1
Q
Present estates: four categories
A
- Fee Simple Absolute; 2. Fee Tail; 3. Defeasible Fees (of which there are three species); 4. The Life Estate
2
Q
Bar examiners expect you to know three things with respect to each of the present estates:
A
- What language will create the estate? 2. Once identified, what are the estate’s distinguishing characteristics? 3. Which future interests, if any, is the estate capable of?
3
Q
What does it mean to ask what are an estate’s distinguishing characteristics?
A
Is the estate devisable, descendible, or alienable?
4
Q
Devisable means
A
can it pass by will
5
Q
descendible means
A
will it pass by the statute of intestacy if it holder dies intestate (without a wil)
6
Q
alienable means
A
is it transferable inter vivos, or during the holder’s lifetime?
7
Q
Fee Simple Absolute: how to create
A
“To A” or “To A and his heirs.” Today, those common law words “and his heirs” are not needed.
8
Q
Fee Simple Absolute: distinguishing characteristics
A
This is ABSOLUTE OWNERSHIP of potentially infinite duration. It is freely DEVISABLE, DESCENDIBLE, and ALIENABLE.
9
Q
Fee simple: is there an accompanying future interest?
A
No.
10
Q
If the fact pattern is O conveys to A or to A and his heirs and A is alive and well, what do A’s heirs have.
A
Nothing. Only A has absolute ownership. While A is alive, he has only prospective heirs. As a property matter, the heirs are powerless. As a property matter they do not exist.
11
Q
Bruce Willis rule:
A
A living person has no heirs.
12
Q
Fee Tail: how created
A
To A and the heirs of his body.
13
Q
Fee Tail: distinguishing characteristics
A
Virtually abolished in the US today. Virtually never tested. Historically, the fee tail would pass directly to grantees lineal blood descendants, no matter what the grantor may have intended otherwise. Had to do with protecting family dynasties. Today, the attempted creation of a fee tail creates instead the fee simple absolute.
14
Q
Fee Tail: accompanied by a future interest?
A
Yes. In O, the grantor, it was called a reversion. In a third party (someone other than O), it was called a remainder.
15
Q
Defeasible Fees: 3
A
- Fee Simple Determinable; 2. The Fee Simple Subject to Condition Subsequent. 3. The Fee Simple Subject to Executory Limitation
16
Q
Fee Simple Determinable: how to create
A
“To A for so long as . . . “ To A during . . . “ “To A until . . . “ Grantor must use clear durational language. If the stated condition is violated, forfeiture is automatic.
17
Q
Fee Simple Determinable: distinguishing characteristics
A
- Defeasible, descendible, and devisable, BUT ALWAYS SUBJECT TO THE CONDTION.
18
Q
Mick Jagger rule of property:
A
You may convey less than what you started with, but you can’t convey more. In other words, you can’t always get what you want.
19
Q
Fee Simple Determinable: accompanying future interest?
A
Yes. It is the possibility of reverter in the grantor. (a forfeiture to the grantor)
FSDPOR: fee simple determinable possibility of reverter. Can’t have one without the other
A has fee simple determinable
O has possibility of reverter
20
Q
Fee Simple Subject to Condition Subsequent: how to create
A
“To A, but if X event occurs, grantor reserves the right to re-enter and retake.” Grantor must use clear durational language AND carve out the right to re-enter.
A has a fee simple subject to condition subsequent
O has the right of entry (synonymous with the power of termination)
21
Q
Fee Simple Subject to Condition Subsequent: distinguishable characteristics
A
This estate is NOT automatically terminated, but it can be cut short AT THE GRANTOR’S OPTION, if the stated condition occurs.
Until grantor exercises his option, the estate continues to be the grantees.
22
Q
Fee simple subject to condition subsequent: accompanying future interest
A
Prerogative to Right of entry (synonymous with the power of termination.)
23
Q
Fee Simple Subject to Executory Limitation: how to create
A
“To A, but if X event occurs, THEN TO B.”
A has a fee simple subject to B’s shifting executory interest
B has a shifting executory interest
24
Q
Fee Simple Subject to Executory Limitation: distinguishing characteristics
A
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 grantor.
25
Fee Simple Subject to Executory Limitation: accompanying future interest?
Shifting executory interest.
26
As concern the defeasible fees, note two important rules of construction:
1. Words of mere desire, hope, or intention are insufficient to create a defeasible fee. Why? Because courts disfavor restrictions on the free use of land. Thus, courts will not find a defeasible fee unless clear durational language is used. (example: to A for the purpose of constructing a day care center--this creates a fee simple with no encumbrances)
2. 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 a reasonable time limited purpose. (Example: To A so long as she never attempts to sell. This is an absolute restraint on alienation. It is void.) (Example: O conveys to A so long as she does not attempt to sell until the year 2014, when clouds on the title will be resolved. Here the restraint is linked to a reasonable, time limited purpose. Thus it is valid. ) A has fee simple determinable; O has possibility of reverter.
27
The Life Estate: how to create
This is an estate that must be measured in explicit lifetime terms, and NEVER in terms of years. (Romantic estate: never talk about love in terms of years--baby, i'll love you for the next 50 years, if you make it that long.. Rather you should say, I will love you for the rest of your life.
To A for life.
A has a life estate.
A is known as the life tenant.
O has a reversion, meaning simply that at the end of A's lifetime the estate reverts back to O or to O's heirs.
28
Life estate pur autrie vie:
A life estate measured by a life other than the grantee's. To A for the life of B.
A has a life estate pur autrie vie.
O has a reversion. At the end of B's life the estate reverts back to O or O's heirs.
29
Can you sell a life estate?
Yes, but you can't convey more than you have. So if the holder of a life estate sells the life estate, the person to whom she sells it has a life estate pur autrie vie because the estate is measured by the original life tenant's life. At the end of the original life tenant's life, the estate reverts back to O or O's heirs.
30
Life estate: distinguishing characteristics
The life tenant's entitlements are rooted in the important doctrine of WASTE.
Two general rules:
1. The life tenant is entitled to all ordinary uses and profits from the land.
2. The life tenant must not commit waste (meaning he must not hurt the future interest holders).
31
3 species of waste:
1. Voluntary or affirmative waste;
2. Permissive waste, or neglect;
3. Ameliorative waste.
32
Voluntary or affirmative waste:
This is overt conduct that causes a drop in value. Synonymous with willful destruction.
33
Voluntary waste and natural resources: general rule
The life tenant must not consume or exploit natural resources on the property (such as timber, oil, or minerals), unless one of four exceptions applies (PURGE: when can the life tenant purge the land?)
1. PU: prior use, meaning that prior to the grant the land was used for exploitation. If prior to the grant the land was used for exploitation, the life tenant may continue the practice of exploitation. Open mines doctrine. If mining was done on the land before the life estate began, she can continue to mine, but she cannot open new mines.
2. R: Repairs. The life tenant may consume natural resources for repairs and maintenance.
3. G: Grant. The life tenant may exploit if granted that right.
4. E: Exploitation. The land is suitable only to exploit. Example: a quarry is only suitable for exploitation.
34
Permissive waste, or neglect:
This occurs when land is allowed to fall into disrepair.
35
Permissive waste and the obligation to repair:
The life tenant must simply MAINTAIN the premises in reasonably good repair.
36
Permissive waste and the obligation to pay all ordinary taxes:
The life tenant is obligated to pay ALL ordinary taxes on the land, to the extent of income or profits from the land. If there is no income or profit, the life tenant is required to pay all ordinary taxes to the extent of the premises fair rental value.
37
Ameliorative waste:
The life tenant must not engage in acts that will enhance the property's value, unless all future interest owners, who are known, consent.
Ameliorative waste is really endeavoring to protect sentimental value.
38
LIfe estate: accompanying future interest
If held by O, the grantor, it is called a reversion. If held by a third party, it is a remainder.
39
Future Interests Capable of Creation in the Grantor:
1. The Possibility of Reverter; 2. The Right of Entry, also known as the Power of Termination; 3. The Reversion.
40
The Possibility of Reverter:
It accompanies only the fee simple determinable.
41
The Right of Entry, also known as the Power of Termination:
It accompanies only the fee simple subject to condition subsequent.
42
The Reversion:
A reversion is the future interest that arises in a grantor who transfers an estate of lesser quantum that she started with, other than a fee simple determinable or a fee simple subject to a condition subsequent.
43
What is the future interest is held by someone other than the grantor? (3)
1. Vested remainder
2. Contingent remainder
3. Executory interest
44
Vested Remainder: 3 species
1. The indefeasibly vested remainder,
2. the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and
3. the vested remainder subject to open.
45
Executory Interest: 2 species
1. the shifting executory interest
| 2. the springing executory interest
46
Our three tasks in assessing future interests in transferees:
1. We must distinguish vested remainders (of which there are three kinds), from contingent remainders.
2. We must distinguish the three kinds of vested remainders from each other;
3. We must distinguish all remainders from executory interests.
47
What is a remainder?
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.
48
Remember that the remainderman is:
1. Sociable--he never travels alone (always accompanies a preceding estate of KNOWN FIXED DURATION. That preceding estate is usually a life estate or a term of years. For example: To A for life, then to B. or To A for ten years, then to B. B is the remainderman. Remainder waits patiently for the preceding estate to naturally end.
2. Patient and polite: REMAINDERMAN NEVER FOLLOWS A DEFEASIBLE FEE.
Remainderman cannot cut short or divest a prior transferee. In other words, if your present estate is a defeasible fee, your future interest is NOT a remainder is to say instead that it will be an executory interest if held by by someone other than grantor.
49
A remainder is vested if
it is both created in an known person and is not subject to any condition precedent.
50
A remainder is contingent if
it is created in an unascertained person or is subject to a condition precedent, or both.
1. The remainder that is contingent because it is created in as yet unborn or unascertained persons.
2. The remainder that is contingent because it is subject to a condition precedent. A condition is a condition precedent when it appears before the language creating the remainder or is woven into the grant to remainderman.
51
Contingent remainders and The Rule of Destructibility of Contingent Remainders:
Historically, at common law, a contingent remainder was destroyed if it was still contingent at the time the preceding estate ended.
Today, the destructibility rule has been abolished.
Now, if the contingent remainder was still contingent at the time of the preceding estates ending, O or O's heirs hold the estate subject to the springing executory interest.
52
The Rule in Shelley's Case:
At common law, the rule would apply in only one setting. O conveys to A for life, then, on A's death, to A's heirs." A is alive. Historically, the present and future interests merged, giving A a fee simple absolute.
Today, the rule in Shelley's case has been virtually abolished. Thus, today, when O conveys To A for life, then to A's heirs, A has a life estate. A's as yet unknown heirs have a contingent remainders. O has a conversion, since A could die without heirs.
53
Doctrine of Worthier Title:
(aka the rule against a remainder in grantor's heirs)
This doctrine is still viable in most states today. It applies when O, who is alive, tries to create a future interest in his heirs.
O, who is alive, conveys to A for life, then to O's heirs.
If the Doctrine of Worthier Title did NOT apply, A has a life estate and O's heirs have a contingent remainder because O is still alive and a living person has no heirs.
Instead, because of the doctrine of worthier title, the contingent remainder in O's heirs is void. Thus, A has a life estate and O has a reversion.
The doctrine endeavors to promote the free transfer of land.
Note: the Doctrine of Worthier Title is a rule of construction, and not a rule of law. Grantor's intent controls. If the grantor clearly manifested the declaration of intent to create a contingent remainder in his heirs, that intent is binding and controls.
54
What can be vested?
Only remainders.
55
Indefeasibly vested remainder:
The holder of this remainder is certain to acquire an estate in the future, with no conditions attached.
To A for life, remainder to B. A is alive. B is alive. A has a life estate. B has a indefeasibly vested remainder.
What if B predeceases A? At common law, B's future interest passes by will or by intestacy.
56
The vested remainder subject to complete defeasance:
(also known as the vested remainder subject to total divestment)
Here remainderman exists. His taking is NOT subject to any condition precedent. However, his right to possession could be cut short because of a condition subsequent.
57
COMMA 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.
58
Vested remainder subject to open
Here, a remainder is vested in a group of takers, at least one of whom is qualified to take. But each class member's share is subject to partial diminution because additional takers can still join in.
59
A class is open or closed if what?
Open--when others can join. Closed--when no others can join.
60
Common law rule of convenience:
The class closes whenever any member can demand possession.
Exception: womb rule--a child in the womb will share.
If one of the party predeceases, at common law, their share goes to their devisees or heirs.
61
Executory interest:
It is a future interest created in a transferee (a third party), which is not a remainder and which takes effect by either CUTTING SHORT some interest in another person (shifiting) or in the grantor or his heirs (springing). DOCTOR EVIL--THE EXECUTIONER
62
Shifting executory interest:
It always follows a defeasible fee and cuts short someone other than grantor.
63
Springing executory interest:
It always follows a defeasible fee and cuts short the grantor or grantor's heirs.
64
Rule Against Perpetuities: the rule
Certain kinds of future interests are void if there is any possibility, however remote, that the given interest may vest more than 21 years after the death of a measuring life.
Policy: will allow certain restrictions on land but only for so long
65
RAP Four step technique: step 1
1. Determine which future interests have been created by the conveyance. The RAP potentially applies ONLY to contingent remainders, executory interests, and certain vested remainders subject to open. RAP does NOT apply to: 1. future interests in O; 2. indefeasibly vested remainders; 3. vested remainders subject to complete defeasance.
66
RAP Four step technique: step 2
Identify the conditions precedent to the vesting of the suspect future interest. In other words, what has to happen for the future interest holder can take?
67
RAP Four step technique: step 3
Find a measuring life. Look for a person alive at the date of the conveyance and ask whether that person's life or death is relevant to the condition's occurrence. WHO HAS THE POWER TO MAKE THIS HAPPEN.
Be careful that the person alive is actually in the grant. For example, if it says to A for life, then to her first child, even though she has a first child already, the grant doesn't specifically mention that child, so the child cannot be the measuring life. If the child were named, then she would be the measuring life.
68
RAP Four step technique: step 4
Ask: Will we know, with CERTAINTY, within 21 years of the death of our measuring life, if our future interest holder(s) can or cannot take? If so, the conveyance is good. If not (if there is any possibility, however remote, that condition precedent might not occur more than 21 years after the death of a measuring life), the future interest is void.
69
Fertile Octogenarian Rule
presumes that a person is fertile no matter their age
70
Bright Line Rules of RAP: #1
A gift to an open class that is conditioned on the members surviving to an age beyond 21 violates the common law RAP.
BAD AS TO ONE, BAD AS TO ALL. To be valid it must be shown that the condition precedent to every class member's taking will occur within the perpetuities period. If it is possible that a disposition might vest too remotely to any member of the class, THE ENTIRE CLASS GIFT IS VOID.
71
Bright Line Rule of RAP: #2
Many shifting executory interests violate the RAP. An executory interest with no limit on the time within which it must vest violates the RAP.
72
Grammatically sound RAP rule:
If the future interest is stricken, AND the conditional grant is no longer grammatically sound, the conditional clause must be stricken. Example: To A and his heirs, but if the land ceases to be used for farm purposes, to B and his heirs.
73
Charity to charity exception:
a gift from one charity to another will not violate the rap. Policy: want to encourage charitable giving. Example: To the American Red Cross, so long as the premises are used for Red Cross purposes, and if they cease to be so used, then to the YMCA.
74
Reform of RAP: "wait and see" or "second look" doctrine
The validity of any suspect future interest is determined on the basis of the facts as they now exist, at the end of the measuring life. This eliminates the what if or anything is possible line of inquiry.
75
Reform of RAP: USRAP
Uniform Statutory Rule Against Perpetuities: codifies the common law RAP and, in addition, provides for an alternative 90 year vesting period.
76
Both the "wait and see" and USRAP reforms embrace what doctrine?
Cy pres doctrine: If a given disposition violates the rule, a court may reform it in a way that most closely matches grantor's intent while still complying with the RAP.
Allows a court to redraft an infirm grant in an attempt to honor the grantor's intent.
The reform will automatically reduce any offensive age contingency to 21 years.
77
Three forms of concurrent ownership:
1. joint tenancy; 2. tenancy by the entirety; 3. Tenancy in common.
78
Joint tenancy: defined
2 or more own with the right of survivorship
79
Tenancy by the entirety:defined
A marital interest between married partners with the right of survivorship
80
Tenancy in common: defined
2 or more own with no right of survivorship.
81
Joint tenancy: distinguishing characteristics
1. The right of survivorship--when one joint tenant dies, his share goes AUTOMATICALLY to the surviving joint tenant.
2. A joint tenant's interest is alienable. It is not divisible or descendible because of the right of survivorship.
82
Creation of Joint Tenancy:
1. The four unities (remember this T-TIP); 2. Grantor must clearly express the right of survivorship.
83
What is the four unities?
```
Joint tenants must take their interests:
T: at the same time
T: by the same title (meaning, in the same instrument)
I: with identical interests
P: rights to possess the whole
```
84
Joint tenancies are disfavored:
because they allow their holders to avoid probate (administration and disposition of property by the court). So MUST meet the requirements.
85
Use of a Straw:
Step 1: A conveys to straw; Step 2: Straw conveys back to A and B as joint tenants with right of survivorship.
86
Severance of a Joint Tenancy:
Remember SPAM: Sale, Partition, And Mortgage.
87
Severance and Sale of a Joint Tenancy: rules
1. A joint tenant can sell or transfer her interest during her lifetime. May do so secretly, without the others knowledge or consent. One joint tenant's sale severs the joint tenancy as to the seller's interest, because it disrupts the four unities. Thus, buyer is a tenant in common. To the extent that we started with more than two joint tenants in the first place, the joint tenancy remains intact, as between the other, non-transferring joint tenants.
2. In equity, a joint tenant's mere act of entering into a contract for the sale of her share will sever the joint tenancy as to the contracting party's interest. This is because of the doctrine of equitable conversion which provides that "equity regards as done that which ought to be done."
88
Severance and Partition of a Joint Tenancy: rules
3 variations:
1. Voluntary agreement: a peaceful way to end the relationship.
2. Partition in kind: a court action for physical division of Blackacre if in the best interests of all. Commonly seen when agricultural or sprawling acreage that lends itself readily to division.
3. Forced sale: a court action if in the best interests of all where Blackacre is sold and the proceeds divided proportionately. Works best when Blackacre is a building.
89
Severance and Mortgage: rules
1. Title theory (minority); 2. Lien theory (majority)
90
Title theory of severance of a joint tenancy by mortgage:
One joint tenant's execution of a mortgage or a lien on his or her share will sever the joint tenancy as to that now encumbered share.
91
Lien theory of severance of a joint tenancy by mortgage:
A joint tenant's execution of a mortgage on his or her interest will not sever the joint tenancy.
92
Tenancy by the Entirety: how to create
Between married partners with right of survivorship. In those states to recognize the tenancy by the entirety, it arises presumptively unless otherwise stated.
93
Tenancy by the Entirety: rules
This is a very protected form of co-ownership: CAN'T TOUCH THIS.
Creditors of one co-owner cannot touch the property.
Unilateral conveyance: Neither tenant, acting alone, can defeat the right of survivorship by unilateral transfer to another. (A UNILATERAL TRANSFER IS A NULLITY. The transferee has nothing.)
94
Tenancy in Common: features
1. Each co-tenant owns an individual part and each has a right to possess the whole.
2. Each interest is divisible, descendible, and alienable. There are no survivorship rights between tenants in common.
3. The presumption favors the tenancy in common (because the tenancy is freely devisible, freely descendible, freely alienable).
95
Rights and Duties of Co-Tenants (applies to all forms of cotenants)
1. Possession; 2. Rent of co-tenant in exclusive possession; 3. Rent from third parties; 4. Adverse possession; 5. Carrying costs; 6. Repairs; 7. Improvements; 8. Waste; 9. Partition.
96
Rights and Duties of Co-Tenants: Possession
Each co-tenant is entitled to possess the whole. If one co-tenant wrongfully excludes another co-tenant from possession of the whole or a part, he has committed wrongful ouster.
97
Rights and Duties of Co-Tenants: Rent from co-tenant in exclusive possession
Absent ouster, a co-tenant in exclusive possession is not liable to the other for rent.
98
Rights and Duties of Co-Tenants: Rent from third parties
A co-tenant who leases all or part of the premises to a third party must account to his co-tenant, providing them their fair share of the rent income.
99
Rights and Duties of Co-Tenants: adverse possession
Unless he has ousted the other co-tenants, one co-tenant in exclusive possession for the statutory adverse possession cannot acquire title to the exclusion of the others. This is because the hostility element of adverse possession is absent unless there is ouster.
100
Rights and Duties of Co-Tenants: carrying costs
Each co-tenant is responsible for his or her fair share of carrying costs: taxes, mortgage interest payments bases upon his undivided share.
101
Rights and Duties of Co-Tenants: Repairs
The repairing co-tenant enjoys a right to contribution for reasonable repairs, provided that she has told the others of the need. The co-tenants must contribute their proportionate share of the repair costs.
102
Rights and Duties of Co-Tenants: Improvements
During the life of the co-tenancy, there is no right to contribution for "improvements." However, at partition, the improving co-tenant is entitled to a credit equal to any increase in value due to her efforts. Attendantly, at partition, the so-called "improver" bears full liability for any drop in value caused by her efforts.
103
Rights and Duties of Co-Tenants: Waste
A co-tenant must not commit waste. Voluntary (willful destruction), permissive (neglect), ameliorative (changes that increase value). A co-tenant can bring a waste action during the lifetime of the co-tenancy.
104
Rights and Duties of Co-Tenants: Partition
A joint tenant or tenant in common has a right to bring an action for partition.
105
Four Leasehold or Nonfreehold Estates:
1. Tenancy for Years (estate for years or term of years); 2. Periodic Tenancy; 3. Tenancy at Will; 4. Tenancy at Sufferance
106
Tenancy for Years:
1. This is a lease for a fixed period of time. The period could be one day or it could be fifty years. When you know the termination date from the start, you have the tenancy for years.
2. Because the term of years tells you from the outset when it will terminate, NO NOTICE is needed to terminate.
3. A term of years greater than one year must be in writing to be enforceable because of the Statute of Frauds.
107
Periodic Tenancy:
1. A lease that continues for SUCCESSIVE intervals until L or T give proper notice to terminate.
2. Periodic tenancy can arise expressly. L conveys to T from month to month or year to year.
3. Periodic tenancy can arise by implication In any one of 3 ways: 1. land is leased with no mention of duration, but provision is made for set intervals; 2. An oral term of years in violations of the Statute of Frauds creates an implied periodic tenancy with the intervals based on the way rent is tendered; 3. The holdover: In a residential lease, if L elects to hold over a T who has wrongfully stayed on past the conclusion of the original lease an implied periodic tenancy arises measured by the way rent is now tendered.
4. How do you terminate a periodic tenancy: Notice, usually written, must be given.
5. How much notice must be given to terminate: at least equal to the period itself, unless otherwise agreed. In a month to month periodic tenancy: one month's notice. Exception: year to year or greater--6 months notice.
6. By private agreement the parties are free to lengthen or shorten any of these common-law prescribed notice provisions.
7. The periodic tenancy must end at the conclusion of a natural lease period. (this will be tested) Example: leased on June 1. T notices L of termination July 15. T is liable for rent through July 30.
108
Tenancy at Will:
This is a tenancy for no fixed duration. It arises when you see to T for as long as L or T desires.
Unless the parties expressly agree to a tenancy at will, the payment of regular rent will cause a court to treat it as an implied periodic tenancy.
The tenancy at will may be terminated by either party at any time. BUT today a reasonable demand to quit is usually needed.
109
Tenancy at Sufferance:
It is created when T has wrongfully held over past the expiration of the original lease. We give this wrongdoer a leasehold estate to permit L to collect the rent. The tenancy at sufferance lasts until L evicts or elects to hold this tenant to a new tenancy.
110
Tenant's Duties:
1. T's liability to third parties; 2. T's duty to repair; 3. T's duty to pay rent.
111
T's liability to third parties:
T is responsible for keeping the premises in reasonably good repair. T is liable for injuries sustained by third parties T invited, even where L expressly promised to make all repairs. It doesn't matter that T may seek indemnification from L.
112
T's duty to repair when the lease is silent:
1. The standard: T must maintain the premises and make ordinary repairs.
2. T must not commit waste: 1. Voluntary waste (overt destruction); 2. Permissive waste (neglect); 3. ameliorative waste (changes that enhance value).
113
Landlord Tenant law and the law of fixtures:
The law of fixtures was with waste doctrine. When a tenant removes a fixture he commits voluntary waste. A fixture is a once movable chattel that, by virtue of its attachement to realty OBJECTIVELY shows the intent to permanently improve the realty. (examples: heating systems; custom storm windows, certain lighting installations). T MUST NOT REMOVE A FIXTURE NO MATTER IF SHE INSTALLED IT. Fixtures pass with ownership of the land.
114
How to tell when a tenant installation qualifies as a fixture:
1. Express agreement controls. Any agreement on point between L and T is binding.
2. In the absence of agreement, T may remove a chattel that she has installed so long as removal does not cause substantial harm to the premises. If removal will cause substantial damage, then if in objective judgment T has shown the intent to install the fixture, the fixture stays put.
115
T's duty to repair when T has expressly covenanted in the lease to maintain the property in good condition for the duration of the lease:
At common law, historically, T was liable for any loss to the property including loss due to force of nature.
Today, the majority view: T may end the lease if the premises are destroyed without T's fault.
116
T's duty to pay rent: T breaches the duty to pay rent and is in possession of the premises
The landlord's only options are to evict through the courts or continue the relationship and sue for rent owed. If the landlord moves to evict, she is nonetheless entitled to rent from the tenant until the tenant, who is now a tenant at sufferance vacates. LANDLORD MUST NOT: engage in self help, such as changing the locks, forcibly removing T, removing any of T's possessions. Self help is flatly outlawed, and is punishable civilly and criminally.
117
T's duty to pay rent: T breaches the duty to pay rent but is out of possession (wrongly vacates)
Remember: SIR
1. Surrender: L can choose to treat T's abandonment as an implicit offer of surrender which L accepts. What is surrender? T shows by words or actions that she wishes to give up the lease. If the unexpired term is greater than one year surrender must be in writing to satisfy the statute of frauds. Practically, the landlord sends a signed letter accepting T's tacit surrender to T's last known address.
2. Ignore the abandonment and hold T responsible for the unpaid rent just as if T were still there. This option is available only in a minority of states.
3. Re-let the premises on the wrongdoer tenant's behalf, and hold him or her liable for any deficiency.
Majority rule: L must at least TRY to re-let. This is a mitigation principle (because lease is a contract).
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Landlord's Duties:
1. Duty to deliver possession; 2. The implied covenant of quiet enjoyment; 3. The implied warranty of habitability; 4. Retaliatory eviction;
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Landlord's duty to deliver possession:
The majority rule (known as the English rule) requires that L put T in physical possession of the premises. Thus, if at the start of T's lease a prior holdover T is still in possession, L has breached and the new T gets damages.
(American Rule: is a minority view and is a misnomer. Obliges L to deliver legal possession (like giving the keys) but not actual possession .)
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Landlord's duty of implied covenant of quiet enjoyment:
Applies to both residential and commercial leases. A fundamental implied promise. T has a right to quiet use and enjoyment of the premises without interference from L.
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What are the 2 ways that landlord can breach the duty of implied covenant of quiet enjoyment?
1. Breach by actual wrongful eviction: this occurs when L wrongfully evicts T or excludes T from the premises.
2. Breach by constructive eviction:
3 elements must be met: SING (Dido)
SI: Substantial Interference: due to L's actions or failures (chronic problem, not necessarily permanent problem)
N: Notice: T must tell L of the problem and L must fail to act meaningfully.
G: Goodbye: T must vacate within a reasonable time after L fails to fix the problem.
Is L liable for the bothersome conduct of other tenants? No. 2 exceptions: 1. L must not permit a nuisance on site; 2. L must control common areas.
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Landlord's duty of implied warranty of habitability
1. Applies only to residential leases (habitability refers to places of human dwelling).
2. The implied warranty of habitability is non-waivable.
3. The standard: the premises must be fit for basic human dwelling, meaning that bare living requirements must be met.
4. The appropriate standard may be supplied by case law or by housing code.
5. The sorts of problems to trigger breach of the implied warranty of habitability include: no heat in winter, no running water, no plumbing.
6. T's entitlements when the implied warranty of habitability is breached:
1. Move out and end the lease (but T doesn't have to);
2. Repair and deduct, allowable by statute in a growing number of states. T may make the reasonable repairs and deduct their cost from future rent.
3. Reduce rent or withhold all rent until the court determines fair rental value. Typically, T must place withheld rent into escrow to show her good faith.
4. Remain in possession, pay rent and affirmatively seek money damages.
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Landlord's duty to refrain from retaliatory eviction
If T lawfully reports L for housing code violations, L is barred from penalizing T by, for example: raising rent, harrassing the tenant, choosing spontaneously to terminate the lease. Policy: don't want to chill reports of violations of law
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Assignment v. Sublease
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 reserves the right.
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Assignment:
In an assignment L and T2 are in privity of estate.
This means that L and T2 are liable to each other for all of the covenants in the original lease that "run with the land." Most, if not all promises, in the original lease run with the land, i.e, they pertain to the leased premises. Common examples: the promise to repair, the promise to pay rent, the promise to paint.
L and T2 ARE NOT in privity of contract, unless T2 expressly assumed the performance of all obligations contained in the original lease.
L and T1 are no longer in privity of estate. However, they remain in privity of contract. Thus, L and T1 are secondarily liable to each other.
Example: T1 to T2 to T3:
T1 Privity of contract
T2 Nothing (unless expressly assumed all promises in the original lease for privity of contract)
T3 Privity of estate
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Sublease
Sublessor transfers less than everything she has. L and sublessee are neither in privity of estate or privity of contract. T2 is liable to T1 and vice versa.
The relationship between T1 and L is undisturbed.
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Landlord's Tort Liability
A MATTER OF TORT LAW
In tort, the common law imposed very harsh norm of caveat lessee. TENANT BEWARE L under no duty to make the premises safe.
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Five exceptions to caveat lessee:
When tenant learns of these exceptions to the harsh common law, he or she CLAPS
1. Common areas: L must maintain all common areas (hallways and stairwells).
2. Latent defects rule: L must WARN T of hidden defects that L knows about or L should know about. (merely a duty to warn, not a duty to repair)
3. Assumption of repairs: L who voluntarily makes repairs must complete them with reasonable care.
4. Public use rule: L who leases public space (such as a convention hall or a museum), and who should know, because of the NATURE of the defect and the LENGTH of the lease that T will not repair, L is liable for any defects on the premises.
5. Short term lease of furnished dwelling: L is liable for any defect on site.
5. Short term lease of furnished dwelling.
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Law of Servitudes refers to what
a family of nonpossessory interests See 2 pages in PAH pages 48 and 49. Memorize these.
Easements, License, Profit, Covenant, Equitable Servitudes,
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Easements: defined
The grant of a nonpossessory property interest that entitles its holder to some form of use or enjoyment of another's land, called the servient tenement.
Common examples: the privilege to lay utility lines on another's land; the easement giving its holder the right of access across a tract of land.
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Affirmative easements:
The right to do something on servient land. Most easements are affirmative.
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Negative easements:
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.
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Remember LASS:
L: light (most frequent--more congested urban settings)
A: air
S: support
S: streamwater from an artificial flow
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The minority view recognizes a 5th category: the right to scenic view. (california and colorado)
NEGATIVE EASEMENTS CAN ONLY BE CREATED EXPRESSLY, BY WRITING SIGNED BY THE GRANTOR. THERE IS NO NATURAL OR AUTOMATIC RIGHT TO A NEGATIVE EASEMENT.
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An easement is appurtenant to land:
IT TAKES TWO BABY
The easement is appurtenant when it benefits its holder in his physical use or enjoyment of his property.
You will know that you have an appurtenant easement when two parcels are involved. A dominant tenement gets the benefit and a servient tenement bears the burden.
Label this as an easement apppurtenant to dominant tenement. Don't speak of easements appurtenant to servient land.
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An 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. Now only 1 parcel is involved. It is the servient land.
Common example: the right to place a billboard on another's land. (Bean company wants to place billboard reading, "Eat beans and you will never have to stop for gas." You say, "That's gross." And you are right.); Right to fish or swim in another's pond; The right to lay power lines on another's land.
Only servient land is burdened, there is no dominent land. Commercial benefit.
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Easement and transferability: appurtenant
The appurtenant easement passes automatically with the dominant tenements, regardless of whether it is even mentioned in the conveyance.
Note that 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.
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Easement and transferability: in gross
Not transferable unless it is for commercial purposes.
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Creation of an affirmative easement:
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Remember PING:
P: proscription
I: implication
N: necessity
G: grant
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Create an affirmative easement by grant:
An easement to endure for more than one year must be in a writing that complies with the formal elements of a deed. We insist on a writing because of the statute of frauds. The writing to evidence the easement is called a deed of easement.
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Create an affirmative easement by implication
By implication: (aka easement implied from existing use)
The court may imply an easement if:
1. the previous use was apparent and 2. the parties expected that it would continue because it is reasonably necessary to the dominant land's use and enjoyment.
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Create an affirmative easement by necessity
The landlocked setting. An easement of right of way is implied by necessity if grantor conveys a portion of his land with no way out except over a part of his remaining land.
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Create an affirmative easement by prescription
An easement may be acquired by satisfying the elements of adverse possession.
Remember COAH:
C: continuous use for the statutory period
O: open and notorious use
A: actual use
H: hostile use (without the servient owner's consent)
Note: Permission defeats the acquisition of an easement by proscription. An easement by proscription requires that the use be hostile.
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Scope of an easement is determined by:
the terms of the grant or the conditions that created it.
Unilateral expansion is not allowed.
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Termination of an easement: list 8
Remember END CRAMP (easement is really cramping your style--your mission is end cramp)
E: Estoppel
N: Necessity
D: Destruction
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C: Condemnation
R: Release
A: Abandonment
M: Merger doctrine
P: Proscription
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Termination of an easement: Estoppel
Here, the servient owner materially changes his or her position in reasonable reliance on the easement holder's assurances that the easement will not be enforced.
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Termination of an easement: Necessity
Easements created by necessity expire as soon as the need ends.
However, if the easement, attributable to necessity, was nonetheless created by express grant, it will not end automatically when the need ends.
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Termination of an easement: Destruction
Destruction of the servient land other than through the willful conduct of of the servient owner ends the easement.
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Termination of an easement: Condemnation
Condemnation of the servient estate ends the easement. By eminent domain.
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Termination of an easement: Release
A written release, given by the easement holder to the servient owner.
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Termination of an easement: Abandonment
The easement holder must demonstrate by PHYSICAL ACTION of an intent to never use the easement again.
Note: abandonment requires physical action by the easement holder. Mere nonuse or mere words is insufficient.
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Termination of an easement: Merger doctrine
(also known as unity of ownership)
The easement is extinguished when title to the easement and title to the servient land become vested in the same person.
Note: If complete unity of title is achieved, the easement is extinguished. Even though there may be later separation of title the easement is not revived. To create it again, must start from scratch.
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Termination of an easement: Proscription
The servient owner may extinguish the easement by interfering with in it accordance with the elements of adverse possession.
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Remember COAH
C: continuous interference
O: open and notorious
A: actual
H: hostile to the easement holder
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License: defined
A mere privilege to enter another's land for some delineated purpose.
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License: rules
1. Licenses are not subject to the statute of frauds. Thus you don't need a writing to create a license.
2. Licenses are freely revocable at the will of the licensor unless estoppel applies to bar revocation.
3. Estoppel will apply to bar revocation only when the licensee has invested substantial money or labor or both in reasonable reliance of the licenses continuation.
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License: classic license cases
1. Ticket cases: tickets create freely revocable licenses.
Examples: tickets to the superbowl, but oversold. Stadium within its rights. But as a contract matter there is a breach of contract where direct damages and incidental and consequentials are compensible.
2. Neighbors talking by the fence: oral easement is unenforceable as such. It violates the statute of frauds. Instead it creates a freely revocable license.
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Profit: rules
1. The profit entitles its holder to enter the servient land and take from it the soil or some substance of the soil: minerals, timber, or oil.
2. The profit shares all the rules of easements.
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Covenant: defined
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 but rather a contractual limitation or promise regarding land.
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Covenants: types
1. Covenant can be negative (known as restrictive covenants): The restrictive covenant is a promise to refrain from doing something related to the land. For example: I promise not to build for commercial purposes. Most covenants are negative.
2. Covenants can be affirmative: The affirmative covenant is a promise to do something related to land. For example: I promise to paint our common fence.
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Covenants: rule
1. How do you know whether to construe the given promise as a covenant or as an equitable servitude: on the basis of the remedy your plaintiff seeks. When plaintiff want money damages, construe as a covenant. LEGAL REMEDY. When plaintiff want an injunction, construe as an equitable servitude. EQUITABLE REMEDY.
2. In covenant parlance, one tract is burdened by the promise and another is benefited. Covenants run with the land when it is capable of binding successors.
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Elements necessary for the burden to run with the land:
Do the burden side first. It is harder for burden to run.
Remember WITHN
W: Writing: the original promise between A and B was in writing.
I: Intent: the original parties, A and B, intended that the covenant would run.
T: Touch and concern the land: the promise must affect the parties legal relationship 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 homeowner's association fees) and covenants not to compete do not touch and concern the land.)
H: Horizontal and Vertical privity are both needed for the burden to run.
N: Notice: A1 had notice of the promise when she took.
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Horizontal privity:
Horizontal privity refers to the nexus between the original parties, A and B. It requires that they be in succession of estate. This means that they were in a grantor grantee or landlord tenant or mortgagor mortgagee relationship. Horizontal privity is hard to establish and is the likely sticking point.
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Vertical privity:
Vertical privity refers to the nexus between A and A1. It simply requires some nonhostile nexus, such as contract, devise, descent. Vertical privity is much easier to establish than horizontal privity. The only time that vertical privity is absent is if A1 acquired her interest through adverse possession.
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Elements necessary to determine if benefit of A's promise to B run from B to B1? Does B1 have standing to bring a breach of promise suit?
Remember WITV
W: Writing: the original promise from A to B was in writing
I: Intent: the original parties, A and B, intended that the benefit would run
T: Touch and Concern: the promise affects the parties as landowners.
V: Vertical privity: a nonhostile nexus between B and B1. (Note: horizontal privity is not required for the benefit to run. That is why it is easier for benefits to run than burdens.)
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Equitable Servitude: defined
The equitable servitude is a promise that equity will enforce against successors. It is accompanied by equitable relief.
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Equitable Servitude: how created to bind successors
Remember WITNES
W: Writing: generally the original promise was in writing
I: Intent: the parties intended that the promise would bind successors
T: Touch and Concern: the promise affects the parties as landowners
N: Notice: the successors of the burdened land had notice of the promise
ES: equitable servitude
NOTE: PRIVITY IS NOT REQUIRED TO BIND SUCCESSORS
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Implied Equitable Servitude:
The general scheme doctrine: always the same fact pattern.
A subdivides her land into 50 lots. She sells lots 1 through 45 through deeds that contain covenants restricting use to residential purposes. A then sells one of the remaining lots to a commercial entity, B, by deed containing no such covenant. B now seeks to build a convenience store on his lot. Can he be enjoined from doing so?
Yes, if the first two elements of the general or common scheme doctrine apply. Under the common scheme doctrine, the court will imply a reciprocal negative servitude (implied equitable servitude) to hold the unrestricted lot holder to the restrictive covenant.
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The two elements of the common scheme doctrine:
1. When the sales began, the subdivider (A) had a general scheme of residential development which included defendant's lot.
2. The defendant lotholder (B) had notice of the promise contained in the prior deeds.
Three forms of notice:
1. actual notice: defendant had literal knowledge of the earlier promises
2. Inquiry notice: the neighborhood conforms to the common restriction (lay of the land)
3. Record notice: the form of notice sometimes imputed to buyers on the basis of public documents.
NOTE: with respect to record notices, the courts are split. Some take the view that a subsequent buyer is on record notice of the contents of prior deeds transferred to others by a common grantor. The better view (because it is less burdensome to the defendant's title searcher), taken by other courts, is that the subsequent buyer does NOT have record notice of the contents of those prior deeds transferred to others by the common grantor.
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Equitable defenses to enforcement of an equitable servitude:
Only one
Changed conditions: the changed circumstances alleged by the party seeking release from the terms of an equitable servitude must be so pervasive that an entire domain has changes.
Mere pockets of limited change is never good enough.
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Adverse Possession: basic concept
Possession for a statutorily prescribed period of time that can if certain elements are met ripen into title.
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Adverse Possession: elements
Remember COAH
C: Continuous, meaning uninterrupted for the statutory perioud
O: Open and Notorious, the sort of possession that the usual owner would make under the circumstances
A: Actual, the entry must be literal (won't allow for a symbolic form of entry)
H: Hostile, the possessor doesn't have the true owner's consent to be there
NOTE: POSSESSOR'S SUBJECTIVE STATE OF MIND IS IRRELEVANT (DOESN'T MATTER IF SHE HAD NO IDEA OR IF SHE KNEW FULL WELL)
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Adverse Possession: tacking
One adverse possessor may tack on to his time with the land his predecessor's time, so long as there's privity, which is satisfied by any nonhostile nexus, such as blood, contract, deed, will. Tacking is not allowed when there has been an ouster.
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Adverse Possession: disabilities
The statute of limitations will not run against a true owner who is afflicted by a disability AT THE START of the adverse possession. Common disabilities include insanity, infancy, imprisonment.
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Every conveyance of real estate consists of a two-step process:
Step 1: the land contract, which endures only until Step II
| Step II: the closing, where the deed becomes our operative document
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Land contract and the Statute of Frauds: standard
1. Must be in writing (Statute of Frauds) signed by the party to be bound.
2. Must describe Blackacre.
3. Must state some consideration.
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Land contract and the Statute of Frauds: when the amount of land in the land contract is more than the actual size of the parcel
Remedy of choice is specific performance with a pro rata deduction in purchase price.
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Land contract and the Statute of Frauds: exception
Doctrine of part performance. 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:
1. B takes possession
2. B remits all or part of the price
3. B makes substantial improvements
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Land Contract and Risk of Loss
Apply the doctrine of equitable conversion: Equity regards as done that which ought to be done. Thus, in equity, once the contract is signed B owns the land, subject of course to the condition that he pay the purchase price at closing.
One important result flows from equity: Destruction. If in the interim between contract and closing, Blackacre is destroyed through no fault of either party, B bears the loss.
Modern day: most contracts will reallocate the loss.
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Two implied promises in every land contract:
1. Seller promises to provide marketable title
| 2. Seller promises not to make any false statements of material fact.
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Implied promise of seller to provide marketable title: standard
Seller promises to provide marketable title at the closing. Marketable title means title free from reasonable doubt. Free from lawsuits and the threat of litigation.
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Implied promise of seller to provide marketable title: 3 circumstances will render title unmarketable
Adverse possession: if even a part of the title rests on adverse possession, it is unmarketable. Seller must be able to provide good title.
2. Encumbrances: Marketable title means an unencumbered fee simple. Thus, servitudes and mortgages render title unmarketable unless 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.
3. Zoning violations: Title is unmarketable when Blackacre VIOLATES a zoning ordinance, because Blackacre is under a threat of litigation. Mere presence of zoning laws is no consequence.
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Implied seller promise not to make any false statements of material fact:
the majority of states now also hold seller liable for failure to disclose latent material defects. Seller is liable for material lies and material omissions. That is significant because today silence is not golden.
If the contract contains a general disclaimer of liability (for example, "property sold as is" or "with all faults") the disclaimer will not excuse seller from liability for fraud or failure to disclose.
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Land contract and implied warranties of habitability:
The land contract contains no implied warranties of habitability. The common law norm is caveat emptor. Buyer beware.
One important exception: The implied warranty of fitness and workmanlike construction applies to the sale of a new home by a builder-vendor.
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The Closing:
The controlling document is now the deed. The deed passes legal title from seller to buyer.
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How does the deed pass legal title from seller to buyer?
Deed must be "LEAD.": Lawfully Executed And Delivered.
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Lawful execution of a deed:
1. The deed must be in writing, signed by the grantor. Note: the deed need not recite consideration, nor must consideration pass to make a deed valid.
2. The description of the land does not have to be perfect. The law requires only an unambiguous description and a good lead.
Unambiguous description:
Good lead: can research and know the meaning of the description
All of O's land is acceptable.
O conveys some of O's land is unacceptable. Even with research we won't know the meaning of some.
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Delivery requirement:
1. The delivery requirement could be satisfied when grantor physically or manually transfers the deed to the grantee. It is permissible here to use the mail or an agent or a messenger.
2. However, delivery does not necessarily require actual physical transfer of the instrument itself. The standard for delivery is a LEGAL standard and is a test solely of present intent. Ask: did grantor have the present intent to be immediately bound irrespective of whether the deed was handed over. "Today is the day, I want you to have Blackacre." "Yes, mom, I accept."
3. Recipient's express rejection of the deed defeats delivery.
4. If a deed, absolute on its face, is transferred to grantee with an oral condition, the oral condition drops out. It is not provable and delivery is done. Too susceptible to fraud.
5. Delivery by escrow is ok. 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 conditions are met. Once the conditions are met title passes to grantee. The advantage of escrow: If grantor dies or becomes incompetent or is otherwise unavailable before the express conditions are met title still passes from the escrow agent to grantee once conditions are met.
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Three types of deed:
1. Quitclaim
2. General warranty deed
3. Statutory special warranty deed
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Quitclaim:
It contains no covenants. Grantor isn't even promising that he has title to convey. This is the worst deed buyer could hope for.
Grantor did implicitly promise in the land contract to provide marketable title AT CLOSING. But any problems post closing and seller is off the hook.
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General warranty deed:
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The best deed a buyer could hope for. It warrants against all defects in title, including those due to grantor's predecessors. The general warranty deed typically contains all six of the following covenants:
1. covenant of seisin
2. covenant of right to convey
3. covenant against encumbrances
4, covenant for quiet enjoyment
5. covenant of warranty
6. covenant for further assistance
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3 present covenants of the general warranty deed, definition of present covenant, statute of limitation for breach of a present covenant:
A present covenant is breached, if ever, at the time of delivery. Includes: covenant of seisin, covenant of right to convey, covenant against encumbrances. The statute of limitations for breach of a present covenant begins to run from the instant of delivery.
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Covenant of seisin:
Grantor promises he owns this estate.
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Covenant of right to convey:
Grantor has the power to transfer. No temporary restraints on alienation. Grantor is under no disability. Grantor is of sound mind and requisite age.
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Covenant against encumbrances:
No servitudes or liens on Blackacre.
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Future covenants: defined; the 3 in the general warranty deed; statute of limitations for breach:
A future covenant is not breached, if ever, until grantee is disturbed in possession. The three future covenants contained in the general warranty deed include: covenant of quiet enjoyment; covenant of warranty; covenant for further assistance. The statute of limitation for breach of a a future covenant will not begin to run until that future date.
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Covenant for quiet enjoyment:
Grantee won't be disturbed in his possession by a third party's lawful claim of title. No double sale of property.
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The covenant of warranty:
Grantor promises to defend grantee against any lawful claims of title asserted by others.
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Covenant for further assistance:
Grantor promises to do whatever is needed in the future to perfect the title.
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Statutory Special Warranty deed:
Provided for by statute in many states, this deed contains two promises that grantor makes only on behalf of himself. (Grantor makes no representations on behalf of his predecessors in interest.)
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2 promises contained in the special warranty deed:
1. Grantor promises that he hasn't conveyed Blackacre to anyone other than grantee
AND
2. Blackacre is free from encumbrances made by the grantor.
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What is the basic model of recording system questions?
the case of the double dealer
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2 Brightline rules for recording system:
1. If B is a Bona Fide Purchaser, and we are in a NOTICE jurisdiction, B wins, regardless of whether or not she records before A does.
2. If B is a Bona Fide Purchaser and we are in a RACE-NOTICE jurisdiction, B wins if she records properly before A does.
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Recording acts exist to protect only
Bona Fide Purchasers and Mortgagees (creditors)
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A bona fide purchaser is one who
1. buys Blackacre for value
AND
2. without notice that someone else got there first
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Two routine value questions for determining bona fide purchaser
1. The bargain basement sale. B paid $50K for Blackacre when its FMV is estimated at $100K. B is a bona fide purchaser as long as B remits substantial pecuniary consideration.
2. The case of the doomed donee. Recording statutes do not protect donees, heirs, or devisees UNLESS the shelter rule applies.
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Three forms of notice that a buyer may potentially be charged with are:
Remember AIR
A: Actual
I: Inquiry
R: Record
Inquiry and Record notice are forms of constructive notice and may be imputed to the buyer regardless of any actual knowledge that the buyer may have.
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Actual notice for bona fide purchaser:
Prior to B's closing, B learns of A.
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Inquiry notice for bona fide purchaser:
Whether he looks or not, B is on inquiry notice of whatever an exam of Blackacre would show. The buyer of real estate has a duty to inspect before transfer of title, to see, for example, whether anyone else is in possession. If another is in possession, B has inquiry notice, regardless of whether buyer actually bothered to inspect or not. Thus, in our model, if A was in possession, B would be on inquiry notice of that fact, thereby defeating B's status as a BFP.
If a recorded instrument makes reference to an unrecorded transaction, grantee is on inquiry notice of whatever a reasonable followup would show.
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Record notice for bona fide purchaser:
B is on record notice of A's deed if at the time B takes, A's deed was recorded properly. Whether B bothers to check the public records or not.
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In our model, what if A has not recorded, or has not recorded properly at the time B takes? Assume that B is a bona fide purchaser. Does B win?
It depends on which recording statute your jurisdiction has enacted. In a notice state, B wins. In a race-notice state, to win B must be a BFP and B must also win the race to record.
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Notice Statute:
"A conveyance of an interest in land (A) shall not be valid against any subsequent purchaser for value (B), without notice thereof (B), unless the conveyance is recorded (A)."
If at the time B takes, he is a bona fide purchaser, he wins. It won't matter that A may ultimately record first, before B does. It won't matter, in the A vs. B contest, that B never records.
THE LAST BFP TO ENTER WINS.
B should record promptly to prevent any problems with any potential Cs.
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Race Notice Statute:
"Any conveyance of an interest in land (A) shall not be valid against any subsequent purchaser for value (B), without notice thereof (B), WHOSE CONVEYANCE IS FIRST RECORDED (B)."
To prevail, B must be a BFP AND B must win the race to record.
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A proper recordation prevents what?
BFPs because notice has been given to all the world.
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What is "proper" recordation?
Within the chain of title, which refers to that sequence of recorded documents capable of giving record notice to later takers. In most states, the chain of title is established through a title search of the grantor grantee index.
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3 chain of title problems:
1. Shelter Rule
2. Problem of the Wild Deed
3. Estoppel by Deed
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Shelter 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.
Example: O conveys to A, who does not record. Later, O conveys to B, a BFP, who records. B then conveys to C, who is a mere donee or who has actual knowledge of the O to A transfer. In the contest of A vs. C, who prevails?
C wins in both a notice and race notice state because of the shelter rule. C steps into the shoes of B who was a BFP who recorded first.
The shelter rule tries to protect B, the BFP by making it easier for B to transfer successfully.
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Problem of the Wild Deed
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.
Example: O sells Blackacre to A, WHO DOES NOT RECORD. Then, A sells to B. B records the A-to-B deed.
Note: The A to B deed, although recorded is not connected to the chain of title, because the O to A link is missing from the records. The A to B deed is a wild deed.
O, our initial grantor and dirty double dealer, then sells Blackacre to C. Assume that C has no actual or inquiry knowledge of the O-to-A or A-to-B conveyance. C records. O has skipped town. In the contest of B vs. C, who prevails?
C wins, in both a notice and race-notice state. C wins in a notice state because at the time she takes she is a BFP. C wins in a race notice state because she is a BFP who wins the race to record.
B's recording is a nullity because of the wild deed. It is as if it was never recorded in the first place.
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Estoppel By Deed:
One who conveys realty in which he has no interest (X), is estopped from denying the validity of that conveyance if he later acquires that previously transferred interest.
Example:
1950 O owns Blackacre. He is thinking about selling it to X, but for now decides against it. In 1950, X, who does not own Blackacre sells it anyway, to A. A records.
1960, O finally sells Blackacre to X. X records.
1970, X sells Blackacre to B. B records.
As between X and A, who owned Blackacre from 1960-1969? A did because of the rule of estoppel by deed.
Who owns Blackacre in 1970? B, as long as he is a BFP. B wins in a notice system because he is the last BFP to enter the scene. B wins in a race notice system because he is a BFP who wins the race to record. A's 1950 recording is a nullity. A variation on the wild deed theme. B's title searcher would not find A's deed because one is entitled to assume that no one sells land until they own it. A should have checked the record to discover that X didn't have anything to convey to her anyway.
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Model for mortgage questions:
C, a creditor, is thinking of lending O $50,000. O offers Blackacre as collateral.
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How does one create a mortgage?
1. A mortgage is the conveyance of a security interest in land, intended by the parties to be collateral for the repayment of a debt.
2. The mortgage typically must be in writing to satisfy the Statue of Frauds. This is the Legal Mortgage.
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A mortgage is the union of 2 elements:
1. A debt
| 2. A voluntary lien in debtor's land to secure the debt.
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mortgagor/mortgagee
Mortgagor: debtor
Mortgagee: creditor
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Legal mortgage:
A mortgage in writing.
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Could be called:
note
mortgage deed
deed of trust
sale lease back
security interest in land
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Equitable mortgage:
O owns Blackacre. Creditor lends O a sum of money. The parties understand that Blackacre is the collateral for the debt. However, instead of executing a note or mortgage deed, O hands Creditor a deed to Blackacre that is absolute on its face. This is called an equitable mortgage.
As between O and creditor: parole evidence is admissible to show the parties intent.
What if Creditor proceeds to sell Blackacre to bona fide purchaser X? X owns the land. O's only recourse is to sue creditor for fraud and the sale proceeds.
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Once a mortgage has been created, what are the parties rights?
Unless and until foreclosure, debtor-mortgagor has title and the right to possess. Creditor-mortgagee has a lien. Simply a right to look to Blackacre in the event of a debtor default.
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All parties to a mortgage can transfer their interests. The mortgage automatically follows:
a properly transferred note.
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The creditor-mortgagee can transfer his interest by
1. endorsing the note and delivering it to transferee
OR
2. executing a separate document of assignment
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If a note is endorsed and delivered, the transferee is eligible to become:
a holder in due course. This means that he takes the note free of any personal defenses that could have been raised against the original creditor.
Personal defenses include: lack of consideration, fraud in the inducement, unconscionability, waiver, estoppel.
Thus, the holder in due course may foreclose the mortgage despite any such personal defense.
By contrast, even a holder in due course is still subject to "real" defenses that the maker might raise.
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"Real" defenses against a holder in due course:
Remember MAD FIFI4 (mad pack of poodles that at any time one of those bitches could jump up and bite the holder in due course)
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MA: Material Alteration
D: Duress
FIF: Fraud in the Factum (meaning a lie about the instrument--example told he was signing a credit application, but was signing a mortgage instead )
I: Incapacity
I: Illegality
I: Infancy
I: Insolvency
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To be a holder in due course of the note, the following criteria must be met:
1. the note must be negotiable, meaning made payable to the named mortgagee;
2. the original note must be endorsed, meaning signed by the named mortgagee;
3. the original note must be delivered to the transferee. A photocopy is unacceptable;
4. the transferee must take the note in good faith without notice of any illegality ;
5. the transferee must pay value for the note, meaning some amount that is more than nominal.
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Recording statutes protect who?
Bona Fide Purchasers and Mortgagees
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If O, our debtor-mortgagor, sells Blackacre, which is now mortgaged, what happens to the lien?
the lien remains on the land so long as the mortgage was properly recorded when Buyer purchases Blackacre.
A buyer takes subject to the lien because all recording statutes apply to mortgages as well as deeds. In a notice state, Buyer takes subject to the lien because Buyer has notice of it. In a race-notice state, Buyer takes subject to the lien because Buyer has record notice and creditor won the race to record.
BUT
O takes out a $50K mortgage with Bank on January 10. On January 15, Madge sells Blackacre to Buyer. Buyer had no knowledge of the lien. On January 20, Bank recorded its mortgage. On January 30, Buyer records his deed. Whether Buyer holds subject to the lien depends on which recording statute has been enacted.
Race-notice jurisdiction: Buyer holds subject to the lien because he lost the race to record.
Notice jurisdiction: Buyer does not hold subject to the lien so long as he was a BFP when he took.
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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. 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 sticks with the land. Thus, if O doesn't pay, the mortgage may be foreclosed.
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Foreclosure:
Assuming that our mortgagee-creditor must look to the land for satisfaction, how must he or she proceed?
The mortgagee must foreclose by proper judicial action. At foreclosure, the land is sold and the land proceeds go toward satisfying the debt.
If the proceeds are less than the amount owed, mortgagee brings a deficiency judgment against debtor.
If there is a surplus? Junior liens are paid in order of priority. Remaining surplus goes back to debtor.
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Order of distribution of funds in a foreclosure:
1. Attorney's fees
2. Foreclosure expenses
3. Any accrued interest on first priority lien
4. Mortgages paid off in order of priority and each mortgagee is entitled to payment in full before any subordinate liens can take.
5. Surplus goes to debtor.
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Effect of foreclosure on various interests:
1. Foreclosure will terminate interests junior to the mortgage being foreclosed but will not affect senior interests.
2. Foreclosure doesn't affect any interest senior to the mortgage being foreclosed.
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Necessary parties to a foreclosure action:
Those with interests subordinate to those of the foreclosing party are necessary parties to the foreclosure action. (junior lien holders)
The debtor-mortgagor is also considered a necessary party, and must be joined, particularly if creditor wishes to proceed against a debtor for a personal deficiency judgment.
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Failure to include a necessary party in a foreclosure action results in:
the preservation of that party's claim, despite the foreclosure and sale. Thus, if a necessary party is not joined, his mortgage remains on the land.
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What does it mean to say that foreclosure will terminate interests junior to the mortgage being foreclosed but will not affect senior interests?
This means that junior lienholders will be paid in descending order with the proceeds from the sale, assuming funds are leftover after full satisfaction of superior claims. Junior lienholders should be able to proceed for a deficiency judgment. But once foreclosure of a superior lien has occurred, with the proceeds distributed appropriately, junior lienholders can no longer look to Blackacre for satisfaction.
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What does it mean to say that foreclosure doesn't affect any interest senior to the mortgage being foreclosed?
This becomes an issue where a junior lienholder forecloses. The buyer at the sale takes subject to such interest. This means that buyer is NOT personally liable on the senior debt, but as a practical matter, if the senior mortgagee is not paid, sooner or later, the senior creditor will foreclose on the land.
Advise the client to bid only up to the amount the property is worth minus the first lien. So if the property is worth $50K and the first lien is $30K, the client bids $20K in order to discharge the first lien.
How will the $20K be distributed. $15K goes to 2nd bank, $5K goes to 3rd bank. It should try for a deficiency judgment against debtor. Buyer then pays off $30K to first bank.
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Priorities: rules
1. As a creditor you must record. Until you properly record your mortgage you have no priority.
2. Once recorded, priority is determined by the norm of first-in-time first-in-right.
3. The purchase money mortgage: A mortgage given to secure a loan that enable the debtor to acquire the encumbered land. Lender is purchase money mortgagee. Assuming that the lender records properly, he has first priority as to the parcel he financed.
4. Subordination agreements are allowed. Meaning, a senior creditor may agree to subordinate its priority to a junior creditor.
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A purchase money mortgagee has what?
superpriority (superior to an after acquired collateral clause even if that security interest is recorded)
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What is an after acquired collateral clause?
Lender takes a security interest in all of O's real estate holdings, "whether now owned or hereafter acquired." Permissible. Synonymous with the floating lien.
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Redemption in equity:
Equitable redemption is universally recognized up to the date of sale. At any time prior to the foreclosure sale, debtor can try to redeem the land. Once a valid foreclosure has taken place the right to equitable redemption is gone.
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How is the right to equitable redemption exercised?
By paying off the missed payments, plus interest, plus costs.
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What if the mortgage contains an acceleration clause?
An acceleration clause permits the mortgagee to declare the full balance due in the event of default. If the mortgage contains an acceleration clause, the full balance plus accrued interest, plus costs must be paid.
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May a debtor/mortgagor waive the right to redeem in the mortgage itself?
NO. This is known as clogging the equity of redemption. It is prohibited as a matter of public policy.
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Statutory redemption:
Recognized in one half of the states, statutory redemption gives the debtor-mortgagor a statutory right to redeem for some fixed period after the foreclosure sale has occurred (typically six months to one year). Where recognized, the statutory redemption applies after foreclosure. The amount to be paid is usually the foreclosure sale price rather than the amount of the original debt. In most states, to recognize statutory redemption, the mortgagor has the right to possess Blackacre during the statutory period.
When a mortgagor redeems, the effect is to nullify the foreclosure sale.
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Lateral support:
If land is improved by buildings and an adjacent landowner's excavation causes that improved land to cave in, the excavator will be liable only if negligent.
Strict liability does not attach to the excavator's actions unless plaintiff shows that, because of defendant's actions, plaintiff's improved land would have collapsed even in its natural state.
In other words, for strict liability to apply, plaintiff mus show that the improvements on his land (for example, the shrubs, the fountain, the structures) did not contribute to his land's collapse.
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Water rights: two major systems for determining the allocation of water in water-courses, such as streams, rivers, and lakes
1. Riparian doctrine
| 2. Prior appropriation doctrine
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Riparian doctrine:
The water belongs to those who own the land bordering the water course. These people are known as riparians, who share the right of reasonable use of the water. Thus, one riparian will be liable if his or her use unreasonably interferes with others use.
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Prior appropriation doctrine:
The water belongs initially to the state, but the right to divert it and use it can be acquired by an individual regardless of whether or not he or she happens to be a riparian owner.
Rights are determined by priority of beneficial use. The norm for allocation is first in time, first in right. Thus, a person can acquire the right to divert and use water from a water course merely by being the first to do so. Any productive or beneficial use of the water, including the use for AGRICULTURE is sufficient to create the appropriation right.
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Groundwater: defined and rule
Also known as percolating water. Water beneath the surface of the earth that is not confined to a known channel. The surface owner is entitled to make reasonable use of groundwater. However, the use must NOT be wasteful. If it is wasteful, it is unreasonable.
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Surface water: defined and rule
Those which come from rain, springs, or melting snow, and which have not yet reached a natural watercourse or basin. The common enemy rule: surface water is a nemesis. It is an ill to be irradicated.
A landowner may change drainage or make any other changes/improvements on his land to combat the flow of surface water.
Many courts have modified the common enemy rule to prohibit unnecessary harm to other's land.
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Possessor's rights
The possessor of land has the right to be free from both trespass and nuisance.
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Trespass: defined
The invasion of land by tangible physical object. To remove a trespasser bring an ejectment action.
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Private nuisance
substantial and unreasonable interference with another's use and enjoyment of land.
Note: unlike trespass, nuisance does NOT require tangible, physical invasion. Thus, odors and noise could give rise to a nuisance, but not a trespass.
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Nuisance and the hypersensitive plaintiff
Plaintiff loses. Her use is hypersensitive.
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Eminent domain: defined
Government's fifth amendment power to take private property for public use in exchange for just compensation.
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Explicit takings:
Acts of governmental condemnation. For example, the government condemns your land to make way for a public highway.
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Implicit or regulatory takings:
a government regulation that, although not intended to be a taking, has the same effect.
A regulation has worked an economic wipeout of your investment.
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Remedy for a regulatory taking:
Government must either:
1. Compensate owner
OR
2. Terminate the regulation and pay owner for damages that occurred while it was in effect.
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Zoning: defined
Pursuant to its police powers, STATE AND LOCAL government may enact statutes to reasonably control land use.
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Variance:
The principal means to achieve flexibility in zoning.
The proponent must show 1. undue hardship; 2. that the variance won't decrease neighboring property values.
The variance is granted or denied by administrative action. Typically a zoning board.
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Nonconforming use:
A once lawful, existing use now deemed nonconforming by a new zoning ordinance. It cannot be eliminated all at once unless just compensation is paid. Otherwise, it could be deemed an unconstitutional taking.
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Unconstitutional extactions:defined
Exactions are those amenities government seeks in exchange for granting permission to build (such as providing several new streetlight, a small park, and wider roads). To pass constitutional scrutiny, these exactions must be reasonably related both in nature and scope to the impact of the proposed development. If they are not, the exactions are unconstitutional.
