Property Flashcards
(126 cards)
1
Q
What are the elements of adverse possession
A
COAH: Continuous, Open and Notorious, Actual, and Hostile
The elements are gauged objectively. The possessor’s subjective state of mind is irrelevant. It does not matter, for example, that the possessor actually thought that he was on his own land or knew that he was encroaching on another’s land
2
Q
What is tacking?
A
One adverse possessor may tack on to his time with the land his predecessor’s time, so long as there is privity between the possessors
3
Q
How do disabilities affect adverse possession?
A
The statute of limitations will not run against a true owner who is affected by a disability at the inception of adverse possession
If the true owner acquires the disability after adverse possession began, then the disability exception does not apply
Common disabilities include insanity, incompetency, infancy, or imprisonment
4
Q
What are the three forms of concurrent ownership?
A
The joint tenancy - two or more own with the right of survivorship
The tenancy by the entirety - a protected marital interest between spouses with the right of survivorship
The tenancy in common - two or more own without the right of survivorship
5
Q
What are the four unities required to create the joint tenancy?
A
T-TIP
T - at the same time
T - by the same title
- Meaning in the same instrument (i.e. a deed)
I - with identical interests (interests must be equal)
P - right to possess the whole
The grantor must clearly express the right of survivorship to create a joint tenancy (i.e. To A and B, as joint tenants, with the right of survivorship)
6
Q
Which actions sever a joint tenancy?
A
SPAM - Sale, Partition, and Mortgage
Severance and Sale - a joint tenant may sell or transfer her interest during her lifetime. One joint tenant’s sale severs the joint tenancy because it disrupts the four unities. The buyer then becomes a tenant-in-common with the remaining tenant(s)
- A joint tenant may do the conveyance secretly without authorization from the other tenant(s)
- If there are more than two joint tenants, the surviving joint tenants remain joint tenants while the new tenant(s) has an interest as a tenancy-in-common
- Because of the doctrine of equitable conversion, the mere act of entering into a contract for the sale of a share will sever the joint tenancy as to the contracting party’s interest
Severance and Partition
- By voluntary agreement - an allowable and peaceful way to end the relationship
- By partition in kind - a judicial action for a physical division of property, if in the best interest of all parties (such as sprawling acreage with multiple owners)
- By forced sale - a judicial action, when, in the best interest of all parties, the land is sold and the sale proceeds are divided up proportionately (such as selling a home or single building; when the property is difficult to divide in-kind)
Severance and Mortgage - One joint tenant’s execution of a mortgage or a lien on his or her share will sever the joint tenancy as to that now-encumbered share only in minority of states that follow the title theory of mortgages
- The title theory of mortgages is that giving a creditor a lien is the equivalent of transferring title to the encumbered share and therefore severs title
- The majority of states follow the lien theory of mortgages, whereby a joint tenant’s execution of a mortgage on his or her interest will not sever the joint tenancy. This is the majority view because it is in line with reasonable expectations.
7
Q
How is a tenancy by the entirety created?
A
In the states that recognize the tenancy by the entirety, it arises presumptively in any conveyance to married partners. In other states, the grantor must clearly specify that the conveyance is to A and B, as married partners, as tenants by the entirety
Creditors of one spouse cannot touch this tenancy for satisfaction of the debt
One spouse, acting alone, cannot defeat the right of survivorship by unilaterally conveying to a third party. The conveyance is void
8
Q
What are the characteristics of a tenancy-in-common?
A
Each co-tenant owns an individual part, and each has a right to possess the whole
Each interest is devisable, descendible, and alienable
When in doubt, the presumption favors TIC because joint tenancies are disfavored
9
Q
Is one co-tenant in exclusive possession required to pay rent to the other co-tenants?
A
No. Absent ouster, a co-tenant in exclusive possession is not liable for rent
10
Q
What is the rule for renting a co-tenancy property to third parties?
A
A co-tenant who leases all or part of the premises to a third party must account to his co-tenants, providing them their fair share of the rental income based on their ownership interest (i.e. A owns 90% and B owns 10%; A is entitled to 90% rental and B is entitled to 10% rental)
11
Q
What are the co-tenants responsible carrying costs of a property?
A
Each co-tenant must pay her fair share of carrying costs based on her undivided interest of the whole (i.e. 90% ownership is responsible for 90% of the costs)
12
Q
What is the right of contribution?
A
As long as the repairs were reasonable and necessary, and the repairing party gave notice to the other co-tenants, then the repairing party has a right of contribution for the repairs
13
Q
What are the responsibilities for improvements on the co-tenancy?
A
Co-tenants are not responsible for improvements on the property. One co-tenant’s improvements could be a burden on the other in the form of waste (voluntary, permissive, ameliorative). The improver gets no affirmative right of contribution
At partition (sale), however, the improver gets a credit for any increase in value he caused, or suffers a debit for any drop in value he caused
A joint tenant or tenant in common has a right to bring an action for partition
14
Q
What are the rules for waste in a co-tenancy?
A
A co-tenant must not commit waste. During the life of the co-tenancy, a co-tenant is permitted to bring an action for waste against another co-tenant
15
Q
What are the four leasehold estates?
A
Tenancy for years
Periodic tenancy
Tenancy at will
Tenancy at sufferance
16
Q
What is the tenancy for years?
A
A lease for a fixed, determined period of time. That period could be as short as one week or as long as 50 years
Also known as the estate for years or term of years
17
Q
How much notice is needed to terminate a term of years?
A
None, because a term of years tells you the termination date
A term of years greater than one year must be in writing to satisfy the statute of frauds
18
Q
What is the periodic tenancy?
A
A lease which continues for successive intervals until the tenant (T) or landlord (L) gives proper notice of termination; continuous until properly terminated
19
Q
What are the ways to create a periodic tenancy?
A
Express - created by written language (i.e. Taylor conveys to Calvin from month-to-month, or year-to-year, or week-to-week)
Implication
- (1) land is leased with no mention of duration, but provision is made for the payment of rent at set intervals (i.e. nothing is said about duration but tenant pays rent each month, which creates an implied month-to-month periodic tenancy)
- (2) an oral term of years in violation of the statute of frauds creates an implied periodic tenancy, measured by the way rent is tendered (i.e. month to month or year to year)
- (3) in a residential lease, if a landlord elects to hold over a tenant who has wrongfully stayed on past the conclusion of the original lease, an implied periodic tenancy arises measured by the way rent is now tendered (i.e. T holds over after the expiration of her one-year lease but sends another month’s rent; creates an implied month-to-month periodic tenancy)
20
Q
How is a periodic tenancy terminated?
A
Notice, usually written
At common law, the required notice is at least equal to the length of the period itself, unless otherwise agreed or dictated by statute
By private agreement, the parties may lengthen or shorten these common-law prescribed notice provisions; based in freedom of contract
21
Q
What is the tenancy at will?
A
A tenancy of no fixed period of duration. For example, “To T for as long as L or T desires”
22
Q
How do you create a tenancy at will?
A
Unless the parties expressly agree to a tenancy at will, the payment of regular rent will cause a court to treat the tenancy as an implied periodic tenancy
23
Q
How do you terminate a tenancy at will?
A
By a reasonable demand to vacate the premises that can be made by either party at any time
24
Q
What is a tenancy at sufferance and how is it created?
A
It is created when T wrongfully held over, past the expiration of the lease. The leasehold estate is known as a tenancy at sufferance to permit L to recover rent
25
How is a tenancy at sufferance terminated?
It lasts only until **L either evicts T or L elects to hold T to a new term**
If L elects to hold T to a **new term**, then **a tenancy at years, periodic tenancy, or a tenancy at will is created** (tenancy at sufferance is short-lived)
26
What are T's liability to third parties?
This is **tort law** in which **T is responsible** for **keeping the premises in reasonably good repair**. In tort, **T is liable for injuries** sustained by third parties she invited, even when L has expressly promised to make all repairs
* But **T can seek indemnification from L if the responsibility to repair should have been on L**
27
What is T's duty to repair?
T need only **maintain the premises**, which means T must make **routine repairs other than** those due to **ordinary wear and tear** (**maintenance**)
T has a duty **not to commit waste**
28
What is the Law of Fixtures?
A fixture is a once-moveable chattel that, by virtue of its **attachment or annexation to realty**, objectively shows the **intent to permanently improve** the realty
It is related to waste because when a tenant removes a fixture she commits voluntary waste
**Fixtures pass with ownership of the land** unless otherwise agreed
T may end the lease when the premises is destroyed without fault to T (i.e. hurricane)
29
How can you know when a tenant installation qualifies as a fixture?
**Express agreement** - controls over default rule; any agreement between L and T is binding (usually in advance of installation; freedom of contract)
**Default** - T may remove a chattel she installed **as long as removal will not _substantially harm_ the premises**
* If removal will cause substantial damage to the premises, then in objective judgment T has shown the intention to install a fixture. Therefore, it passes with ownership of the land. **Subjective intentions of T are irrelevant**
30
What is T's duty to pay rent?
T has a duty to pay rent based on the terms of the lease
If T **breaches** the duty and is in possession, **L's options** are: (1) **evict** through the courts, or (2) **continue** the relationship **and sue for rent due**
If the **landlord evicts, she is still entitled to rent**
* By virtue of eviction, by default the tenant is now a tenant at sufferance
31
What are landlord's options upon breach of the duty to pay rent?
**SIR**
**Surrender** - treat T's **abandonment as an implicit offer of surrender.** T can abandon **by showing, by words or conduct, that she wants to give up the lease**
* If the **unexpired term is greater than one year**, then must be **in writing**
**Ignore** the abandonment and **hold T responsible for the unpaid rent**, as if T was still there. Only available in a minority of states
**Re-let** the premises on the wrongdoer-tenant's behalf and **hold the tenant liable for any deficiency**
* The **majority rule** is that L must **try to re-let** as a mitigation principal. L must **make a good faith effort to re-let**
32
What are the rules of self-help for landlord?
**L must not engage in self-help**, such as by changing the locks, forcibly removing the tenant, or removing tenant's possessions
Self help is punishable by civil and criminal penalties
33
What is the duty to deliver possession?
This **majority rule** requires that L **put T in actual physical possession** of the premises. Thus, if at the start of T's lease, a **prior holdover** T is still in possession, then L has breached and the **new T gets damages**
34
What is the implied covenant of quiet enjoyment (**very likely to be tested**)?
A duty that arises by implication that T has **a right to quiet enjoyment of the premises without interference from L**. L implicitly promises this in every lease, whether commercial or residential
L can **breach** this covenant **by wrongful or constructive eviction**
35
What is the breach by wrongful eviction and breach by constructive eviction?
**Wrongful** - when L wrongfully evicts T or excludes T from the premises
**Constructive (more likely to be tested)** - occurs by meeting **three elements** (**SING**)
* **Substantial Interference** - **chronic or permanent problem** due to L's actions or failures to act (chronic = recurring)
* **Notice** - **T must give L notice** of the problem, and **L must fail to respond meaningfully**
* **Goodbye (vacate)** - **T must vacate** within a reasonable time after L fails to fix the problem
* The aggrieved tenant **cannot remain onsite** and still plead she has been constructively evicted
36
What is the implied warranty of habitability (**commonly tested**)?
The premises must be **fit for basic human dwelling**; bare living requirements must be met (modest standard, not a high bar)
An implied promise that applies **only to residential leases**. It is **non-waivable** because waiver is a **violation of public policy**
Usually discerned by the local housing code or by case law
General problems include **no heat in winter, no plumbing, no running water**
Tenant does **not need to vacate** to bring an action
37
What are T's entitlements when the implied warranty of habitability is breached?
**MR3**
**Move** - move out and end the lease (but not required to do so)
**Repair and deduct** cost from rental rate
**Reduce or withhold rent** until the court determines fair rental value
* Typically, T must place withheld rent into an escrow account to show good faith
**Remain in possession, pay rent, and sue** for money damages
Exam Tip - remember the difference between the covenant of quiet enjoyment (where to plead constructive eviction T must vacate) and the implied warranty of habitability (where T could vacate but is not required to do so).
38
What is the doctrine of retaliatory eviction and the rules surrounding it?
**L cannot penalize T** if T lawfully reports housing code violations, such as by raising the rent, ending the lease, harassing the tenant, or any other retaliatory action
The purpose is to encourage good-faith whistleblowing
39
May a tenant transfer her leasehold?
Yes, in the absence of some prohibition in the lease prohibiting transfer, the tenant may freely transfer his or her interest in whole (assignment) or in part (a sublease)
In the lease, L can prohibit T from assigning or subletting without L's prior written approval
40
What is the difference from an assignment and a sublease?
**Assignment transfers the lease in whole** (the entire interest), while **a sublease transfers the lease in part** (less than the entire interest)
**Once L consents** to one transfer by T, **L waives the right to object to future transfers** by that T, unless L expressly reserves the right
41
What is meant by privity of estate?
When **L and T2 are in privity of estate**, L and T2 are **liable for each** other in all covenants of the lease that run with the land
I.e. promise to pay rent, promise to improve or repair, promise to pay taxes
42
What is meant by privity of contract?
**L and T2 are not in privity of contract** because they never exchanged the original promissory words of contract
**But L and T1 remain in privity of contract** because they exchanged the original promissory words of contract, meaning L and T1 are secondarily liable to each other
If T2, or the direct wrongdoer, cannot pay or is unavailable, then T1 is liable
**If T2 assigns to T3, then L can proceed against T3** because they are in **privity of estate** (T3 is in possession). **L can also proceed against T1** because they **remain in privity of contract**, but cannot proceed against T2 because they are neither in privity of contract or privity of estate.
43
What are the rules for privity of estate and privity of contract under a sublease?
**L and T2 are neither in privity of estate or privity of contract.**
The **relationship between L and T1 remains fully intact** because T1 transferred less than the entire interest to T2.
If **T2 fails to pay rent, L proceeds against T1 and T1 proceeds against T2**. If L violates the **implied warranty of habitability**, **T2 proceeds against T1 and T1 proceeds against L.**
44
What are the five exceptions of landlord's tort liability (**one or two often tested**)?
**CLAPS**
**Common Areas** - L must maintain all common areas
**Latent Defects** - L must **warn T of hidden defects that L knows about or should know about**; this is a duty to warn not a duty to repair
**Assumption of Repairs** - While under no duty to make repairs, **once undertaken, L must complete them with reasonable care**, meaning L is liable if he makes the repairs negligent
**Public Use Rule** - L who **leases public space** (e.g. a convention hall or museum) **and who should know**, because of the significant nature of the **defect** and the short length of the lease that T will not repair, **is liable for any defects on the premises** (T does not have the time or expertise to make the needed repairs)
**Short Term Lease of Furnished Dwelling** - **L is responsible for any defective condition** which proximately injures T, because T has neither the time or ability to make repairs himself
45
What is an easement?
A **grant of a nonpossessory property** interest that **entitles its holder to some form of use or enjoyment** of another's land
46
What is the difference from an affirmative easement and a negative easement?
**Affirmative** - the **right to do something** on servient land
**Negative** - entitles its holder to **prevent the servient landholder from doing something**
* Generally recognized by only four categories: LASS (**light, air, support, stream water from artificial flow**) (Negative easement for light commonly tested)
* A minority of states also allow a negative easement for scenic view
* A **negative easement can only be created expressly**, by writing signed by the grantor. No natural or automatic right to a negative easement
47
What is an easement appurtenant?
An easement that **benefits its holder** (the **dominant tenement**) in his physical use or enjoyment of his property
**Two properties are involved** - the dominant tenement (the estate with the benefit) and the **servient tenement (the estate with the burden).**
48
What is an easement in gross?
An easement that confers upon its holder only some **personal or pecuniary advantage** that is not related to his use or enjoyment of his land
* Examples: the right to place a billboard on another's lot; the right to lay power lines on another's lot; the right to fish or swim
**Servient land is burdened, but there is no dominant land**
49
What are the rules of transferability for easements?
The **benefit of the easement appurtenant passes automatically** with the dominant tenement, regardless of whether it is even mentioned in the conveyance
The **burden of the easement appurtenant also passes automatically** with the servient tenement **unless the new owner is a bona fide purchaser without notice** of the easement
An **easement in gross is not transferable unless** it is for **commercial purposes**
50
How can you create an affirmative easement?
**PING**
**Prescription** - acquired by analogy to adverse possession
* **COAH**; continuous use for the statutory period; open and notorious (visible); **actual use that need not be exclusive** (differs from adverse possession); hostile without the servient owner's consent (no permission)
**Implication** - an easement **implied from existing use**
* Previous use **must be apparent**; the parties **expected it to survive** division; it is **reasonably necessary** to the dominant land's **use and enjoyment**
**Necessity** - when the grantor conveys part of his land with no way out except over some part of the grantor's remaining land (landlocked land)
**Grant** - by **express language**; **an easement to endure for more than one year must be in writing** to satisfy the statute of frauds (the writing is known as the deed of easement)
51
How is the scope of an easement determined?
By the terms of the grant or the conditions that created the easement
52
How can you terminate an easement?
Eight ways: **END CRAMP**
**Estoppel** - the **servient owner materially changes his or her position in reasonable reliance** on the easement holder's assurance that the easement will no longer be enforced
**Necessity** - expires **as soon as the necessity ends**
**Destruction** - **destruction of the servient land**, other than through the willful conduct of the servient owner
**Condemnation** - condemnation of the servient estate by governmental eminent domain power
**Release (commonly tested)** - a release given by the dominant easement holder
**Abandonment (commonly tested)** - **physical action that shows intent to never use** the easement again
* Mere **nonuse**, or mere words, are **insufficient** to terminate
**Merger** - easement is **extinguished when title to the easement and title to the servient land become vested in the same person** (unity of title)
* The easement will not be automatically revived if the land is partitioned in the future
**Prescription** - **COAH**: Continuous interference (not continuous use); Open and notorious; Actual; Hostile to the easement holder
53
What is a license?
A mere **privilege to enter into another's land** for some delineated purpose. A **writing is not required** because they are not subject to the statute of frauds
**Freely revocable at the will of the licensor, unless estoppel** applies
* **Estoppel** applies **only when the licensee has invested substantial money or labor in reasonable reliance** on the license's continuation
54
What is a profit?
Entitles the holder to enter the servient land **to take from it the soil or some product of the soil** (timber, minerals, oil, etc.)
The same rules for easements apply to profits
55
What is a covenant?
A promise to do or not do something related to the land. It is unlike the easement because it is **not the grant of a property interest. Instead, it is a contractual limitation or promise regarding land use.**
## Footnote
**One tract is burdened by the promise and the other tract is benefitted**
56
What is the difference from a restrictive covenant and affirmative covenant?
**Restrictive (negative)** - a promise to refrain from doing something related to the land (i.e. I promise not to build for commercial purposes; I promise not to paint the shutters brown)
**Affirmative** - a promise to do something related to the land (i.e. I promise to maintain our common fence; I promise to water our common garden)
57
What does it mean to run with the land?
When a covenant runs with the land, it binds its successors. The burden and the benefit must run with the land
Vertical privity will run between A and A-1, and horizontal privity will run between A and B
**Both horizontal and vertical privity are required for the burden to run**. But **only vertical privity are required for the benefit to run**
58
What does vertical privity mean?
The **nexus between A and A-1 and B and B-1.** It requires a **non-hostile connection** such as a **contractual relationship, a will, intestacy, etc.** (non-hostile nexus such as contract, devise, or descent).
It is easier to establish vertical privity than horizontal privity
Vertical privity **will only be absent when A-1 acquires the interest through adverse possession**.
59
What does horizontal privity mean?
The **nexus between A and B** (the original parties). It requires that **they be in succession of estate,** meaning that they were in **a grantor/grantee or landlord/tenant or mortgagor/mortgagee relationship** when the covenant was created.
60
What is required for the burden of a covenant to run?
**WITHN** (no I in WITHN)
**Writing** - the original promise between A and B must be in writing
**Intent** - the original parties, A and B, **manifested an intent** for the promise to run
* **Courts are generous** in **finding the requisite intent**
**Touch and Concern the Land** - the promise must affect the parties as landowners and not just the community at large
* Covenants to pay money to be used in connection with the land (such as homeowners' association fees) and covenants not to compete do touch and concern the land
**Horizontal and Vertical Privity** - both required for burden to run
**Notice** - A-1 must have notice of the promise when she took
61
What is required for the benefit to run?
**WITV**
**Writing** - the original promise between A and B was in writing
**Intent** - the original parties intended that the benefit would run
**Touch and concern** - the promise affects the parties as landowners
**Vertical privity** - requires some non-hostile nexus between B and B-1
62
How do you create an equitable servitude that will bind successors?
**WITNES** (only one S, not two)
**Writing** - generally, but not always, the original parties' promise was in writing
**Intent** - the original parties intended that the promise would be enforceable by and against assignees (liberally inferred)
**Touch and concern** - the promise affects the parties as landowners
**Notice** - the assignees of the burdened land had notice of the promise
**Equitable Servitude**
*_Privity is not required to bind successors_* to an equitable servitude
63
What are the three forms of notice that apply to the common scheme doctrine?
**AIR**
**Actual notice** - the defendant had **literal knowledge** of the promise in the other deeds; had been explicitly told of or explicitly read the promise in the other deeds
**Inquiry notice** - the **neighborhood conforms to the common restriction** (the lay of the land); this is a form of constructive notice
**Record notice** - notice was provided through public records; also a **form of constructive notice** that is imputed to buyers regardless of actual notice
64
What is the equitable defense to enforcement of an equitable servitude?
The **doctrine of changed conditions**; changed circumstances
Changed circumstances alleged by the party seeking release from the terms of an equitable servitude **must be so pervasive that the entire area has changed**
**Mere pockets of limited change are not adequate** to apply the doctrine of changed conditions
65
What is escrow?
**Delivery of deed to a third party** to be held until purchase price is paid
66
Is the statute of frauds applicable to transfers of land?
Yes, to be enforceable
A land contract must be memorialized in a writing that is signed by the party to be charged
**Need not be a formal contract**; a memorandum suffices, such as escrow instructions or emails, which can be deemed contracts of sale
67
What are the statute of frauds requirements for land sales contracts?
The writing must contain **"all essential terms**":
* **Description** of the property
* Identification of the **parties**
* **Price** and manner of payment
**Signature by the grantor;** the grantee's signature is not necessary
68
What are the delivery and acceptance requirements?
The deed itself is not affected until it has been delivered and accepted
69
What are the requirements to convey real property by an inter vivos gift?
Donative **intent**
## Footnote
**Delivery**
**Acceptance**
70
What is the Doctrine of Part Performance?
A court may give **specific performance** of a contract (but not damages) **despite the absence of a writing**
In most states, **two of the following** are required: (1) **possession** of the land by the purchaser, (2) making of **substantial improvements**, and/or (3) **payment of all or part of the purchase price** by the purchaser
71
Which theories support the Doctrine of Part Performance?
Evidentiary theory - if **acts done** by a party can be **explained only by reference** to an **agreement**, these acts **unequivocally establish the existence of an oral contract**
**Hardship or estoppel theory** - if **acts done** by a party **in reliance** on the contract would **result in hardship** that it would be a fraud on that party, the other party will be **estopped from asserting the SoF as a defense**
72
How can the seller obtain specific performance based on the buyer's actions?
**Evidentiary theory** - it is immaterial who performed the acts constituting the part performance. **The seller may obtain specific performance based on the buyer's acts**
**Hardship or estoppel theory** - the **plaintiff must be the one whose action would result in hardship if the SoF were invoked**. The seller normally cannot rely on the buyer's acts
* **Ascertain whether the seller has done anything that would cause him a hardship** if SoF were successfully asserted by the buyer
73
What is the Doctrine of Equitable Conversion?
Once a contract is signed and each party is entitled to specific performance, equity regards the **purchaser as the owner** of the real property.
The **seller's interest** of the right to the proceeds of sale is **personal property**
**Legal title** that remains in the seller's name is to be **held in trust** for the purchaser as **security for the debt owed to the seller**
**Seller is still entitled to possession until closing**; possession follows legal title
74
What are the risk of loss rules?
If the property is destroyed without fault of either party, the majority rule is that **the risk of loss is on the buyer** (because the buyer is deemed the owner under the doctrine of equitable conversion)
The buyer **must pay the contract price despite the loss**, unless the contract provides otherwise
The **minority rule** is that **the risk is on the seller** unless the buyer has either legal title or possession (in states that have adopted the Uniform Vendor and Purchaser Risk Act)
75
What is the rule of marketable title?
An **implied covenant** in **every land transaction** that **at closing** the seller will provide the buyer **title that is "marketable"**
76
What is the definition of marketability?
Title must be **reasonably free from doubt**
Title that a reasonably prudent buyer would be willing to accept
It need not be perfect title, but the title must be free from questions that might present an unreasonable risk of litigation. Generally, this means an unencumbered fee simple with good record title
77
When may there be defects in record chain of title?
Title may be unmarketable because of a defect in the chain of title
Must be a **significant variation** in the description of the land; that a deed was **defectively executed**; or that a **prior grantor lacked capacity to convey**
78
What are examples of encumbrances?
Mortgages, liens, easements, covenants, and encroachments
* These render the title unmarketable unless the buyer waives them
But a **seller has a right to satisfy a mortgage** or lien at closing with the proceeds from the sale
**Closing will result in marketable title and the buyer cannot claim title is unmarketable**
**Encroachment** (property sitting across a property line) also renders title **unmarketable**
**Zoning** restrictions generally do **not render title unmarketable**
Any of the above-mentioned encumbrances can be waived in the contract of sale
79
Does a quitclaim deed affect the implied covenant to provide marketable title?
No, the seller is still required to provide marketable title
80
What are the remedies if title is unmarketable?
Buyer **must notify the seller** and give a **reasonable time to cure**, even if it requires an extension of the closing date
If the **seller fails to cure**, the buyer may pursue (1) r**escission, damages, or specific performance, or (2) merger**
* Specific performance here means to have an abatement of the sale price, or in some jurisdictions, to require the seller to quiet title
* **If the buyer permits closing, then the contract is said to merge** with the deed, and in the absence of fraud, the **seller is no longer liable** on the implied covenant of marketable title
81
What is the meaning of tender of performance?
The buyer's obligation to pay the purchase price and the seller's obligation to convey the title are deemed to be concurrent conditions.
Neither party is in breach until the other party tenders her performance
82
What are the remedies for breach of the sales contract?
Damages
Liquidated damages
Specific performance
83
What are the damages and liquidated damages remedies?
**Damages** - usually the **difference between the contract price and the market value** of the land on the date of breach. May also include incidental damages such as title examination or moving or storage costs
**Liquidated damages** - Seller may retain "**earnest money**." Earnest money must be reasonable in light of the seller's anticipated and actual damages.
* Many courts uphold **a deposit of up to 10%** of the sales price without further inquiry into reasonableness.
I**f title is unmarketable, many courts have limited the buyer's recovery to damages incidental to out-of-pocket costs** (title examination, etc.) and return of the buyer's earnest money. Other courts will give the buyer the standard measure of contractual damages
84
What is the warranty of fitness or quality?
Applies only to **new residential construction**; must be constructed in a **reasonable and workmanlike manner** and **suitable for human habitation**
* Can also sue for negligence in performance under the building contract
Other than new residential construction, contracts of sale and deeds of real property carry no implied warranty of fitness or quality
85
What are the standards for defects in improvements?
A seller may be liable for defects in improvements under the following:
* **Misrepresentation (fraud)** - proof that the seller made a false statement of fact (oral or written), the buyer relied on the statement, and that it materially affected the value of the property. The seller must have either known it was false or made it negligently (without taking reasonable care to determine its truth)
* **Active concealment** - seller is liable for taking active steps to conceal a defect
* **Failure to disclose defects** - the seller must know or have reason to know of the defect, the defect is not obvious or apparent, the buyer is unlikely to discover it by ordinary inspection, and the defect is serious enough to cause a reasonable buyer to reconsider the purchase if it were known
86
What are the disclaimers of liability?
"As Is" - not sufficient to overcome a seller's liability for fraud, concealment, or failure to disclose
Specific disclaimers - if the exculpatory clause identifies and disclaims liability for specific types of defects (i.e. not liable for leaks in the roof), it is likely to be upheld
87
When are deeds void and voidable?
Void - forgeries, deeds never delivered, issued to a nonexistent grantee, or obtained by fraud in the factum (grantor was deceived and did not realize he was executing a deed); implies the deed will be set aside by the court
Voidable - executed by a person under the age of majority or who lacked capacity, deeds obtained by fraud in the inducement, by duress, by undue influence, mistake, or breach of fiduciary duty; implies the deed will be set aside only if the property has not passed to a bona fide
88
When is parol evidence admissible to clear up ambiguity in a deed?
When there is a **patent ambiguity** (one appearing on the face of the deed) or **latent ambiguity** (not apparent on the face of the deed)
Parol evidence is used to **ascertain the parties' intent**
If the **description in the deed is inadequate**, then _parol evidence is inadmissible_ and the **deed will likely fail** for lack of an adequate description
89
What is reformation of deeds and when is it applicable?
If there was no mistake or ambiguity, but a mistake in the writing of the deed, relief may be available through reformation
An equitable remedy in which the court re-writes the deed to make it conform to the intent of the parties
It will be granted for a mutual mistake or for a scrivener's (drafter's) error
It will be granted for unilateral mistake only if the party who is not mistaken induced the mistake by misrepresentation or some other inequitable conduct
If the property has passed to a bona fide purchaser who relied on the original language of the deed, the court will not reform it
90
What is the rule for delivery?
**A deed is not effective to transfer an interest in realty unless it has been delivered**
Physical transfer of a deed is not necessary, but may be achieved by mail, by grantor's agent or messenger, or by physical transfer by the grantor's attorney in the grantor's presence
**Delivery refers to the grantor's intent**; it is satisfied by **words or conduct** evidencing the grantor's intention that the deed have **some present operative effect** (i.e. that title pass immediately and irrevocably, even though the right of possession may be postponed until some future time)
**Under some circumstances, conditional delivery is permissible.** It becomes effective only upon the occurrence of a condition, but the transfer then relates back to the time of the conditional delivery
91
What are the presumptions relating to delivery?
Delivery is presumed if a deed is (1) handed to the grantee, or (2) acknowledged by the grantor before a notary and recorded
**Continued possession of the deed _by the grantor raises a presumption of nondelivery_** and therefore no passage of title (rebuttable presumption)
**Possession by a grantee** of a properly executed deed raises a **presumption that the delivery requirement has been satisfied** (rebuttable presumption)
**Title passes to the grantee upon effective delivery**; the grantor must relinquish absolute and unconditional control
If the grantor executes and delivers a deed but fails to record, title passes
92
What are the three types of deed?
**General warranty deed** - one in which the grantor covenants against title defects created by himself and by all prior titleholders
**Special warranty deed** - covenants only that he himself did not create title defects, but represents nothing about what prior titleholders may have done
**Quitclaim deed** - no assurances that title is not defective
93
What are the "usual covenants of title"?
**Seisin** - a covenant that the **grantor has the estate or interest** that she purports to convey
**Covenant of the right to convey** - the grantor **has the power and authority to make the grant**
**Covenant against encumbrances** - assures that there are neither visible encumbrances (easements, profits, etc.) nor invisible encumbrances (mortgages, etc.)
**Covenant for quiet enjoyment** - that the **grantee will not be disturbed** in his or her possession or enjoyment of the property by a third party's lawful claim of title
**Covenant of warranty** - the **grantor agrees to defend** on behalf of the grantee any lawful or reasonable claims of title by a third party
**Covenant for further assurances** - to **perform whatever acts are reasonably necessary to perfect the title conveyed** if it turns out to be imperfect
94
What are the present covenants?
**Seisin, right to convey, covenant against encumbrances**
Breached at the time of conveyance
95
What are the future covenants?
**Quiet enjoyment, warranty, and further assurances**
**Breached only upon interference** with the possession of the grantee or her successors
The distinction of present or future covenants is important because it determines when the statute of limitations begins to run
96
What are the three major types of recording acts?
Notice statutes
Race-Notice statutes
Race statutes
97
What is a bona fide purchaser?
A purchaser who **gives valuable consideration and has no notice** of the prior conveyance
**Only BFPs prevail** under "**notice" and "race-notice"** statutes; it is not required to be a BFP under a pure "race" statute because the purchaser can have actual notice of the conveyance and still prevail
98
What is required for constructive notice?
**Record notice** - recording of the instrument
* Record notice gives the rebuttable presumption that the instrument has been validly delivered and that it is authentic
**Inquiry notice** - if the subsequent grantee is bound to make reasonable inquiry, she will be held to have knowledge of an facts that such inquiry would have revealed (even if she made no inquiry)
99
What are the rules for notice statutes?
**A subsequent BFP prevails over a prior grantee who failed to record**
This is because the BFP had no actual or constructive notice at the time of the conveyance
100
What is a typical notice statute?
No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value **without notice** thereof, **unless it is recorded**
101
What are the rules for race-notice statutes?
A subsequent BFP is **protected only if she records before the prior grantee.**
The rationale is the best evidence of which deed was delivered first is to determine who recorded first (BFP must record first)
102
What is a typical race-notice statute?
No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value **without notice** thereof whose conveyance is **first recorded**
103
What are the rules for race statutes?
**Whoever records first wins**. Actual notice is irrelevant.
The rationale is that actual notice depends upon extrinsic evidence, which may be unreliable. Race statutes are the **minority rule.**
104
What is a typical race statute?
No conveyance or mortgage of an interest in land is valid against any subsequent purchaser whose conveyance is **first recorded**
105
What is the shelter rule?
A **person who takes from a BFP** will prevail against any interest that the transferor-BFP would have prevailed against. This is true **even where the transferee had actual knowledge** of the prior unrecorded instrument
* The rationale is a BFP may not be able to convey an interest in the land without the shelter rule
Exception: the shelter rule **will not help someone who previously had title** and had notice of the unrecorded interest. Ex. If O repurchased from B, O would have notice of A's interest and could not claim the benefit of the "shelter rule"
106
What is the recording acts rule for purchasers under installment land contracts?
A purchaser who has paid only part of the purchase price under an installment land contract is **protected by the recording acts only to the extent of payment made.**
107
What is a tract index?
The searcher looks at the page **indexed by block and/or lot** describing the property and any instruments affecting it
108
What is a grantor/grantee index?
The searcher establishes **a chain of title by searching back in time** in the grantee-grantor index.
From that point, **he then searches forward in time in the index to see if any grantor conveyed an interest to someone** outside of the backward chain
109
What is a mortgage?
The conveyance of a security interest in land, intended by the parties to be collateral for the re-payment of a monetary obligation
The owner of real estate gives the lender a lien in that real estate to secure the loan that the lender makes
A mortgage must typically be in writing to satisfy the Statute of Frauds
110
What is the difference from a purchase-money mortgage and a non-purchase-money mortgage?
**Purchase-money** - an **extension of value by a lender who takes as collateral a security interest in the very real estate** that its loan enables the debtor to acquire
Non-purchase-money mortgage is any other mortgage
111
How do you transfer a mortgage?
The mortgagor transfers by deeding the property, while the mortgagee transfers by indorsing the note and executing a separate assignment of the mortgage
## Footnote
**The note and mortgage must pass to the same person for the transfer to be complete**
112
How do you become a holder in due course?
(1) the note must be **negotiable in form**; it must be payable to "bearer" or to "the order of" the named payee and contain a promise to pay a fixed amount of money
(2) the original note must be **indorsed** by the named payee
(3) The original note must be **delivered** to the transferee
(4) the transferee must take the note **in good faith**
(5) the transferee must pay **value** for it.
(6) The transferee must **not have any notice** that the note is overdue or has been dishonored, or that the maker has any defense to the duty to pay it
113
What are the benefits of being a holder in due course?
A holder in due course will **take the note free of any personal defenses** that the maker might raise (failure of consideration, fraud in the inducement, waiver, estoppel, and payment)
But the HDC is **still subject to "real" defenses** (infancy, incapacity, duress, illegality, fraud in the execution, forgery, insolvency)
114
What are the rules for redemption of foreclosure?
**Redemption in equity** (or equitable redemption) - at **any time prior** to the foreclosure **sale,** the mortgagor has the **right to redeem** the land or free it of the mortgage by **paying off the amount due with any accrued interest**
**Statutory redemption** - a statutory right to **redeem for some fixed period** after the foreclosure sale has occurred (**usually six months to one year**)
* The amount to be paid is **usually the foreclosure sale price, not the original price**
* Only **applies after foreclosure has occurred**
115
What happens if you fail to include a necessary party in a foreclosure action?
**Failure to include** a necessary party results in the **preservation of that party's claim**, despite the foreclosure and sale
If a necessary party is not joined, then his **mortgage will remain on the land**
116
What is the effect of foreclosure on junior interests?
Foreclosure will **terminate interests junior** to the mortgage being foreclosed but will not affect senior interests
This means that **junior lienholders will be paid in descending order** with the proceeds from the sale, assuming funds are leftover after full satisfaction of superior claims
117
What is the effect of foreclosure on senior interests?
It **does not affect** any interest **senior** to the mortgage being foreclosed. The **buyer at the sale takes subject to such interests**
118
What are the priority rules for creditors?
A **creditor must record** to obtain a **priority.**
Once recorded, priority is determined by **first in time, first in right**
119
What are the consumer rights during the foreclosure process?
After the **mortgagor has defaulted**, the **mortgagee must in good faith consider a request made by the mortgagor for a loan modification or other alternative** to foreclosure
The mortgagee **cannot file a foreclosure action in court while such a request is pending**
If the request is **made after the foreclosure action** is filed, the mortgagee **cannot proceed to foreclosure sale until the request is resolved**
120
What is the rule for trespass?
If the land is invaded by a **tangible, physical object** that interferes with the right of exclusive possession, there is a trespass
121
What are the rules for private nuisance?
If the land is invaded by **intangibles** (such as odors or noise) that **substantially and unreasonably interfere** with the **use or enjoyment** of property, the possessor may bring an action for private nuisance
122
What is a public nuisance?
An invasion by intangibles that **unreasonably interferes** with the **health, safety, or property** rights of the public
123
What are the standards for zoning?
The state may enact statutes to reasonably control the use of land for the **protection of the health, safety, morals, and welfare** of its citizens.
124
What is a nonconforming use?
A **once lawful, existing use** now deemed nonconforming by a new zoning ordinance.
Generally, the nonconforming use **may continue indefinitely**, but **any change in the use** (such as tearing down a building and replacing it with a new one) **must comply with the new zoning ordinance**
125
What are cumulative and noncumulative zoning ordinances?
**Cumulative** - creates a **hierarchy of uses of land**, where a single-family home is the highest use, followed by a two-family home, then apartment buildings, then commercial use, then industrial use
Land that is zoned for a particular use may be used **for the stated purpose or for any other higher use**
**Noncumulative** - land may be **used only for the purpose** for which it was zoned
126
