Real Property

Question 1

LOW

DEFEASIBLE FEE (SIMPLE)

Answer 1

A defeasible fee is a conveyance in fee simple in which the grantor places express conditions on the conveyance (e.g., “O to A on the condition that . . .”). A defeasible fee is capable of lasting forever, but may be terminated by the occurrence of an event.

A defeasible fee gives the grantee a present possessory interest in the property, but reserves a future interest in the property in the favor of the grantor or a third party. There are three main types of defeasible fees:

1. Fee Simple Determinable
2. Fee Simple Subject to Condition Subsequent
3. Fee Simple Subject to Executory Interest

Question 2

LOW

FEE SIMPLE DETERMINABLE

Answer 2

A fee simple determinable is a conditional conveyance in which the grantor retains a future interest as a possibility of reverter.

The possibility of reverter vests automatically when the condition fails (i.e., the grantor does not have to reclaim the property, the interest automatically vests back to him).

A fee simple determinable is created when the grantor uses durational language, such as: “while,” “during,” or “until.”

Question 3

LOW

FEE SIMPLE SUBJECT TO CONDITION SUBSEQUENT

Answer 3

A fee simple subject to condition subsequent is a conditional conveyance in which the grantor retains a future interest as a right of entry.

The right of entry does NOT vest automatically when the condition fails (i.e., the grantor must reclaim the property).

A fee simple subject to condition subsequent is created when the grantor uses conditional language, such as: “provided that,” or “on the condition that.”

Question 4

LOW

FEE SIMPLE SUBJECT TO EXECUTORY INTEREST

Answer 4

A fee simple subject to executory interest is a conditional conveyance in which a third party (not the grantor) is granted an executory interest in the property.

An executory interest is a future interest that divests (i.e., terminates) an earlier interest.

Question 5

LOW

TRANSFERABILITY OF A LIFE ESTATE

Answer 5

A life estate is transferable. The transferee’s interest in the property terminates upon the death of the measuring life.

Question 6

LOW

VESTED AND CONTINGENT REMAINDERS

Answer 6

If possession of the land goes to a third party after a life estate terminates, then the third party takes a remainder.

A remainder can be vested or contingent.

A vested remainder is a future interest that is both:

1. Given to an ascertained (i.e., readily identifiable) grantee; AND
2. NOT subject to a condition precedent (i.e., a condition that must be satisfied in order for the interest to vest).

If either of the two above elements fail, the remainder is contingent.

Question 7

LOW

TENANCY IN COMMON

Answer 7

A tenancy in common is the default estate created by a conveyance of real property to two or more people.

The grantor need NOT use any type of explicit language to create a tenancy in common (e.g., “O to A and B”). Each tenant in common has:

1. A separate but undivided interest in the property (i.e., the property does not have to be physically divided);The right to possess and enjoy the entire property; AND
2. The right to transfer their interest in the property freely during their lifetime or at death (i.e., NO right of survivorship).

Question 8

MED

*JOINT TENANCY

Answer 8

A joint tenancy is a conveyance of real property to two or more people that is distinguished by a right of survivorship, whereby the surviving joint tenants automatically take the deceased tenant’s property interest.

Thus, joint tenants CANNOT pass their property interest by will or intestate succession (at death, their property interest automatically passes to the other joint tenants).

To create a joint tenancy, the grantor must clearly express his intent to create a joint tenancy by using survivorship language (e.g., “as joint tenants with a right of survivorship”).

Additionally, the “four unities” (PITT) must be in place to create a joint tenancy:

1. Possession. Each joint tenant must have an equal right to posses and enjoy the whole property (also required for tenants in common).
2. Interest. Each joint tenant must have an equal share of the same type of interest (e.g., two joint tenants each have a 50% share in fee simple).
3. Time. Joint tenants must receive their property interests at the same time.
4. Title. Joint tenants must receive their property interest in the same instrument of title.

Question 9

MED

*SEVERANCE OF THE JOINT TENANCY BY CONVEYANCE

Answer 9

If any of the four unities (PITT) are severed, then the joint tenancy is terminated and the cotenants hold the property as tenants in common. When a joint tenant conveys her interest to a third party, that party takes the property as a tenant in common (clearly destroys the time and title unities).

If there were originally two joint tenants, the conveyance converts the estate into a tenancy in common (i.e., the two tenants are now tenants in common with no right of survivorship). If there were originally three or more joint tenants, the joint tenancy remains among the other joint tenants not involved in the conveyance while the third party is a tenant in common.

Question 10

MED

*SEVERANCE OF THE JOINT TENANCY BY MORTGAGE

Answer 10

When a joint tenant grants a mortgage interest in the joint tenancy to a creditor, the effect will depend on the jurisdiction:

1. In a lien theory jurisdiction (majority view), the mortgage is treated as a lien and does NOT terminate the joint tenancy.
2. In a title theory jurisdiction (minority view), the mortgage will terminate the joint tenancy, and the tenants will then hold the property as tenants in common.

Question 11

LOW

COTENANT DIVISION OF REPAIR COSTS AND IMPROVEMENT COSTS

Answer 11

Repair costs (even if the repairs are necessary) are NOT divided between the cotenants (i.e., there is no right for reimbursement for necessary repair costs). However, the cotenant who pays for the repairs can get credit for the repairs in a partition action.

Improvement costs are NOT divided between the cotenants (i.e., there is no right for reimbursement for improvement costs). However, the cotenant who pays for the improvements can get credit for the repairs in a partition action.

Question 12

LOW

TENANCY FOR YEARS

Answer 12

A tenancy for years is an interest that lasts for a fixed and ascertainable amount of time.

If the term is longer than one year, then the agreement must be in writing because of the statute of frauds.

A tenancy for years automatically terminates when the term expires

Question 13

LOW

PERIODIC TENANCY

Answer 13

A periodic tenancy is a repetitive and ongoing interest that continues for a set period of time UNTIL it is terminated by proper notice from either party (e.g., month-to-month lease, year-to-year lease, etc.).

The parties must intend to create a periodic tenancy.

Intent can be express (e.g., a specific term in the signed lease agreement) or implied (e.g., ongoing payment of rent).

Question 14

LOW

TENANCY AT WILL

Answer 14

A tenancy at will continues until it is terminated by either party. It may be terminated at any time for any reason, and may be terminated without notice.

The parties must intend to create a tenancy at will.

Intent can be express (e.g., a specific term in the signed lease agreement gives either party or both parties the “right to terminate at will”) or implied (e.g., ongoing payment of rent at will).

If the agreement gives only the landlord the right to terminate at will, the tenant also gets the right to terminate implicitly. If the agreement gives only the tenant the right to terminate at will, the landlord is not given the right to terminate at will.

Question 15

LOW

THE TENANT’S DUTY TO PAY RENT

Answer 15

The tenant has a contractual duty to pay rent to the landlord in exchange for his possessory interest in the landlord’s property. If the tenant fails to pay rent, the landlord may evict the tenant or sue the tenant for breach of contract. However, there are three main situations where the duty to pay rent is suspended:

1. The premises are destroyed (so long as the tenant did not cause the damage);
2. The landlord completely or partially evicts the tenant; OR
3. The landlord materially breaches on the lease.

Question 16

LOW

IMPLIED WARRANTY OF HABITABILITY

Define and Options for Breach (4)

Answer 16

A warranty of habitability is implied in every residential lease (NOT commercial leases).

The implied warranty of habitability requires landlords to maintain their property such that it is reasonably suitable for basic human needs (failure to comply with applicable housing codes constitutes a breach).

The tenant cannot waive habitability protection.

If the landlord breaches the implied warranty of habitability, the tenant may:

1. Vacate the premises and terminate the lease (the tenant is not required to vacate the premises);
2. Withhold or reduce the rent (if the tenant chooses to withhold rent, the tenant must first notify the landlord of the problem and give the landlord a reasonable opportunity to correct the problem);
3. Remedy the defect and offset the costs against the rent; OR
4. Defend against eviction.

Question 17

LOW

IMPLIED COVENANT OF QUIET ENJOYMENT

Define and Constructive Eviction Factors (4)

Answer 17

Every lease (commercial and residential) includes an implied covenant of quiet enjoyment.

This prevents the landlord from taking action that makes the premises wholly or substantially unsuitable for their intended purposes resulting in the constructive eviction of the tenant

The implied covenant of quiet enjoyment is breached (tenant may withhold rent or seek damages) if the tenant is constructively evicted.

A constructive eviction occurs if the:

1. Landlord caused the premises to be unsuitable for their intended purposes;
2. Tenant notified the landlord of the problem;
3. Landlord did NOT correct the problem; AND
4. Tenant vacates the premises after a reasonable amount of time passed.

Question 18

MED

*LEASE ASSIGNMENTS

Answer 18

An assignment is a complete transfer of the tenant’s entire remaining term under the lease. In an assignment,

the landlord can collect rent from the assignee or the original tenant.

Question 19

lowest

SUBLEASES

Answer 19

A sublease is a transfer of less than the tenant’s entire remaining term under the lease. In a sublease,

the landlord can ONLY collect rent from the original tenant.

The subtenant ONLY has rent obligations to the original tenant.

Question 20

LOW

LEASE SURRENDER

Answer 20

A surrender terminates the lease agreement and ends the landlord-tenant relationship between both parties (releases both parties from their duties and obligations under the lease agreement).

A surrender occurs when a tenant returns possession of the leased premises to the landlord before the expiration of the lease and the landlord consents.

Question 21

MED

*LEASE ABANDONMENT

Answer 21

An abandonment occurs when the tenant unilaterally returns possession of the leased premises before expiration of the lease WITHOUT the landlord’s consent.

Here, the tenant will have to continue paying rent until the landlord is able to find a replacement tenant.

If the tenant refuses to pay rent, the landlord is entitled to damages for the difference between the original rent and the rent received from the replacement tenant.

Question 22

MED

*LANDLORD’S DUTY TO MITIGATE

Answer 22

Under the majority rule, the landlord has a duty to mitigate damages if the tenant abandons the property early or is evicted by making reasonable efforts to re-rent the property to another tenant.

The landlord is entitled to damages for the difference between the original rent and the rent received from the replacement tenant. Under the minority rule, the landlord does not have to mitigate damages.

Question 23

lowest

REAL COVENANTS: BENEFIT RUN

Answer 23

A real covenant is a promise concerning the use of the land that runs to successors to the promise.

The benefit of the covenant is the ability to enforce the covenant.

In order for a benefit to run to successors, the following four elements must be present:

1. Writing. The covenant must be included in writing in the original conveyance.
2. Intent. The original parties must have intended for the covenant to run with the land.
3. Touch and Concern. The covenant must touch and concern the land (i.e., the benefit of the covenant must affect both the promisee and promisor as owners of the land - usually by increasing the value of the land).
4. Relaxed Vertical Privity. The successor need only take an interest that is carved out of the original party’s estate [i.e., the successor can take less than the original party’s entire interest in the property - e.g., the successor takes a life estate from a fee simple).

Question 24

lowest

REAL COVENANTS: BURDEN RUN

Answer 24

A real covenant is a promise concerning the use of the land that runs to successors to the promise. .

The burden of the covenant is being subject to it or bound by it.

In order for a burden to run to successors, the following six elements must be present:

1. Writing. The covenant must be included in writing in the original conveyance.
2. Intent. The original parties must have intended for the covenant to run with the land.
3. Touch and Concern. The covenant must touch and concern the land (i.e., the benefit of the covenant must affect both the promisee and promisor as owners of the land - usually by increasing the value of the land).
4. Strict Vertical Privity. The successor must take the original party’s entire interest.
5. Horizontal Privity. The instrument used in the conveyance of the property between the original parties must contain the estate and the covenant (e.g., the deed contains the covenant).
6. Notice. The new owner must have notice of the covenant. Notice may be either actual or constructive (i.e., record notice).

Question 25

lowest

EQUITABLE SERVITUDES

Answer 25

An equitable servitude operates like a real covenant with easier requirements.

The main difference between a real covenant and an equitable servitude is in the remedy. The remedy for a breach of a real covenant is money damages while the remedy for a breach of an equitable servitude is injunctive relief.

In order to bind a successor, the following four elements must be present:

1. Writing. The servitude must be included in writing in the original conveyance.
2. Intent. The original parties must have intended for the servitude to run with the land.
3. Touch and Concern. The servitude must touch and concern the land (i.e., the servitude must affect both the promisee and promisor as owners of the land - usually by increasing the value of the land).
4. Notice. The new owner must have notice of the servitude. Notice may be either actual, constructive (i.e., record notice), or inquiry.

Question 26

lowest

IMPLIED RECIPROCAL SERVITUDES

Answer 26

Implied reciprocal servitudes arise in planned subdivisions (implied from the common scheme).

Most jurisdictions impose the following requirements to enforce an implied reciprocal servitude:

1. There must be intent to create a servitude on all plots (i.e., a common scheme);
2. The servitude must be negative (i.e., a promise to refrain from doing something); AND
3. The party against whom enforcement of the servitude is sought must have actual, constructive, or inquiry notice.

Question 27

MED

*IMPLIED EASEMENT BY IMPLICATION

Answer 27

An easement is a right held by one person to use another’s land.

An implied easement by implication is created when:

1. A single tract of land is divided by a common owner and a piece of the land is conveyed to another;
2. Before the division, the common owner used the single tract of land as if there was an easement on it;
3. After the division, the common owner’s use of the conveyed land must be continuous and apparent; AND
4. Such use must be reasonably necessary for the owner’s use and enjoyment.

Question 28

lowest

IMPLIED EASEMENT BY NECESSITY

Answer 28

An easement is a right held by one person to use another’s land.

An implied easement by necessity is created when:

1. A single tract of land is divided by a common owner and a piece of the land is conveyed to another; AND
2. Necessity arose when the land was divided into two separate estates where one of the properties became virtually useless without the easement.

Question 29

lowest

IMPLIED EASEMENT BY PRESCRIPTION

Answer 29

An easement is a right held by one person to use another’s land.

An implied easement by prescription is created when a landowner allows a trespasser to use his land continuously for the statutory period.

The trespasser’s use must be:

1. Hostile (i.e., without permission from the owner of the land);
2. Open and notorious (i.e., not hidden); AND
3. Continuous for the statutory period.

NOTE: Unlike adverse possession, the use need NOT be exclusive (e.g., a public easement).

Question 30

MED

*TERMINATION OF AN EASEMENT (7)

Answer 30

An easement may be terminated by any of the following:

1. Release. An easement is terminated if the holder expressly releases it. The release must be in writing and satisfy the statute of frauds.
2. Merger. An easement is terminated if the holder acquires fee title to the underlying estate - the easement merges into the title.
3. Abandonment. An easement is terminated if the holder demonstrates an intent to never use the easement again through physical action (i.e., requires more than non-use or statements).
4. Prescription. An easement is terminated if the holder fails to protect against trespassers for the statutory period.
5. Sale to a Bona Fide Purchaser. An easement may be terminated if the landowner sells the property.
6. Estoppel. An easement is terminated if the landowner reasonably relies to his detriment on the easement holder’s assurance that the easement will no longer be used.
7. End of Necessity. An easement by necessity terminates if it is no longer necessary.

Question 31

MED

*FIXTURES

Answer 31

A fixture is tangible personal property (i.e., chattel) that is attached to real property in such a manner that it is treated as part of the real property when determining its ownership.

Generally, a chattel is considered a fixture if the owner of real property intends for the chattel to become a fixture by attaching it to the real property.

Such intent is judged by applying an objective, reasonable person standard that examines such factors as:

1. The importance of the chattel to the real property;
2. Whether the chattel was specially designed for use on the real property; AND
3. The amount of damage that removal of the chattel would cause to the real property.

Question 32

MED

*STRUCTURES BUILT ON REAL PROPERTY

Answer 32

Structures built on real property (e.g., walls) and materials incorporated into a structure (e.g., bricks used in making a wall) become part of the real property.

The owner of the real property is generally also the owner of any structures on the real property (including the materials incorporated into the structures).

Question 33

LOW

DEED MERGER

Answer 33

Covenants under the land sale contract are merged into the deed and CANNOT be enforced unless the covenant is also in the deed.

Prior to closing, any liability must be based on a provision in the land sale contract.

After closing, any liability must be based on a deed warranty.

Question 34

LOW

IMPLIED COVENANT OF MARKETABLE TITLE

Answer 34

In every land sale contract, the seller has a duty to convey marketable title to the buyer at closing.

Marketable title is title that is free from an unreasonable risk of litigation.

If there is a defect in title rendering title unmarketable, it must be fixed or cured before closing (at which point the contract and deed merge and the deed controls).

If the seller cannot deliver marketable title at closing, the buyer can rescind the contract without penalty.

Question 35

LOW

DEFECTS IN TITLE THAT RENDER TITLE UNMARKETABLE (5)

Answer 35

Defects in title that render title unmarketable include:

1. Title acquired by adverse possession that has not yet been quieted (i.e., supported by a judicial decree).
2. Future interest holders that have not agreed to the transfer;
3. Private encumbrances (e.g., mortgage, covenant, option, or easement);
4. Violation of a zoning ordinance; OR
5. Significant physical defect (encroachment on the land that is incurable).

Question 36

LOW

WAIVER OF THE IMPLIED COVENANT OF MARKETABLE TITLE

Answer 36

The land sale purchaser may choose to waive the requirement that the seller deliver marketable title at closing.

However, a seller CANNOT cancel a land sale contract for failure to deliver marketable title if the buyer chooses to waive the requirement.

Question 37

MED

*NEW CONSTRUCTION IMPLIED WARRANTIES

Answer 37

The implied warranty of fitness or suitability applies to defects in new construction. It protects against latent defects (i.e., defects that are not discoverable from a reasonable inspection)

and warrants that the new construction is safe and fit for human habitation.

In most jurisdictions, both the initial purchaser and subsequent purchasers may recover damages. In other jurisdictions, only the initial purchaser can enforce this warranty.

Question 38

lowest

DUTY TO DISCLOSE PROPERTY DEFECTS

Answer 38

Most jurisdictions impose a duty on the seller to disclose material defects to the buyer.

Material defects are defects that substantially impact the:

1. Value of the property;
2. Desirability of the property; OR
3. Health and safety of its occupants.

General disclaimers (e.g.,“as is”) do NOT satisfy the seller’s duty to disclose defects

Question 39

LOW

EQUITABLE CONVERSION AND RISK OF LOSS

Answer 39

In the majority of jurisdictions, the purchaser holds equitable title during the period between the execution of the contract and the closing and delivery of the deed.

During this period, the purchaser is responsible for any damages to the property while the seller, as holder of legal title, has the right to possess the property.

In a minority of jurisdictions, the risk of loss is on the seller until closing and delivery of the deed.

Question 40

FUTURE-ADVANCE MORTGAGE

Answer 40

A future-advance mortgage is a line of credit used for home equity, construction, business, and commercial loans (often called a “second mortgage”).

Question 41

LOW

DEED OF TRUST

Answer 41

A deed of trust is an alternative used instead of a mortgage as a security device. A deed of trust operates like a mortgage, but involves three parties:

1. The borrower;
2. The lender; AND
3. A third-party trustee who holds title of the property until the loan is paid off.

Question 42

LOW

INSTALLMENT LAND CONTRACT

Answer 42

An installment land contract is an alternative used instead of a mortgage as a security device.

The seller finances the purchase in an installment land contract retaining title until the buyer makes the final payment on the installment plan.

Question 43

LOW

ABSOLUTE DEED

Answer 43

An absolute deed is an alternative used instead of a mortgage as a security device.

It is an instrument used by the borrower to transfer the deed to the property instead of conveying a security interest in exchange for a loan.

Question 44

LOW

MORTGAGE TRANSFER BY THE BORROWER

Who remains liable and from who can collect

Answer 44

The borrower may transfer the property by deed (i.e., selling), will, or intestate succession.

The borrower remains personally liable after the transfer unless the lender releases the borrower from his obligation or the lender modifies the transferee’s obligation.

If the transferee assumes the mortgage, the transferee is primarily liable upon default while the original borrower is secondarily liable.

If the transferee takes title subject to the mortgage, the transferee is not personally liable upon default while the original borrower remains liable (this is the default/presumed option).

Question 45

LOW

FORECLOSURE

Answer 45

A foreclosure is a forced sale of an asset where the proceeds of the sale are used to pay off the debt.

If the proceeds are not enough to cover the debt, the lender may seek a deficiency judgment against the borrower.

If there are excess proceeds, the money will be used to satisfy other creditors.

Question 46

LOW

CREDITOR PRIORITY AFTER FORECLOSURE

and 4 exceptions

Answer 46

If there are excess proceeds after a foreclosure sale, the money will be used to satisfy other creditors.

Generally, interests acquired before the interest that is being foreclosed (senior interests) survive the foreclosure

while interests acquired after the interest that is being foreclosed (junior interests) are extinguished by the foreclosure.

All surviving debts must be satisfied in chronological order starting with the oldest and moving down,

unless any of the following exceptions apply:

1. Purchase-Money Mortgages. A purchase-money mortgage has priority over all other mortgages, even those earlier in time, that arose prior to the borrower’s acquisition of the property.
2. Unrecorded Senior Mortgages. A junior mortgage that is properly recorded may take priority over an unrecorded senior mortgage.
3. Subordination Agreements. A senior lender can agree to subordinate its interest to a junior interest.
4. Mortgage Modifications. A senior lender and borrower can agree to modify the mortgage. If the modification is more burdensome on the borrower, the senior lender subordinates its interest. However, only the modification subordinates (the original mortgage remains senior).

Question 47

MED

*ADVERSE POSSESSION

4 requirements

Answer 47

Adverse possession allows a trespasser in unlawful possession of land owned by another to acquire title to that land if their possession is:

1. Continuous for the statutory period (seasonal or infrequent use will suffice if the use is consistent with the type of property being possessed).
2. Open and notorious (the adverse possessor must use the property as if they were a true owner - their possession cannot be hidden from the true owner);
3. Exclusive (the adverse possessor cannot share possession of the land with the true owner); AND
4. Hostile (the adverse possessor cannot have the true owner’s consent to possess or use the property).

Question 48

MED

ADVERSE POSSESSION STATUTORY PERIOD ISSUES: TACKING AND DISABILITIES

Answer 48

Tacking. An adverse possessor can tack on the time of possession of a prior adverse possessor to meet the statutory period requirement if the adverse possessors are in privity with one another (i.e., the transfer of land was voluntarily agreed upon).

Disabilities. The statutory period will not run against a true owner who had a disability (e.g., insanity, imprisonment, etc.) at the time the adverse possession begun.

Question 49

LOW

DEED REQUIREMENTS

Answer 49

A valid deed must:

1. Satisfy the statute of frauds;
2. Identify the parties and describe the property;
3. Be delivered (a deed is delivered when the grantor demonstrates a present intent to transfer the property to the grantee or his agent - physical transfer of a deed is not required); AND
4. Be accepted (acceptance is generally presumed).

Question 50

LOW

DELIVERY AND ACCEPTANCE OF A DEED

Answer 50

A valid deed must be delivered and accepted.

A deed is delivered when the grantor demonstrates a present intent to transfer the property (physical transfer of a deed is not required - present intent can be demonstrated orally).

______________________________

A deed is NOT delivered if the delivery is revocable (e.g., “I will transfer you this property in 3 weeks, unless I change my mind before then”).

A grantor can make a valid delivery to an agent (e.g., a grantor can deliver a deed to his attorney with clear instructions to deliver it to the grantee).

Acceptance is generally presumed provided that the transfer is for value.

Question 51

HIGH

**GENERAL WARRANTY, SPECIAL WARRANTY, AND QUITCLAIM DEEDS

Answer 51

After closing, the land sale contract merges into the deed.

Subsequently, any liability must arise out of the deed rather than the contract. There are three kinds of deeds:

1. General Warranty Deed. General warranty deeds provide the greatest amount of title protection. The grantor warrants title against all defects, even if the grantor did not cause the defects.
2. Special Warranty Deed. Special warranty deeds provide less title protection than general warranty deeds. The grantor warrants titles against defects caused by the grantor.
3. Quitclaim Deed. Quitclaim deeds provide the least amount of title protection. The grantor makes no warranties as to the health of the title.

Question 52

HIGH

**PRESENT COVENANTS IMPLIED IN GENERAL AND SPECIAL WARRANTY DEEDS (3)

Answer 52

There are three present covenants implied in general and special warranty deeds:

1. Covenant of Seisin. Warrants that the deed describes the land in question and that the grantor is the rightful owner.
2. Covenant of the Right to Convey. Warrants that the grantor has the right to convey the property.
3. Covenant Against Encumbrances. Warrants that there are no undisclosed encumbrances on the property that could limit its value.

Question 53

HIGH

**FUTURE COVENANTS IMPLIED IN GENERAL AND SPECIAL WARRANTY DEEDS (3)

Answer 53

There are three future covenants implied in general and special warranty deeds:

1. Covenant of Quiet Enjoyment. Grantor promises to defend against future challenges to the grantee’s title to the property.
2. Covenant of Warranty. Grantor promises to defend against future developments that extend into the grantee’s property boundary.
3. Covenant of Further Assurances. Grantor promises to do what is reasonably necessary to cure future problems with title.

Question 54

HIGH

**COMPETING CLAIMS TO TITLE AND THE (3) RECORDING STATUTES

Answer 54

Under the common law, if a grantor transfers the same piece of property to multiple grantees, the first grantee to receive the deed acquires rightful title. In the absence of a recording statute, the common law rule controls.

________________________________

However, there are three types of recording statues that have been adopted by the states to resolve competing claims to title:

1. Race Statutes. The first** grantee **to record acquires title, regardless of notice.
2. Notice Statutes. A subsequent purchaser acquires title if the purchase is made without notice of a prior unrecorded conveyance.
3. Race-Notice Statutes. A subsequent purchaser acquires title if the purchase is made without notice of a prior unrecorded conveyance AND the subsequent purchaser records first.

Question 55

HIGH

**ACTUAL, CONSTRUCTIVE, AND INQUIRY NOTICE OF THE SUBSEQUENT PURCHASER

Answer 55

There are three types of notice:

1. Actual Notice. A subsequent purchaser has actual notice when he has personal knowledge of a prior interest.
2. Constructive Notice. A subsequent purchaser is on constructive notice when the prior interest is recorded (i.e., validly recording a deed by publicly registering it automatically puts the entire public on notice).
3. Inquiry Notice. A subsequent purchaser has inquiry notice when a reasonable investigation would have revealed the existence of prior claims (e.g., someone is clearly living on the property in question).

Question 56

HIGH

**WILD DEEDS

Answer 56

If a deed is not recorded properly, it is considered a wild deed.

A wild deed does NOT put subsequent purchasers on constructive notice.

Question 57

MED

*THE SHELTER RULE

Answer 57

A person who is transferred property from a bona fide purchaser (BFP) has the same recording statute protections as the BFP (i.e., the transferee “takes shelter” in the status of the BFP transferor).

A BFP is a person who pays valuable consideration** (i.e., not an heir, devisee, or donee) for real property **without notice of a prior interest.