay the debt.
A debtor borrows money and then issues a deed that appears to be absolute on its face to the lender. So on the face it looks like it's a straight conveyance from the debtor to the lender. However, extrinsic evidence establishes an agreement between the debtor and the lender that when the debt is paid the lender will give the deed back to the debtor. If extrinsic evidence can establish that agreement, this will be viewed as a mortgage.
Installment Land Sale Contract
Buyer buys land and is going to take possession of the land today but is then going to pay off the purchase price in installments over a period of time. Seller will retain legal title under the agreement until all installments have been paid. Seller's security is that the buyer cannot get legal title until all is paid.
Installment Land Sale Contract - Time is of the Essence
Almost always an ILSC will include a clause stating "time is of the essence." If it does and buyer defaults by missing a payment or paying late, the seller can treat the default as terminating the K allowing the seller to keep the land and all the money paid to date. To prevent this from happening, some courts wont enforce the clause unless there are some facts that show time actually is of the essence. Also, if the seller has previous accepted a late payment, courts might view that as a waiver of the clause.
Mortgage - Lien Theory
A mortgage is treated as a lien on property. The mortgagor retains the right to possession of the premises and any rents or profits produced by the premises.
Mortgage - Title Theory
A mortgage is treated as a title to property. The mortgagor retains possession of the premises until default. The mortgagee has the right to rents and profits.
Mortgage - Intermediate Theory
The lien theory applies until default, the the title theory kicks in. Prior to default, the mortgagor retains rights to possession and profits, but after default the mortgagee gets those.
Mortgage - Duties
The person who has possession of the property has the duty to manage that property in a reasonably prudent manner. They cannot commit waste.
Mortgage - Prepayment
There is no right to prepay a mortgage unless the mortgage instrument expressly allows it. Mortgage instrument can allow for prepayment fees for paying early, which are generally always upheld.
Deed in Lieu of Foreclosure
If the debtor falls into default and the lender wants to foreclose on the property, debtor can deed the property to the lender and call it even. If there are any other mortgages on the land, the person with the deed is responsible for those other mortgages.
Mortgage Default - Creditor's Remedies
1. Sue in personam - suing the debtor personally for the debt.
2. Sue in rem - foreclosing on the mortgaged property.
Most common form of foreclosure. It's a judicial proceeding and involves all that goes along with a judicial proceeding.
Order of Mortgages
They line up in the order in which they attached to the property. Order is determined by recording acts. However, a Purchase Money Mortgage automatically moves in to the #1 spot in mortgage priority.
Order of Mortgages - Foreclosure on 1st Mortgage
When someone buys a property at a foreclosure sale on the 1st mortgage, they buy it free and clear of all mortgages. The proceeds from the sale pay off the mortgages in order of priority until your out of money or mortgages. If you're out of money, the remaining mortgages can get a judgment against the debtor for the remaining amount. If you run out of mortgages the original mortgagor gets the leftover money.
Order of Mortgages - Foreclosure on not the 1st priority mortgage
If say mortgage 3 forecloses, mortgages 1 and 2 are senior interests and mortgages 4 and 5 are junior interests. Senior interests are unaffected by the foreclosure sale, they don't have to be notified or participate. The junior interests are discharged the normal way. If someone buys the property, the senior mortgages are still attached to the property.
A judgment against the debtor for any amount of the debt not retired by the foreclosure sale.
Mortgages - Redemption
How a debtor stops a foreclosure sale. They pay off the debt or bring the loan current. Often times mortgage instruments will have an acceleration clause which says in the event the debt goes into default, all money becomes due; so you wont be able to bring the loan current.
Equitable Right of Redemption
Right that exists in equity and therefore it exists automatically and can't be taken away. Applies at any time from the institution of the foreclosure proceeding to the sale.
Statutory Right of Redemption
Kicks in after the foreclosure sale and only exists if there's a statute in the jrdx authorizing it. The debtor is given a statutory period of time (6 to 18 months) after the sale when the debtor can go to the person who bought the property at the foreclosure sale and make them sell it back to the debtor for however much they bought it for at the sale.
Vendor Purchase Money Mortgage
The seller sells property and the buyer pays off the purchase price over time, and the seller takes a mortgage on the property to secure payment of the purchase price. All this has to be done at the same time in the same transaction.
Third Party Purchase Money Mortgage
Third party is contribution part of the purchase price and they take a mortgage to secure payment of their contribution. Has to be done at the same time in the same transaction.
Future Advance Mortgage
Like a line of credit or home equity loan. You're borrowing against the property but not accessing the money immediately, rather over time. As long as full notice is given, the priority of this mortgage is at the date the arrangement is made.
2 Types of Transfer of Mortgaged Property
1. Taking the property "subject to" the mortgage. The new owner is not personally liable on the debt.
2. Taking the property and "assuming" the mortgage. The new owner has personal liability for the debt.
If the language is ambiguous, look to the facts to see if they point one way or another. If the facts are silent, it's treated as "subject to"
Transferred Mortgage "Assumption" - Debt Falls Into Default
Grantor is entitled to exoneration: a court order requiring the grantee to pay off the debt.
Transferred Mortgage "Assumption" - Grantor makes a payment on the debt
Grantor has the right to sue the Grantee for reimbursement of those payments.
Transfer Mortgage "Assumption" - Subrogation
If grantor wants to, they could pay off the mortgage debt and have the debt subrogated to themselves, and now they have the mortgage and could enforce it against the grantee.
If the mortgaged property is ever sold, all money owed automatically comes due.