Real Property Flashcards
(202 cards)
1
Q
Freehold Estates (Three Categories)
A
(1) Fee Simple Absolute
(2) Defeasible Fees - 3
(3) Life Estate
2
Q
Freehold Estates - General QTNA
A
- What language will create the estate?
- Once identified, what are the estate’s distinguishing characteristics? In other words, is the estate devisable, meaning, can it pass by will? Is the estate
descendible, meaning, will it pass by the statutes
of intestacy if its holder dies intestate (without a
will)? Is the estate alienable, meaning, is it transferable inter vivos, or during the holder’s lifetime? - Which future interests, if any, is the estate capable
of?
3
Q
Fee Simple Absolute (General)
A
Rule: A fee simple absolute is absolute ownership of potentially infinite duration. It is freely alienable, devisable,
and descendible.
Language: “To A” or “To A and his heirs.”
Note: Today, common
law words “and his heirs” are not needed. PLUS living person has no heirs
4
Q
Defeasible Fees - “Capable of Forfeiture”
A
- To be defeasible
means to be capable of forfeiture - Think of these as three types of fee simple (“to A”) with a catch or condition attached that renders the estate subject to the risk of forfeiture
5
Q
Defeasible Fees - Fee Simple Determinable
A
Rule: This estate, like all of the defeasible fees, is devisable,
descendible, and alienable, but always subject to the
condition.
Language: To A so long as . . .” “To A during . . .” “To A until . . .”
- Look for clear durational language
Note: Accompanying future interest = possibility of reverter FSDPOR (Frank Sinatra Doesn’t Prefer Orville Redenbacker)
6
Q
Defeasible Fees - Fee Simple Determinable’s Accompanying Future Interest
A
Rule: Only one future interest accompanies the fee simple determinable, Possibility of Reverter (for grantor) - FSDPOR
7
Q
Defeasible Fees - Present Possessory Fee Simple Subject to Condition Subsequent
A
Rule: This estate is NOT automatically terminated, but it can be cut short at the grantor’s prerogative if a stated condition occurs.
Requirements:
(1) Clear durational language
(2) Clear statement of the right of reentry
Accompanying future interest = right of reentry synonymous with the power of termination
Language: “To A, but if X event occurs, grantor reserves the right
to re-enter and retake.”
8
Q
Defeasible Fees - Fee Simple Subject to Condition Subsequent Accompanying Future Interest
A
Accompanying Future Interest = right of reentry synonymous with the power of termination
9
Q
Defeasible Fees - Fee Simple Subject to Executory Limitation
A
Rule: This estate is just like the fee simple determinable,
only now, if the condition is broken, the estate is
automatically forfeited in favor of someone other
than the grantor.
Language: “To A, but if X event occurs, then to B.”
Subject to shifting executory interest
Accompanying Future Interest for Grantor = shifting executory interest
10
Q
Covenants - Restrictive Covenants
A
Rule: Restrictive covenants control how an individual uses their land
Two Types:
(1) Real Covenants
(2) Equitable Servitude
Note: If suing for damages = real covenant issue
If suing for injunction or equitable relief = equitable servitude issue
11
Q
Real Covenants
A
Rule:
Note: Need to prove privity
12
Q
Equitable Servitude
A
Rule:
Note: Need (1) intent (2) notice and (3) touch and concern
13
Q
Rule Against Perpetuities (Quick Application)
A
Ask: “Is it possible that, 21 years after every party in the grant dies, one of the interests will vest? If so, it violates the RAP.”
Note: Only applicable to (1)executory interests,
(2) contingent remainders, and
(3) vested remainders subject to partial divestment (i.e., class gifts)
When a grant violates the RAP, you strike out the future interest, and the current interest becomes a Fee Simple Determinable, and the grantor gets a POR (possibility of reverter)
14
Q
Co-Tenancy
A
Grantor or transferor conveys a property to multiple owners at the same time
15
Q
Tenancy in Common
A
Default estate created by a conveyance of real property to multiple owners at the same time
Language: (To A & B)
At Death: Granted to whoever they want
16
Q
Joint Tenancy
A
Rule: JT is a conveyance of real property to 2+ people that is distinguished by a right of survivorship (surviving JT takes the deceased tenant’s property interest automatically)
At Death: No right to decide who receives interest. B as a joint tenant has a right of survivorship
Created by:
(1) grantor makes a clear expression of intent to create a JT using survivorship (“and”)
(2) Four Unities - Common Law
(i) time (interests vested at the same time),
(ii) title (interests acquired by the same instrument), (iii) interest (interests of the same type and duration), and
(iv) possession (interests give identical rights to enjoyment)
Note: If these four unities are not present, a joint tenancy cannot be created at common law. Instead, a tenancy in common results
17
Q
Concurrent Ownership - Tenancy in Common
A
Rule: A tenancy in common is a concurrent estate with no right of survivorship
Language: At common law, a conveyance of property from O “to O and A as joint tenants with right of survivorship” creates a tenancy in common
18
Q
Concurrent Ownership - Tenancy by the Entirety
A
Rule: A tenancy by the entirety is a marital estate akin to a joint tenancy in that four unities (plus a fifth-marriage) are required for its creation, and the surviving spouse has the right of survivorship
Four Unities:
(i) time (interests vested at the same time),
(ii) title (interests acquired by the same instrument), (iii) interest (interests of the same type and duration), and
(iv) possession (interests give identical rights to enjoyment)
19
Q
Devisable
A
Rule: If an estate is divisible, it can pass by will
20
Q
Descendible
A
Rule: If an estate is descendible, it will pass by statutes of intestacy if its holder dies intestate (without a will)
21
Q
Alienable
A
Rule: If an estate is alienable, it is transferable inter vivos (during the holder’s lifetime)
22
Q
Defeasible Fees - Rules of Construction
A
- Rule: Courts will not find a defeasible fee unless CLEAR DURATIONAL LANGUAGE is used. Words of desire, hope or mere intention are insufficient to create defeasible fees
Ex. “for the purpose of..” “with the hope that..”
- Rule: Absolute restraints on alienation are void. An absolute restraint on alienation is an absolute
ban on the power to sell or transfer, that is not
linked to any reasonable time-limited purpose.
23
Q
Present Estates - Life Estate
A
Rule: Life estate is an estate that must be measured in explicit lifetime terms, and never in terms of years
Language: “to A for life”
Future Interest: Reversion (if held by grantor) Remainder (if held by third party)
Measured by life of transferee or by some other life (pur autre vie)
24
Q
Life Estate Pur Autre Vie
A
Rule: A life estate measured by a life other than the grantee’s
25
Doctrine of Waste - Life Tenant
Rule: The life tenant is entitled to all ordinary uses and profits from the land, and the life tenant must not commit waste
Waste Types (Three)
1. Voluntary (Affirmative) Waste
2. Permissive Waste (Neglect)
3. Ameliorative Waste
26
Waste - Voluntary (Affirmative) Waste
Rule: Voluntary waste (also known as affirmative waste) is actual, overt conduct that causes a drop in value
27
Waste - Permissive Waste (Neglect)
Rule: Permissive waste occurs when land is allowed to fall into disrepair or the life tenant fails to reasonably protect the land (synonymous with neglect)
• Permissive waste and the obligation to repair: The life tenant must simply maintain
the premises in reasonably good repair.
• Permissive waste and the obligation to pay all ordinary taxes: The life tenant must
pay all ordinary taxes on the land, to the extent of any income or profits that the life
tenant is reaping from the land. If there is no income or profit, the life tenant is required to pay all ordinary taxes only to the extent
of the premises’ fair rental value.
Note: When no income or profits are coming in from the land, the life tenant’s tax
liability for the parcel will be computed not on the basis of the fair market value
but instead on the basis of its mere fair rental value (a considerably lesser sum).
28
Waste - Ameliorative Waste
Rule: The life tenant must not engage in acts that will enhance the property’s value, unless all future interest holders are known and consent.
Why: Property law honors the future interest holders’ reasonable expectations and sentimental value.
29
Future Interests - Retained by the Grantor (3)
1. The Possibility of Reverter: Fee simple determinable
2. The Right of Entry (Power of Termination): Fee simple subject to condition subsequent
3. Reversion: A reversion is the future interest that arises in a grantor who transfers an estate of lesser duration than she started with
30
Future Interests - In Transferees (3)
1. Contingent Remainder
2. Vested Remainder:
(i) indefeasibly vested remainder, (ii) vested remainder subject to complete defeasance
(also known as the vested remainder subject to
total divestment), and (iii) vested remainder
subject to open
3. Executory Interest:
(i) shifting (ii) springing
31
Remainder
Rule: A remainder is a future interest created in a grantee that is capable of becoming possessory upon the expiration of a prior possessory estate created in the same conveyance in which the remainder is created. Either contingent or vested.
Note: Never cuts short or divests the prior taker
32
Contingent Remainder
Rule: A remainder is contingent if: (1) it is created in an unascertained or unknown person or (2) it is subject to an unmet condition precedent, or both (A condition is a condition precedent when it appears
before the language creating the remainder or is woven into the grant to the remainder)
33
Vested Remainder
Rule: A remainder is vested when it is created in a known taker who is not subject to a condition precedent
(i) indefeasibly vested remainder
(ii) vested remainder subject to complete defeasance
(also known as the vested remainder subject to
total divestment)
(iii) vested remainder
subject to open
34
Indefeasibly Vested Remainder
Rule: The holder of an indefeasibly vested remainder is certain to acquire an estate in the future, with no strings or conditions attached
35
Vested Remainder Subject to Complete Defeasance (Vested Remainder Subject
to Total Divestment)
Rule: Here, remainders exist, and the taking is NOT subject to any condition precedent. However, this right to possession could be cut short because of a condition subsequent
Note: It is important to know the difference between
a condition precedent, which creates a contingent
remainder, and a condition subsequent, which creates
a vested remainder subject to complete defeasance.
To tell the difference, apply the “Comma Rule”
36
Comma Rule (applicable to Vested Remainder Subject to Complete Defeasance)
Rule: “Comma Rule”: When
conditional language in a transfer follows language
that, taken alone and set off by commas, would create a vested remainder, the condition is a condition subsequent, and you have a vested remainder subject
to complete defeasance
37
Vested Remainder Subject to Open
```
Rule: The remainder is vested in a group of takers, at least one of whom is qualified to take possession. But each class member’s share could get smaller because additional
takers, not yet ascertained, can still join the class
```
38
Rule of Convenience (applicable to Vested Remainder Subject to Open)
Rule: Common law, class closes whenever any member is within its rights to demand possession
Open Class: Members may still join
Closed Class: Members may no longer join, or not possible
Note: Womb Rule: A child of the womb (aka pregnant/ in womb at time of supposed transfer) then they are able to become a part of the class
39
Executory Interest
```
Rule: An executory interest is a future interest created in
a transferee (a third party), which is not a remainder
because it takes effect by either cutting short some
interest in another person (“shifting”) or in the grantor
or his heirs (“springing”)
```
40
Shifting Executory Interest
Rule: A shifting executory interest always follows a defeasible fee and cuts short someone other than the grantor
41
Springing Executory Interest
Rule: A springing executory interest cuts short the interest of the grantor
42
Rule Against Perpetuities (Barbri)
Rule: Certain kinds of future interests are void if there is
any possibility, however remote, that the given interest could vest more than 21 years after the death of a measuring life
Note: RAP potentially applies only to contingent remainders, executory interests, and certain vested remainders subject to open
Does NOT apply to Grantor future interests, indefeasibly vested remainder or vr subject to complete defeasance
43
Four-Step Technique for Assessing RAP Problems
1. Determine which future interests have been created by the conveyance
2. Determine what has to happen for the future
interest holder to take
3. Look for the Measuring Life: people alive at the date of the conveyance whose lives and/or deaths are relevant to what has to happen for the future interest holder to
take
4. Determine whether we will know for sure within 21 years of the DEATH of a measuring life if the future interest holder(s) can take
- if so, conveyance is good
- if not, the future interest is void
44
Bright Line Rule of Common Law RAP
Rule: An executory interest with no limit on the time within which it must vest violates the RAP
45
Reform of the RAP
(i) “Wait and See” or “Second Look” Doctrine: Under this majority reform effort, the validity of any suspect future interest is determined on the basis of the facts as they now exist, at the conclusion of our
measuring life
(ii) The Uniform Statutory Rule Against Perpetuities
(USRAP): Codifies the common law RAP and, in addition, provides for an alternative 90-year vesting period
(iii) Cy Pres Doctrine** (“As Near As Possible”): If a given disposition violates the rule, a court may reform it in a way that most closely matches the grantor’s intent, while still complying with the rule against perpetuities. Both reform measures apply cy pres.
46
Adverse Possession
Basic Concept: Possession for a statutorily prescribed period of time can, if certain elements are met, ripen into title
Note: Note: 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
47
Elements of Adverse Possession
```
COAH (can one adversely habitate)
C - Continuous
O - Open and Notorious
A - Actual and exclusive
H - Hostile
```
48
Tacking
Rule: 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
Privity - satisfied by any non-hostile nexus, such as a
contract, deed, or will
By contrast, privity is absent when the possessor
acquires possession by ousting his predecessor in
possession
- ouster defeats privity
49
Disabilities
Rule: The statute of limitations will not run against a true owner who is afflicted by a disability at the inception of the adverse possession
ex. insanity, coma, imprisonment
50
Concurrent Estates
General: Three forms of concurrent ownership
(i) Joint Tenancy
(ii) Tenancy by the Entirety
(iii) Tenancy in Common
51
Joint Tenancy
General: Two or more own with the right of survivorship, goes automatically to the surviving tenant
Distinguishing:
- Right of Survivorship
- Alienable
- Not Devisable or Descendible
52
Tenancy by the Entirety
General: A protected marital interest between spouses with the right of survivorship
53
Tenancy in Common
General: Two or more own without the right of survivorship
54
How to Create a Joint Tenancy - Four Unities (T-TIP)
Rule: Joint tenants must take their interests:
T - Time: must take at the same time
T - Title: must take by the same title (i.e. deed, will, etc.)
I - Identical Shares
P - Possess: must have rights to possess and enjoy the whole
Note: Clear expression of right of survivorship required
55
Severance of a Joint Tenancy
SAP: Severance - Sale and Partition
56
Severance and Sale - Joint Tenancy
Rule: Severance and Sale - A joint tenant may sell or transfer her interest
during her lifetime, without informing the other joint tenants (remains intact as to other members, but new member is a tenant in common)
- if one dies, share goes to the other joint tenant
57
Severance and Partition - Joint Tenancy
Three Types:
(i) By voluntary agreement: An allowable and
peaceful way to end the relationship
(ii) Partition in kind: A judicial action for a physical
division of the property, if in the best interests
of all parties.
When would a partition in kind work best?
- when sprawling acreage, i.e. farm or vineyard
(iii) Forced sale: A judicial action when, in the best
interests of all parties, the land is sold and the
sale proceeds are divided up proportionately.
When would a forced sale work best?
- when it is a home or single building
58
Tenancy by the Entirety
General: It can be created only between married partners, who
take as fictitious “one person” with the right of survivorship
How Created: In states that recognize the tenancy by the entirety, it arises presumptively in any conveyance to married
partners unless the language of the grant clearly indicates otherwise
Remember: Can't Touch This - very protected form of co-ownership
Creditors: Creditors of only one spouse cannot touch
this tenancy for satisfaction of the debt
Unilateral conveyance: One spouse, acting alone,
cannot defeat the right of survivorship by unilaterally
conveying to a third party
59
Tenancy in Common
General:
- Each co-tenant owns an individual part, and each
has a right to possess the whole
- Each interest is devisable, descendible, and alienable.
Note: No survivorship rights
60
Rights and Duties of Co-Tenants - Possession
Rule: All parties must be able to enjoy the whole property, or otherwise qualified as ouster, an actionable wrong
61
Rights and Duties of Co-Tenants - Rent from Co-Tenant in Exclusive Possession
Rule: Absent ouster, a co-tenant in exclusive possession
| is not liable to the other co-tenants for rent
62
Rights and Duties of Co-Tenants - Rent from Third Parties
Rule: 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
63
Rights and Duties of Co-Tenants - Adverse Possession
Rule: Unless he has ousted the other co-tenant, the cotenant in exclusive possession for the statutory adverse possession period cannot acquire title to the
whole to the exclusion of the other co-tenant
Why: Does not meet the hostility requirement
64
Rights and Duties of Co-Tenants - Carryi
Rule: Each party pays their "fair share" i.e. percentage owned. Refers to taxes and mortgage interest payments
65
Rights and Duties of Co-Tenants - Repairs
Rule: The repairing co-tenant enjoys a right to contribution during the life of the co-tenancy for reasonable,
necessary repairs, provided he gave notice to the other
co-tenant(s) of the need for the repairs
Note: Split by "fair share"
66
Rights and Duties of Co-Tenants - Improvements
Rule: During the life of the co-tenancy there is no right
to contribution for “improvements” made by one cotenant
At Partition: Improver gets a credit equal to any value enhancement of unilateral change (or deduction equal to value decrease of change)
67
Rights and Duties of Co-Tenants - Waste
Rule: 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
Voluntary (Destruction)
Permissive (Neglect)
Ameliorative (Unilateral change, even if increase)
68
Rights and Duties of Co-Tenants - Partition
Rule: A joint tenant or tenant in common has a right to bring an action for partition
(i) voluntary agreement
(ii) partition in kind
(iii) forced sale
69
Landlord and Tenant Law: Leasehold/ Nonfreehold Estates
(Four Types)
- The tenancy for years
- The periodic tenancy
- The tenancy at will
- The tenancy at sufferance
70
Tenancy for Years
Rule: This lease, also known as the estate for years or term of years, is for a fixed, determined period of time
No notice to terminate required, note above 1 year needs to be in writing (SOF)
71
Periodic Tenancy
Rule: This is a lease which continues for successive intervals until given proper notice of termination
Creation:
(i) Expressly
(ii) By Implication
- land leased w/ no mention of duration
- oral term of years (in violation of SOF) measured by the way rent is tendered
- holdover in a residential lease, when tenant wrongfully stays on past the conclusion of the original lease
Termination:
Rule: Absent statutory language, notice in writing usually must be given, at least equal to a given interval or period itself
Termination Note: Six months at common law, but one month under the Restatement**
Additional Note: By private agreement, the parties may lengthen or shorten these common-law prescribed notice provisions
72
Tenancy at Will
Rule: This is a tenancy of no fixed period of duration
Language: “To T for as long as L or T desires.”
Creation: 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
Termination: In theory, a tenancy at will can be terminated by either party at any time. Yet today, a reasonable demand to quit the premises is typically required
73
Tenancy at Sufferance
Creation: It is created when T has wrongfully held over, past the expiration of the lease. We give this wrongdoer a leasehold estate (the tenancy at sufferance), to permit
L to recover rent.
Termination: The tenancy at sufferance is short-lived. It lasts only until L either evicts T or elects to hold T to a new tenancy.
74
Tenant's Duties
General: Two duties of tenant's (i) duty to repair and (ii) duty to pay rent
75
Tenant's Duty to Repair - When Lease is Silent
Rule: T need only maintain the premises, not responsible for normal wear and tear
76
Tenant's Duty to Repair - When Lease is Silent (Waste)
Rule: T Must Not Commit Waste
(i) voluntary
(ii) permissive
(iii) ameliorative
77
Tenant's Duty to Repair - When Lease is Silent (Law of Fixtures)
Rule: When a tenant removes a fixture, liable for voluntary waste (related to doctrine of waste)
Note: Fixture - A fixture is a once movable chattel that, by virtue of its annexation to
realty, objectively shows the intent to permanently
improve the realty
Note: This means that if what T installed amounts to a fixture, T must not remove it
78
Tenant's Duty to Repair - When Lease is Silent (Law of Fixtures) - Is it a Fixture?
Two Ways to Tell:
There are two ways to tell.
1. Express agreement controls - what is in the lease described as fixtures
2. If no express agreement on point, T may remove a chattel that she has installed so long as removal does not cause substantial harm to the premises
Note: If removal will cause substantial damage to
the premises, then in objective judgment T has
shown the intention to install a fixture. Thus, it must
stay put.
Remember: Fixtures pass with ownership of the
land. If T removes a fixture, she is liable for voluntary waste.
79
Tenant's Duty to Repair - Express Agreement in Lease
(to Maintain Property in
Good Condition for Duration of the Lease)
Note: At common law, historically, T was responsible for any
loss to the property, including loss attributable to force of nature, such as tornado, earthquake, hurricane, etc.
Majority View: T may end the lease when the premises are destroyed without T's fault
80
Tenant's Duty to Pay Rent
- T Breaches the Duty to Pay Rent and is in
Possession of the Premises
Options: (i) Evict through the courts or (ii) Continue the relationship and sue for the monies owed
Note: In eviction, tenant is a tenant at sufferance
Self-Help: Landlord must not engage in self-help i.e. changing the locks, forcible removal, removal of possessions, etc.
- Self-help is flatly outlawed and is punishable civilly and
criminally
81
Tenant's Duty to Pay Rent
- T Breaches the Duty to Pay Rent but is Out of
Possession
Ex. Tenant wrongfully vacates with time left on a term-of-years lease
Remember: SIR
S: Surrender - T shows want to give up lease by words or conduct
I: Ignore - Ignore the abandonment and hold T responsible for the unpaid rent, just as if T were still there. (Only available in a minority of states)
R: Relet - Re-let the premises on the wrongdoer-tenant’s behalf, and hold the wrongdoer-tenant liable for any deficiency because of a duty to mitigate (Majority view)
82
Landlord's Duties - Duty to Deliver Possession
Rule: The 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, what
result?
- L breached and now T gets damages
83
Landlord's Duties - Implied Covenant of Quiet Use and Enjoyment**
Rule: This exceedingly important promise arises by implication in every residential and commercial lease that provides that T has a right to quiet use and enjoyment of the premises without interference of L
i.e. Wrongful Eviction - When L wrongfully wrongfully evicts or excludes T from the premises
Constructive Eviction - SING
S I - substantial interference due to L's actions or failures
N - Notice:T must notify L of the problem and L must fail to avail it
G - Get out: T must leave
Note: The aggrieved tenant must vacate in a reasonable time after L fails to remedy
Note: Acts of Other Tenants
General Rule: L is not liable for the actions of other tenants. Exceptions:
- Most not allow a nuisance on site
- Must control common areas
84
Landlord's Duties - Implied Warranty of Habitability**
General: This implied promise applies only to residential leases and not to commercial leases. The
implied warranty of habitability is non-waivable (any attempt to do so is null)
Rule: The premises must be fit for basic human dwelling
Appropriate Standard Discerned: case law and statutory law (housing code)
Ex. no heat in winter, no workable plumbing, no working water
85
Landlord's Duties - T’s Entitlements When Implied Warranty of
Habitability Is Breached
Remember M R 3: Move, Repair, Reduce, Remain
M: Move out and end the lease BUT T does not have to
R: Repair and deduct - make necessary repairs and deduct cost from future rent
R: Reduce or withhold rent until court assesses fair rental value (Note: will have to place rent money in escrow to show good faith)
R: Remain, paying rent and suing for money damages
86
Retaliatory Eviction
Rule: If T lawfully reports L for housing code violations, L
is barred from penalizing T, (Example: by raising
rent, ending the lease, harassing T, or taking any other reprisals)
Reason: To encourage and protect good faith tenant whistleblowing
87
Transfer of Leasehold - Assignment versus Sublease
Rule: In the absence of some prohibition in the lease, a T
may freely transfer his or her interest in whole (thereby accomplishing an assignment) or in part (thereby accomplishing a sublease). In the lease, L can prohibit T from assigning or subletting without L’s prior written approval. However, 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
Ex. T1 has 10 months remaining on a two-year term of years lease. T1 transfers all 10 months to T2. Is this an assignment or a sublease? Assignment because gave all of rest of 10-month lease term
88
Privity of Estate
Rule: If T2 is now in possession, and liable to each other for all covenants that run with the land
i.e. promise to pay rent or repair
Note: L and T2 are not in privity of contract. Why
not? They never exchanged the original promissory
words of contract that created the lease.
L and T1
As a result of an assignment, L and T1 are no longer
in privity of estate, because no retention of possession
However, they remain in privity of contract. Why?
They shared the original words of contract that
created the lease.
Because L and T1 remain in privity of contract:
89
Transfer of Leasehold - Sublease
Rule: A sublease arises when T1 transfers less than all the time that is left
Result: The landlord and sublessee are in neither privity of estate nor privity of contract. Instead, T2 is responsible to T1 and vice versa
Note: The relationship between L and T1 remains fully intact. Thus, for example, if T2 fails to pay rent, L
proceeds against T1 and T1 in turn proceeds against
T2. If the residential premises betray the implied
warranty of habitability, T2 proceeds against T1 and
T1 in turn proceeds against L
90
Landlord's Tort Liability
Rule: Common Law of Caveat Lessee; The norm: Let the tenant beware. In tort, L was under no duty to make the premises safe
Five Most Important Exceptions: When tenant learns of these exceptions to the harsh common law of caveat lessee, she
CLAPS back
91
Landlord's Tort Liability - Five Exceptions
CLAPS back
C - Common Areas - L must maintain all common areas (hallways, stairwells)
L - Latent Defects Rule: L must warn T of hidden defects of which L has knowledge or reason to know
Note: This is a duty to warn, and not a duty to repair
A - Assumption of Repairs: While under no duty to
make repairs, once undertaken, L must complete them with reasonable care, i.e. if repairs made negligently, L is liable for personal injury
P - 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, because T does not have time or expertise to make repairs themself
S - Short-Term Lease of Furnished Dwelling: L is responsible for any defective condition which proximately injures T because T does not have time or expertise to make repairs themself
92
Latent Defects Rule
Rule: If, at the time a lease is entered into, the landlord knows of a dangerous condition that the tenant could not discover upon reasonable inspection, the landlord has a duty to disclose the dangerous condition. Failure to disclose the information about the condition results in liability for any injury resulting from the condition.
93
Servitudes - Easements
Rule: An easement is a grant of a non-possessory property interest that entitles its holder to some form of use or enjoyment of another’s land; can be affirmative or negative
94
Affirmative Easement
Rule: An affirmative easement is the right to go onto and do something on
servient lan. Most easements are affirmative.
95
Negative Easement
Rule: The negative easement entitles its holder to prevent the servient landowner from doing something that
would otherwise be permissible. Negative easements are generally recognized in only four categories:
LASS
A minority of states also allow a negative easement
for scenic view.
Creation of a Negative Easement: Rule can only be created expressly, by
a writing signed by the grantor. There is no natural or
automatic right to a negative easement.
96
Four Categories of Negative Easements
LASS
L - Light; light or light structure atop servient land
A - Appurtenant or in gross
S -
S -
97
Negative Easement - Appurtenant or in Gross
General: An easement is either appurtenant to land or it is held in gross
98
Negative Easement - Appurtenant (Relevant to or Helpful To)
Rule: The easement is appurtenant when it benefits its holder in his physical use or enjoyment of his property
Two parcels of land must be involved:
• a dominant tenement, which derives the benefit
and
• a servient tenement, which bears the burden
99
Negative Easement - In Gross
Rule: The easement is in gross if it confers upon its holder only some personal or pecuniary advantage that is not related to his use or enjoyment of his land. Here, servient land is burdened. However, there is no benefited or dominant tenement.
Only one land is involved - purely personal or commercial gain
100
Transferability of Easements - Easement Appurtenant
Rule: The appurtenant easement passes automatically with
the dominant tenement, regardless of whether it is
even mentioned in the conveyance
Note: The burden of the easement appurtenant also passes automatically with the servient estate, unless the new owner is a bona fide purchaser without notice of the easement
101
Transferability of Easements - Easement in Gross
Rule: An easement in gross is not transferable unless it is for commercial purposes
Note: Personal easement in gross is PERSONAL to its holder
102
Creation of an Affirmative Easement
PING
P - Prescription; An easement may be acquired by analogy to adverse
possession (COAH) Note: Does not have to be exclusive (obviously bc easement)
- continuous use for the given statutory period
- open and notorious use
- actual use
- hostile use (w/o permission)
(Note: Permission defeats the acquisition of an easement by prescription. An easement by prescription
requires that the use be hostile)
I - Implication; Must be readily apparent and expected it to survive division (if reasonably necessary to dominant parcels use and enjoyment)
N - Necessity; An easement by necessity will be implied when grantor conveys a portion of its land with no way out, except over some part of the grantor’s remaining land
G - Grant; An easement to endure for more than one year must be in a writing that complies with the formal elements of a deed (SOF in a deed of easement)
103
Scope of an Easement Determination**
Rule: By the terms or conditions that created it
Note: No unilateral expansion to use of the easement
104
Termination of Easements
Rule: There are 8 ways to terminate an easement
- END CRAMP: Estoppel, Necessity, Destruction,
Condemnation, Release, Abandonment, Merger, Prescription
105
Termination of Easements - Estoppel
Rule: Here, the servient owner materially changes his or her position in reasonable reliance on the easement holder’s assurances that the easement will no longer
be enforced
106
Termination of Easements -Necessity
Rule: Easements created by necessity expire as soon as the necessity ends,
Exception: Unless the easement was reduced to an express grant
107
Termination of Easements -
| Destruction
Rule: Destruction of the servient land, other than through the willful conduct of the servient owner, will terminate the easement
108
Termination of Easements -
| Condemnation
Rule: Condemnation of the servient estate by governmental eminent domain power will terminate the easement
109
Termination of Easements -Release**
Rule: A release given by the easement holder to the servient land owner will terminate the easement, and must be in writing
110
Termination of Easements -
| Abandonment**
Rule: Abandonment requires physical action by the easement holder, showing the physical action never to make use of the easement again
Note: Mere nonuse, or mere words, are insufficient to terminate by abandonment
111
Termination of Easements -
| Merger
Rule: The easement is extinguished when title to the easement and title to the servient land become vested in the same person
Note: Would have to start from scratch if title becomes separated again
112
Termination of Easements -
| Prescription
```
Rule: The servient owner may extinguish the easement by interfering with it in accordance with the elements of adverse possession (COAH)
C: Continuous interference
O: Open and notorious
A: Actual
H: Hostile to the easement holder
```
113
Licenses and Profits - License Creation
Rule: The license is a mere privilege to enter another’s land for some delineated purpose, and a writing is not required
114
Licenses and Profits - License Revocation
Rule: Licenses are freely revocable, at the will of the licensor, unless estoppel applies to bar revocation
Example:
Ticket Cases - creates a freely revocable license
Neighbors Talking by the Fence* - created is freely revocable license, beware
of seemingly oral easements, not enforceable, violates SOF
115
Licenses and Profits - License Estoppel
Estoppel applies only when the licensee has invested substantial money or labor or both in reasonable reliance on the license’s continuation
116
Licenses and Profits - Profits
Rule: The profit entitles its holder to enter the servient land and take from it the soil or a product of the soil
Ex. Timber, minerals, oil
Same Rules for Creation and Termination
117
Servitudes - Restrictive Covenants
Covenants Generally: The covenant is a promise to do or not do something
related to 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, can be negative or affirmative
118
Negative Restrictive Covenants
Rule: Covenants can be negative, these are known as restrictive covenants that are restrictions on the use of land to not do something
Ex. I promise I will not have a pet
119
Affirmative Restrictive Covenants
Rule: The affirmative covenant is a promise to do something related to land
Ex. I promise to have a pet
120
Covenant vs. Equitable Servitude
Rule: Decide on the basis of the remedy that the Plaintiff seeks
If the plaintiff wants money
damages, you must construe the promise as a covenant.
If the plaintiff wants an injunction, you must
construe the promise as an equitable servitude
121
Covenants - Running with the Land
Rule: Covenants run with the land when it is capable of binding successors to the originally binding parties
- Diagram out respective interests
1. Does the burden of A’s promise to B run from A to
A-1 (Always analyze the burden side first. It is harder
for the burden to run than for the benefit to run)
- For the Burden of a Covenant to Run Remember W I T H N
2. Does the benefit of A’s promise to B run from B to
B-1
- For the Benefit of a Covenant to Run Remember W I T V
122
Covenants - Running with the Land Burden Analysis (W I T H N)
Writing: The original promise (between A and B) must
have been in writing
Intent: The original parties (A and B) must have intended that the covenant would run
Note: Courts are generous in finding the requisite intent
Touch and concern the land:
The promise must affect the parties’ legal relations as
landowners and not simply as members of the community at large.
Note: 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 are required for
the burden to run**
• Horizontal privity refers to the nexus between
the original promising parties (A and B).
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
Horizontal privity is difficult to establish. Its absence is the reason why many burdens
will not run (likely)
• Vertical privity refers to the nexus between A and A-1:
It simply requires some non-hostile nexus, such as: contract, devise, or descent
The only time vertical privity will be absent:
when A-1 acquired her interest through adverse possession**
Notice: A-1 must have had notice of the promise when
A-1 took
123
Covenants - Running with the Land Benefit Analysis (W I T V)
Writing: the original promise (between A and B) was in
writing
Intent: the original parties (A and B) must have intended that the benefit would run
Touch and concern: The promise must affect the parties as landowners
Vertical privity: a non-hostile nexus between B and B-1
Note: Horizontal privity is not required for the benefit
to run** (why it’s easier for the benefit to run than for the burden to run)
124
Equitable Servitudes
Rule: The equitable servitude is a promise that equity will enforce against successors, accompanied by injunctive relief
The benefit of an equitable servitude runs to successors if: (i) the original parties so intended, and (ii) the servitude touches and concerns the land. The burden runs if (i) and (ii) are met and (iii) the subsequent purchaser has actual or constructive notice of the covenant.
125
Creation of Equitable Servitudes
Rule: To create an equitable servitude that will bind successors.. (you need a W I T N E S)
Writing: Generally, but not always, the original promise
was in writing
Intent: The original parties intended that the promise
would be enforceable by and against assignees
Touch and concern: The promise affects the parties as landowners
Notice: The assignees of the burdened land had notice of the promise when they took
ES: Equitable Servitude
Note: Privity is not required to bind successors to an equitable servitude
126
Implied Equitable Servitude - Common Scheme Doctrine
Rule: Under the common scheme doctrine, the court will imply a reciprocal negative servitude to hold the unrestricted lot holder to the promise. (Reciprocal negative servitude means an implied equitable servitude)
Two Elements:
(1) When the sales began, the subdivider (A) had a general
scheme of residential development which included the defendant’s lot
(2) The defendant lot-holder (B) had notice of the promise
contained in those prior deeds when it took
127
Implied Equitable Servitude - Synonymous with the General or Common Scheme Doctrine
Rule: Found when A is subdivided, if no such covenant contains restrictive covenant, then can be enjoined
128
Implied Equitable Servitude - Common Scheme Doctrine: Notice
Rule: Three Forms - A I R
(i) Actual notice, meaning someone told you/ it was expressed outright
(ii) Inquiry notice, meaning the neighborhood conforms to the common restriction (Lay of the Land notice)
(iii) Record notice, meaning the form of notice sometimes imputed to buyers on the basis of public documents
129
Equitable Defenses to Enforcement of an Equitable Servitude
Doctrine of Changed Conditions
Rule: The 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
Note: Must seek release in equity in court, ______ mere pockets of limited change is never good enough
130
Conveyancing
Rule: Land conveyancing is the purchase and sale of real estate
Every conveyance of real estate consists of a two-step process:
- Step I: The land contract, which conveys equitable
title. The land contract endures until step II
- Step II: The closing, where the deed passes legal title
and becomes our operative document
131
Land Contracts - Statute of Frauds
Rule: The standard of land contracts is the SOF, and under the SOF the contract must
- be in writing,
- signed by the party against whom enforcement
is sought,
- describe the land, and
- be supported by consideration
Exception: The Doctrine of Part Performance
132
Land Contracts- What if Size of Land Recited in Contract Is More than Its
Actual Size
Specific performance with a pro rate reduction in price
133
Land Contracts - SOF Exception: The Doctrine of Part Performance
Rule: If, on your facts, you have two of the following three, the doctrine is satisfied and equity will decree specific performance of an oral contract for the sale of land:
(i) B takes possession
(ii) B pays all or a significant part of the price; and/ or
(iii) B makes substantial improvements
134
The Problem of Risk of Loss
Rule: Apply the doctrine of equitable conversion - Equity regards as done that which ought to be done
In equity, once the contract is signed, buyer is deemed to be the equitable owner
Note: Destruction. If, in
the interim between contract and closing, Blackacre is destroyed through no fault of either party, BUYER bears
the risk of loss, subject to seller remitting the lost payment for the sale price
135
Implied Promises in Land Contracts
Rule: Two implied promises in every land contract
(1) Seller promises to provide marketable title at the closing: free from reasonable doubt
(2) Seller Will Not Make
False Statements of Material Fact
136
Implied Promises in Land Contracts - Unmarketable Title
Rule: Three circumstances that will render title unmarketable
(i) Adverse possession: If even a portion of the
title rests on adverse possession, it is unmarketable. In other words, for title to be marketable, Seller must be able to provide good/clean title
(ii) Encumbrances: Marketable title means an unencumbered fee simple.
Servitudes and mortgages render title unmarketable unless the buyer has waived them.
Note: Seller has the right to satisfy an outstanding mortgage or lien at the closing, with the
proceeds of the sale. Thus, buyer cannot claim
title is unmarketable because it is subject to a
mortgage prior to closing, so long as the parties understand that the closing will result in the mortgage being satisfied or discharged.
(iii) Zoning violations: If the premises are in violation, title is unmarketable
137
Implied Promises in Land Contracts - False Statement of Material Fact
Rule: Seller promises not to make any false statements of material fact. The majority of states now also hold seller liable for failing to disclose latent material defects
Note: Seller cannot avoid liability for fraud or failure to disclose by including in the contract a general disclaimer of liability (for example, “property sold as is” or “with all faults”)
138
Land Contracts - No Implied Warranty of Fitness or Habitability
Rule: The land contract contains no implied warranties of
fitness or habitability. The common law is buyer beware
Exception: The implied warranty of fitness and workmanlike construction applies to the sale
of a new home by a builder-vendor
139
Closing
Rule: When closing The controlling document now is the deed, passing legal title from seller to buyer (L E A D)
140
Closing - Deed Requirements (L E A D)
Rule: to pass legal title from seller to buyer the deed must be “LEAD”: Lawfully Executed And Delivered
Description of Land - Must be sufficiently unambiguous and sufficient to be a lead in the land discussed (does not have to be perfect)
141
Closing - Deed Requirements Delivery**
Rule: The delivery requirement could be satisfied when the grantor physically or manually transfers the deed to the grantee. It is permissible here to use the mail or agent or messenger
Exception: Delivery does not necessarily require
actual physical transfer of the instrument itself
Note: The standard for delivery is a legal standard, and is a test solely of present intent - Did grantor
have the present intent to be bound, irrespective
of whether or not the deed was literally handed
over to the grantee
- If recipient expressly rejects the deed, rejection defeats delivery
Additional Note : If a deed, absolute on its face, is transferred to the
grantee with an oral condition, the oral condition drops out/ void (not provable) and delivery is done
142
Closing Deed Delivery - By Escrow
Rule: Grantor may deliver an executed deed to a third
party, known as an escrow agent, with instructions
that the deed be delivered to grantee once certain
conditions are met. Title passes to grantee once conditions are met
Rule: If grantor dies or becomes incompetent or is otherwise unavailable before the express conditions are met, title will still pass from the escrow agent to the
grantee once the conditions are met
143
Covenants for Title and Three Types of Deed**
(1) Quitclaim Deed
(2) General Warranty Deed
(3) Special Warranty Deed
144
Quitclaim Deed
Rule: Quitclaim deeds do not contain any covenants
Note: Grantor isn’t even promising that he has title to convey. This is the worst deed a buyer could hope for.
145
General Warranty Deed
Rule: General warranty deeds warrant against all defects in title, including those attributable to grantor’s predecessors
Note: The best deed a buyer could hope for
The general warranty deed typically contains all six
of the following covenants.
146
General Warranty Deed - Present Covenants (3)
Rule: A present covenant is breached, if ever, at the time the deed is delivered.
SOL begins to run at delivery.
(1) The Covenant of Seisin: grantor promises that she owns land
(2) The Covenant of the Right to Convey: grantor has the power to transfer
(3) The Covenant Against Encumbrances: grantor promises that there are no servitudes or liens on the land
147
General Warranty Deed - Future Covenants (3)
Rule: A future covenant is not breached, if ever, until
grantee is disturbed in possession. SOL begins to run when grantee is disturbed in possession
(1) The Covenant for Quiet Enjoyment: Grantor
promises that grantee will not be disturbed in
possession by a third party’s lawful claim of title
(2) The Covenant of Warranty: Grantor promises
to defend grantee should there by any superior
claims of title asserted by others
(3) The Covenant for Further Assurances: Grantor
promises to do what’s needed to perfect grantee’s title if it later turns out to be imperfect
148
Special Warranty Deed
Rule: This deed contains the same covenants as the general warranty deed, but here the grantor makes those promises only on behalf of itself
Note: Grantor makes no representations on behalf of its predecessors in interest
149
Recording System
Questions will always be reduced to the "model of the dirty double dealer"
Brightline Rules: Recording Statutes
1. Notice Jurisdiction - If B is a bona fide purchaser in a
NOTICE jurisdiction, B wins, regardless of whether or not she records before A does
2. Race-Notice Jurisdiction - If B is a bona fide purchaser in a RACE-NOTICE jurisdiction, B wins if she records properly before A does
Recording statutes protect bona fide purchasers and mortgagees
150
Recording System - Bona Fide Purchaser
Rule: A BFP is a purchaser who takes land without notice of a prior instrument and pays valuable consideration.
A bona fide purchaser is one who
(i) buys for value;
(ii) without notice that someone else got there first
(at the time of closing)
151
Recording System - Bona Fide Purchaser: Value Analysis
Rule: (i) buys for value
Note: Buy for Value Q's
1. Bargain Basement Sale - as long as substantial pecuniary value is paid
2. Doomed Donee - Recording statutes do not protect donees, heirs, or devisees unless the Shelter Rule applies
152
Recording System - Bona Fide Purchaser: Notice Analysis
Rule: (ii) without notice that someone else got there first
```
Three Forms of Notice that a buyer may potentially
be charged with: A I R
A: Actual Notice
I: Inquiry Notice
R: Record Notice
```
153
Recording System - Bona Fide Purchaser: Actual Notice
Rule: Actual notice means prior to closing, B knows of A
154
Recording System - Bona Fide Purchaser: Inquiry Notice
Rule: Whether bothers to inspect prior to closing or not, buyer has a duty to inspect the premises before transfer to title
If another is in possession, B is charged with inquiry
notice of that fact, regardless of whether B actually bothered to inspect or not
Inquiry notice also means that if a recorded instrument makes reference to an unrecorded transaction,
grantee is on inquiry notice of whatever a reasonable
follow-up would have revealed
155
Recording System - Bona Fide Purchaser: Record Notice
Rule: B is on record notice of A’s deed if at the time B takes, A’s deed was properly recorded within the chain of title
Exceptions:
Notice Jurisdiction -
Rule: If B is a bona fide purchaser in a NOTICE jurisdiction, B wins, regardless of whether or not she records before A does
Race-Notice Jurisdiction - Rule: If B is a bona fide purchaser in a RACE-NOTICE jurisdiction, B wins if she records properly before A does (B must be a BFP and win the race to record)
156
Recording Statutes - Notice Statute
Language: "A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded."
To Prevail: In a notice state, the last BFP to take wins
157
Recording Statutes - Race-Notice Statute
Language: “A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first
recorded.”
To Prevail: In a race-notice state, B must be a BFP and win the race to record
158
Recording Statutes - Chain of Title
Rule: To give record notice to subsequent takers, the deed must be recorded properly, within the chain of title. The chain of title is the sequence of recorded documents capable of giving record notice to subsequent
takers
In most states, the chain of title is established by a title search of the grantor-grantee index
Note: note that in either a notice or race-notice jurisdiction, B’s status as a subsequent bona fide purchaser will be defeated if A had promptly and properly recorded before B takes. In
other words, A’s proper recordation
159
Recording Statutes - Discrete Chain of Title Problems
1. The Shelter Rule
2. The Problem of the Wild Deed
3. Estoppel by Deed
160
Recording Statutes - Chain of Title Problems: The Shelter Rule
Rule: One who takes from a BFP will prevail against any
entity that the transferor-BFP would have prevailed
against
In other words, the transferee “takes shelter”
in the status of her transferor, and thereby “steps into
the shoes” of the BFP even though she otherwise fails
to meet the requirements of BFP status
**The rule is attempting to protect B, the BFP by making it easier for B to transfer title successfully (without being weighted by dirty dealer's transgressions)
161
Recording Statutes - Chain of Title Problems: The Problem of the Wild Deed
Rule: If a deed, entered on the records (A to B), has a grantor unconnected to the
chain of title (O to A), the deed is a wild deed. It is
incapable of giving record notice of its existence
In other words, not connected to the title because a link is missing to the records
Ex. O sells Blackacre to A, who does not record. Then, A sells to B. B records the A-to-B deed
Remember: B’s recording is a nullity
162
Recording Statutes - Chain of Title Problems: Estoppel by Deed
Rule: One who conveys realty in which he has no interest, is estopped from denying the validity of that conveyance if he subsequently acquires the title that he had previously purported to transfer
Note: One is entitled to assume that no one sells land until they first own it, and old deed would not be found because the first recording would be a nullity
163
Creation of Mortgages
Rule: A mortgage is the conveyance of a security interest in land, intended by the parties to be collateral for the repayment of a monetary obligation.
In other words, the owner of real estate gives the lender a lien in that real
estate to secure or backup the loan that the lender
makes
Mortgage is the union of two elements:
1. Debt - obligation to pay represented in a writing
2. Voluntary Transfer - of a lien (security interest) in the debtor's land to finance/ collateralize the debt
164
Mortgage Vocabulary
Debtor - Mortgagor
| Creditor - Mortgagee
165
Primary Ways to Mortgage: Purchase-Money Mortgage
Rule: The purchase-money mortgage is 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
A mortgage given to
secure a loan that enables the debtor to acquire the
encumbered land.
166
Primary Ways to Mortgage: Non-Purchase-Money
Rule: The non-purchase-money mortgage is when collateralizing already owned property for other purchase
167
Mortgage Requirements - Writing
Rule: The mortgage typically must be in writing to satisfy the
Statute of Frauds. This is the legal mortgage
Legal Mortgage Names:
- Note
- Mortgage Deed
- Deed of Trust
- Sale Leaseback
- Security Interest in Land
168
Mortgage Transfer of Interests
General Rule: All parties to a mortgage can transfer their interests
169
Mortgage Transfer of Interests - Transfer by Mortgagee
Rule: In transfers by mortgagee, the mortgage automatically follows a properly transferred note
170
Mortgage Transfer of Interests - Transfer by Mortgagor
Rule: In transfers by mortgagor, the mortgage remains on the land as long as the mortgage instrument was properly recorded.
Remember: recording
statutes protect mortgagees**
171
Mortgage Transfer of Interests - Liability in Transfer by Mortgagor
Q: Who is personally liable on the debt if O, our debtor-mortgagor, sells Blackacre to B?
- If B has “assumed the mortgage” both O and B are
personally liable. B is primarily liable, and O remains secondarily liable.
- If B takes “subject to the mortgage” B assumes no
personal liability. Only O is personally liable. But, if
recorded, the mortgage remains on the land. Thus, if
O does not pay, the mortgage may be foreclosed
172
Mortgage Transfer of Interests - Recording Statutes
Rule: All recording statutes apply to mortgages as well as deeds. Thus, a subsequent buyer takes subject to a properly recorded lien
Remember: Recording
statutes protect mortgagees**
- In a notice state, Buyer takes subject to the lien because buyer had record notice
- In a race-notice state, Buyer takes subject to the lien because it had record-notice and creditor recorded first
173
Foreclosure
Rule: If a debtor-mortgagor has defaulted on a loan, the mortgagee must foreclose by proper judicial
proceeding. At foreclosure, the land is sold. The sale
proceeds go to satisfying the debt
- If less than the amount owed, pursues deficiency action to attach and apply other debts to satisfy mortgage
- If more than the amount owed, junior lien holders will be paid off in order of priority, and if any surplus is left, it goes to the debtor. Each claimant is entitled to satisfaction in full before a
junior lien holder may take (can then pursue a deficiency action)
Note: Attorney's fees, foreclosure fees and any accrued interest fees will be paid off first
174
Effect of Foreclosure on Various Interests - Junior Interests
Rule: 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 left over after full satisfaction
of superior claims. Junior lienholders should be able to
proceed for a deficiency judgment.
Exception: **But once foreclosure of a superior claim has occurred, with the proceeds distributed appropriately, junior lienholders can no longer look to Blackacre for satisfaction
Necessary Parties: Debtor-Mortgagor and Junior Creditors
Rule: Failure to include a necessary party results in the preservation of that party’s claim, despite the foreclosure
and sale. Thus, if a necessary party is not joined, his
mortgage will remain on the land
175
Effect of Foreclosure on Various Interests - Senior Interests
Rule: Foreclosure does not affect any interest senior to the mortgage being foreclosed. The buyer at the sale takes subject to such interest
Note: Foreclosure sale buyer is NOT personally liable on the senior debt, BUT as a practical matter, if the senior mortgage is not paid, sooner or later the senior creditor will foreclose against the land
- i.e. If original debtor cannot repay the debt,
First Bank (whose lien was properly recorded) is entitled to foreclose on Blackacre, because First Bank’s mortgage was
properly recorded, it sticks with the land
176
Recording - Priorities
Rule: As a creditor, you must record. Until you record, you
have no priority. Once recorded, priority is determined by the norm of first-in-time, first-in-right
First-in-Time, First-in-Right: The creditor who records first takes first, and so on
Exception: Purchase-Money Mortgage (mortgage given to secure a loan that enables the debtor to acquire the
encumbered land)
177
Recording - Priorities Exception: Purchase-Money Mortgages
Rule: If recorded properly purchase-money mortgagees get first priority in the parcel it financed after all
Note: Purchase-Money Mortgage - mortgage given to secure a loan that enables the debtor to acquire the
encumbered land
Note: Floating Lien - whereby a lender takes by collateral an interest in present and after-acquired property
- Occurs when loan is undercollateralized at its inception
178
Subordination Agreements
Rule: By private agreement, a senior creditor may agree to subordinate its priority to a junior creditor. Subordination agreements are permissible and normal
Why? - favor may be reciprocated on another deal
179
Redemption - Redemption in Equity
Rule: Equitable redemption is universally recognized up to the date of sale, (any time
prior to the foreclosure sale the debtor has the right to
redeem the land by freeing it of the mortgage).
Once a valid foreclosure has taken place the right to
equitable redemption is cut off
180
Redemption - Exercising Equitable Redemption
(1) In the absence of an acceleration clause, (call in the entire amount owed on the debt if in default) may pay off the missed payments, plus accrued interest and costs
(2) In the presence of an acceleration clause, debtor must pay off the full balance, plus accrued interest and costs
Note: Clogging - A debtor/mortgagor may NOT waive the right to redeem in the mortgage itself
181
Zoning
Defined: Pursuant to its police powers, government
| may enact statutes to control land use
182
Zoning - The Variance
Rule: The principal means to achieve flexibility in zoning.
The variance grants a landowner permission to depart from a zoning stricture
Must Show:
(1) Undue hardships
(2) The variance won't diminish neighboring property values
Note: The variance is granted or denied by administrative
action, typically in the form of a zoning board
183
Zoning - Nonconforming Use
Rule: When a once lawful, existing use is now deemed nonconforming by a new zoning ordinance, the once
lawful use cannot be eliminated all at once, UNLESS just compensation is paid
184
Zoning - General (Cumulative and Noncumulative)**
Note: Two types of zoning ordinances: Cumulative
and Noncumulative
General: A cumulative zoning ordinance creates a hierarchy of uses of land, where a single-family home is the highest use, followed for example by a two-family home (which is a lesser use), and then an apartment building (an even lesser use), and then a strip mall (even lesser), and then a factory (even lesser)
185
Zoning - Cumulative Zoning**
Rule: Under a cumulative zoning ordinance, land that is zoned for a particular use may be used for that particular use and for any higher use
186
Zoning - Noncumulative Zoning**
Rule: Under a noncumulative zoning ordinance, land may be
| used only for the purpose for which it is zoned
187
Condominiums
General: In a condominium, each owns the interior of her individual unit plus an
undivided interest in the exterior and common elements
188
Homeowners' Associations (HOA)
The owner of each condominium is a member of the HOA, who oversees the common elements
The HOA passes rules codified in what’s called a
declaration of covenants, conditions, and restrictions (or CC&R), that prescribe what owners can and
cannot do with their property (works as servitudes, privately imposed restrictive covenants)
A board elected by the members of the HOA enforces the CC&Rs
Note: Each condominium owner must pay regular dues to the HOA to maintain the common elements. If the monthly fees are insufficient to pay necessary expenses, then the HOA imposes an additional one time fee ("Special Assessment")
189
Mortgage Theory of Title - Lien Theory
Rule: Mortgagee holds a security interest only
190
Mortgage Theory of Title - Title Theory
Rule: Mortgagee holds title until mortgage is satisfied
191
Mortgage Theory of Title - Intermediate Theory
Rule: Mortgagee holds title only after default
192
Other Security Interests
1. Deed of Trust - similar to a mortgage, but a third-party trustee forecloses
2. Installment Land Contract - seller retains the deed until buyer pays in full
3. Absolute Deed - treated as an equitable mortgage when given for a debt
4. Sale-Leaseback - court may determine this was a disguised mortgage
193
Surcharged Easements
Rule: If an easement is said to be surcharged, this means the easement's legal scope was exceeded, and the servient owner may sue to enjoin the use
194
Easement by Necessity
Rule: An easement by necessity arises when the owner of a tract of land sells a part of the tract and by this division deprives one lot of access to a public road or utility line.
Note: The owner of the servient parcel has the right to locate the easement, provided the location is reasonably convenient.
195
Doctrine of "Reciprocal Negative Servitudes"
Rule: When a developer subdivides land into several parcels and some of the deeds contain negative covenants but some do not, negative covenants or equitable servitudes binding all the parcels in the subdivision may be implied under the doctrine of "reciprocal negative servitudes."
Two Requirements:
(i) a common scheme for development, and (ii) notice of the covenants
- actual, record, inquiry
196
Exception to Implied Warranty of Marketable Title: Beneficial Easement
Rule: A majority of courts have held that an easement that was (i) visible or known to the buyer, and/or (ii) beneficial to the land/ enhanced the value of the property, it does not constitute an encumbrance that renders seller's title unmarketable
Generally, if an easement is not provided for in the contract, it usually renders the seller's title unmarketable.
197
Color of Title
Rule: Color of title is possession of a document that purports to give title, but for reasons not apparent from its face does not
198
Mortgagee Obtaining Judgment: Grantor-Mortgagor vs Grantee
Rule: When a grantee assumes the mortgage, the grantee expressly promises the grantor-mortgagor that he will pay the mortgage obligation as it becomes due. The mortgagee then becomes a third-party beneficiary of the grantee's promise to pay and can sue the grantee directly if the grantee fails to pay. After the assumption, the grantor-mortgagor becomes a surety who is secondarily liable to the mortgagee on the note if the grantee fails to pay.
- Thus, the parties are "jointly liable"
199
Priority in Foreclosures - Modification of Senior Interest
Rule: Generally, the priority of a mortgage is determined by the time it was placed on the property, and the proceeds of a foreclosure sale will be used to pay off the mortgages in the order of their priority.
However, if the landowner enters into a modification agreement with the senior mortgagee, raising its interest rate or otherwise making the agreement more burdensome, the junior mortgage will be given priority over the modification.
200
Priority in Foreclosures - Lien Senior to Mortgagee in Default
Rule: Generally, the priority of a mortgage is determined by the time it was placed on the property, and the proceeds of a foreclosure sale will be used to pay off the mortgages in the order of their priority.
However, if a lien senior to that of a mortgagee is in default, the junior mortgagee has the right to pay it off (i.e., redeem it) to avoid being wiped out by its foreclosure. Thus, those persons with interests subordinate to those of the foreclosing party are necessary parties to the foreclosure action. Failure to include a necessary party results in the preservation of that party's interest despite foreclosure and sale. Hence, the seller's failure to include the creditor as a party to the foreclosure action preserved the creditor's mortgage on the property.
201
Applicability of Recording Acts (Statutes) - Any Type
Rule: Under any recording act, a subsequent bona fide purchaser with no actual, inquiry or constructive notice prevails over a prior grantee or mortgagee who has not recorded at the time of the conveyance to the subsequent purchaser
Exception: Subsequent purchasers are not protected by the recording acts against, and thus take subject to, interests that arise by operation of law (e.g. title by adverse possession, easements, etc.)
202
Hostile Possession Under an Invalid Deed
Rule: Any time someone enters possession with an invalid deed, the possession is hostile because they are claiming rights superior to those of the true owner
