The Big 3 Interests in Land
1. Estates - Giving possession
2. Easements - Giving right of use
3. Restrictive Covenants - restricting someone else's use of their land
Two Present Freehold Estates
1. Fee Simple Absolute
2. Life Estate
Fee Simple Absolute
Creation: courts will presume a fee simple unless language shows clear intent to create another estate
- Runs forever, fully alienable (no restraints on transfer of ownership). Any attempt to put a direct restraint on alienation = void (ignore the restriction)
- Conditions on transfer are OK, but not restrictions
- Right of first refusal is not an invalid restraint
- Never measured by time, only by a life.
Life estate can be implied.
- - Measuring life can be the life of someone other than life estate holder
- - If life tenant dies before the measuring life, life estate passes to estate of life tenant until the measuring life dies
- Forfeiture restrictions on life estates are okay.
Rights and Duties of a Life Tenant - Waste
- All a life tenant can do is maintain
the estate = continuing the normal use
of the land in its present condition
- If life tenant does more
than or less
than merely maintain, life tenant guilty of waste.
- 1. Voluntary Waste
- 2. Permissive Waste
- 3. Ameliorative Waste
Rights and Duties of a Life Tenant - Waste
(1. Voluntary Waste)
Voluntary Waste - any affirmative action beyond the right of maintenance causing harm to the premises
- Life tenant can only continue normal use, any change = voluntary waste, life tenant is liable to the holder of the future interest
- Open Mines Doctrine - depletion of natural resources is waste, unless the normal use of the land was to deplete them (coal mine, oil field, etc.)
- Sale of crops is not waste
Rights and Duties of a Life Tenant - Waste
(2. Permissive Waste)
Permissive Waste - where tenant has failed to maintain. Inaction, not action.
- Life tenant does not have to insure the property
Tenant must do three things to avoid permissive waste:
1. Repair - life tenant must keep property in repair, but is only responsible for ordinary repairs, not replacement.
2. Taxes - life tenant pays all taxes on property. BUT--> if taxes not paid, tax sale terminates the future interest.
3. Interest - life tenant pays any interest on any mortgage. (Holder of future interest pays principal)
** Life Tenant's Liability - life tenant's obligation is limited to amount of income received from the land, or if the life tenant is personally using the property, the reasonable rental value of the land
Rights and Duties of a Life Tenant - Waste
(3. Ameliorative Waste)
Ameliorative Waste - occurs when the affirmative act substantially alters the property, but increases the value of it.
- If changed conditions have made property basically worthless in current use, life tenant can tear down w/o liability to holder of future interest
Class Gifts -
Class Gifts - gifts to class of unnamed persons
- Members of a class who predecease the T are eliminated and do not recover, their gift lapses.
- Once the class is established when the will is executed, the class stays open to accommodate those who later fall into class definition
- Rule of Convenience - Class closes when any one of the class is entitled to a distribution. Only a rule of construction - applied only if grantor does not specify otherwise
The interest exists now, but possession will not be until later, if at all.
Two future interests topics:
1. The Classification Rules
2. The Rule Against Perpetuities
(5 Future Interests; 2 Categories)
: Those retained by Grantor
- Estates grantor keeps when grantor gives less
than the full interest held by grantor:
2. Possibility of Reverter
3. Right of Entry (Power of Termination)
**If there is any chance
that property might go back to grantor, then one of these is kept**
- Category 2: Those given to Grantee:
- 1. Remainder
2. Executory Interest
Future Interests Retained by Grantor
Reversion - the interest kept by Grantor when Grantor gives less than the durational estate Grantor had. I.e. - if pure life estate given, Grantor retains reversion interest if/when life tenant dies.
- Reversion is not certain to send property back to O, it may or may not go back, depending on the grant
- Reversion is never subject to RAP
- Can be transferred freely
- Grantor can't keep reversion if he has given away the full interest (i.e. O to A for life, then to B and her heirs)
Future Interests Retained by Grantor
(Possibility of Reverter)
Possibility of Reverter
- Whenever Grantor gives a fee simple determinable
, Grantor keeps possibility of reverter. (i.e. - O to A and his heirs for so long as
no liquor is consumed on land.)
- - Fee Simple Determinable - ends a fee simple grant automatically when the condition happens
- - Possibility of reverter only goes with a fee simple determinable
- Possibility of reverter is NEVER
subject to RAP, and is freely transferrable
- Key language to look for
: O to A "so long as"
, or "while
", or "during
", or "until
" XYZ happens.
Future Interests Retained by Grantor
(Right of Entry (Power of Termination))
Right of Entry - when Grantor gives a fee simple on a condition subsequent, Grantor keeps a right of entry (power of termination). (i.e. - O to A and his heirs; provided, that if liquor is ever consumed there, O or O's heirs shall have right to reenter and retake.)
- With a fee simple on a condition subsequent, title does not automatically go back to Grantor if condition is violated, Grantor must exercise right of entry.
- Language to look for: If language gives to Grantee with a condition introduced by "provided, however", and gives O right to "go and retake" the property, it is a fee simple on condition subsequent. Other possible language = "but if" or "upon condition that".
- Grantor must expressly reserve a right of entry, and a failure to do so = condition is ignored.
- If language is ambiguous - choose F/S on condition subsequent over F/S determinable (construe against auto forfeit)
- Right of entry (power of termination) is not subject to RAP, but it cannot be transferred inter vivos (transfer by will or intestate succession at death OK)
Future Interests Given a Grantee
Vested Remainder - nothing stands in way of it becoming possessory on the expiration of the state before it; i.e. - we know who will take and are no conditions to the taking. (O to A for life, then to B and her heirs <-- B = vested remainder).
Vested Remainder Subject to Open - where remainder interest is to a class whose members are not yet fully known the class remains open to allow for future persons to enter class. RAP may apply. (O to A for life, then to A's children (A has 3 kids now) <-- Kids each of VR-StO)
Contingent Remainder - something has to happen or be known before remainder can become possessory. RAP may apply. 3 situations:
1. Condition - remainder is contingent if a condition must be satisfied before the grantee can be certain of possession (i.e. O to A for life, then to B and his heirs if B...)
2. Grantee Not in Existence - if at time of grant, Grantee is not alive then that interest must be a contingent remainder - Grantee's interest is contingent on being born
3. Identity of Taker Unknown - if you can't ID, by name, the person who holds the remainder, then remainder is contingent until you can (i.a. - O to A for life, then to A's widow <-- can't ID until death).
**Common to both vested & contingent R's - they become possessory, if ever, only upon natural expiration of estate before them
- Remainders never affect the estates that are before them
Future Interests Given a Grantee
Executory Interest - operates to cut short the estate that comes before it; it does not come into possession at the natural expiration of the earlier estate.
- If a future interest is not a remainder, must be executory interest
- Read the estates in order, watch for punctuation to see if a contingency is a part of the first estate given to a grantee, or part of the second
- Vested remainder subject to an executory interest is sometimes called a vested remainder subject to total divestment, or a vested remainder subject to executory limitation
- If a future interest in a grantee cuts short an earlier estate, it MUST be an executory interest
- Holder of a life tenant cannot sue life tenant for waste
- Shifting Executory Interest - operates by taking title from one Grantee and giving to to another Grantee (O to A for life, then to B and his heirs, but if at B's death B is not survived by issue, then to C and his heirs)
- Springing Executory Interest - operates by taking title from the Grantor and giving to to Grantee (O to A for life, then one day after A's death to B and his heirs).
Rule Against Perpetuities
- No interest is valid unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest.
- - Ask yourself: Could everyone alive at the time of the grant die, and 21 years pass, before the interest might vest? If yes = void.
- - If there is any chance that an interest might vest outside of a life-in-being + 21 years = void interest
- Only estates RAP applies to: contingent remainders, executory interests, and vested remainders subject to open
- Validity of grant is determined at the time of creation
and it doesn't matter if the interest actually does vest w/in RAP period.
- Perpetuity savings clause
may save grant by requiring vesting w/in time period
- Options and Rights of First Refusal
- do not
- Charity to Charity Exception
- RAP never violated if the give is from one charity to another charity (both grantees must be charities)
RAP and Class Gifts - 2 Situations:
(Gift to Class following Earlier Estate)
1. Age Contingency in Open Class - watch for facts where class is open and gift over is contingent on a class member reaching certain age (i.e. > 21)
- If RAP voids the gift to ANY member of the class b/c of possibility that interest might vest outside time period, then ALL members of class lose, even those whose interests have already vested
2. The Unborn Spouse - watch for gift ver following a widow or widower's life state, where the gift over cannot vest until the widow/widower dies.
- If transfer by will look at the situation as of time of testator's death; if by deed look at the situation at time of the deed.
Concurrent Ownership - Joint Tenancy
1. Right of Survivorship
- The surviving JT's take automatically on death of a JT; they do not inherit the share
2. Right to Partition
- Any JT can ask that the property be partitioned - lines are drawn and the party is no longer a JT
- Can come by agreement of parties, or court can draw lines; if lines can't be drawn (i.e. single family home), court can sell the property and divide proceeds
Concurrent Ownership - Joint Tenancy
(Creation and Destruction)
Creation of a JT
- Requires the "four unities" of Time, Title, Interest, and Possession (TTIP)
- 1. Time - all interests must have vested at the same time
- 2. Title - the grant to all JTs must be made by the same instrument
- 3. Interest - all JTs must take the same kind and same amount of interest (i.e. 4 people each get 1/4)
- all must have identical
rights of possession
- Language needed to create a JT: must clearly make intention known, if intent of grantor is unclear, court construes the interest to be a tenancy in common
. NEED: "as joint tenants, with right of survivorship
" or "in joint tenancy with right of survivorship
Destruction of JT - 2 Ways
- voluntary destruction
- an involuntary destruction. Occurs whenever any one of the four entities are disturbed. Four ways to sever on the exam:
a) A conveyance
by one of the JTs - One JTs transfer of his or her interest creates a severance that destroys just the seller's JT, turning it into a tenancy in common (TIC)
in the buyer, other JTs continue to hold their interest in joint tenancy.
b. A mortgage
in a title theory state. In a lien theory state, there is no severance
upon mortgage, but there is severance
in a title theory state. Assume lien theory state.
c. A contract of sale
- doctrine of equitable conversion means severance occurs when K of sale is signed (on that date)
d. A creditor's sale
of the interest in the JT - judgment lien IS NOT enough, must be a judicial sale.
Concurrent Ownership - Tenancies-in-Common (TIC)
1. Right to Partition - any one tenant in common can force it
2. No Right of Survivorship - TIC's interest can pass along to his heirs, not to the other TICs
- Only one unity is required: Possession - all tenants in common must have equal rights of possession.
- TIC is default tenancy, if JT is not properly created = TIC
Rights & Duties Between Co-Tenants
- Three Aspects to Consider:
- 1. Possession - each co-tenant has the right to possess all the property consistent with the other co-tenant's rights to also possess it all
- requirement that one co-tenant may have to account to another for a share of profits the co-tenant received (getting share of profits). General Rule - one co-tenant does not
have to account to another co-tenant for a share of profits, except:
- accounting required if one C-T is either keeping a C-T off the property, or claiming a right of exclusive possession
- to share
- of the property by C-T to a 3rd party
- of natural resources
- right of one C-T to force others to pay their share of some expenditure co-tenant made (i.e. necessary repairs)
- none for improvements or non-necessary repairs, money spent may later be recouped upon sale
- available for any mortgage on the property (signed by all C-Ts) or any governmentally imposed obligation (i.e. taxes, assessments, etc.)
Non-Freehold (Landlord-Tenant) Estates
1. Tenancy for Years
2. Periodic Tenancy
3. Tenancy at Will
4. Tenancy at Sufferance
(1. Tenancy for Years)
- Any estate measured by a fixed period of time, not matter how short, is a tenancy for years
- KEY PHRASE: "specified time", does not have to be for "years" (i.e. 5/1/10 - 6/1/11)
- Statute of Frauds: any tenancy for years over/more than one year, must be in writing
(2. Periodic Tenancy)
KEY WORD: repeating
- an ongoing, continuing, repetitive estate, until one party gives valid notice (i.e. month to month, week to week, year to year)
- Three Ways to Create:
- 1. PT by Express Agreement - an agreement
2. PT by Implication
- where lease is silent as to duration. If lease does not specify how long it is to last, then it is presumed to be a PT measured by the rent payment
(i.e. - month to month if rent paid monthly)
3. PT by Operation of Law
- two situations:
a. Oral lease violating the statute of frauds
- acceptance of rent creates a PT by operation of law, even though a lease violates S/F. The period is determined by the period covered by the rent check accepted.
b. The hold-over case
- tenant stays after expiration of lease, then landlord accepts rent. If hold-over tenant sends landlord a check for another period's rent, and L accepts it, there is now a PT by operation of law.
Termination of PT
- occurs by giving proper notice; two requirements (need BOTH) for proper notice:
- equal to the rental period (i.e. month to month = 1 month notice). Exception: if tenancy is year to year, just six months notice required.
2. Effective Day
- must have the correct effective day of termination = the last day of a period.
(Tenancy at Will)
- Either party can terminate at any time, without notice
- - Five Other Ways to Terminate:
- 1. Death of either party
2. Waste by the tenant
3. Assignment by the tenant
4. Transfer of title by the landlord
5. Lease by landlord to someone else
(Tenancy at Sufferance)
- Is the bare possession of a hold-over tenant. At L's sole option, L can either:
- 1. Hold T as a wrongdoing trespasser and sue to throw T off property and recover damages for the holdover, or
- 2. Impose new periodic tenancy on T:
i. for Residential
property - the new period always = month to month
ii. for Commercial
property, the new period is determined as follows:
a. If old expired tenancy was for year or more, new tenancy is year to year
- b. If old tenancy was for less than a year, new tenancy is measured by the rent period of the old tenancy
- - L cannot impose new tenancy on holdover T if it is not reasonable
- - Raised rent situation - if L tells T of higher rent before expiration of lease, and T holds over after expiration, L can impose new periodic tenancy on the holder over T at the higher rent
If lease silent on T's duties, T must:
1. Pay Rent
2. Not Commit Waste - all previous waste rules apply here too
- if lease says tenant must repair and maintain, then T is liable for all damage to property, including even ordinary wear and tear, unless that is excluded.
- EXCEPTION: T can terminate the lease if premises are destroyed w/o T's fault.
- If T fails to pay rent L can sue both for damages and to throw T off property
- If T unjustifiably abandons the leasehold L has two choices:
1. Treat abandonment as an offer of surrender and accept the offer by retaking premises; thus ending T's liability as of that date.
2. Re-rent the premises on T's account and hold T liable for any deficiency
1. To give T possession
of the premises when lease begins (if L doesn't = breach)
2. To deliver residential
premises in a habitable condition:
- there is an implied warranty of habitability in residential property
- reasonably suited for residential use
- if L breaches implied warranty, T has two options
- a. T can move out and end lease
- b. T can stay and sue for breach
- 3. Implied Covenant of Quiet Enjoyment - in every lease, L makes implied promise he will not breach covenant. Three ways L can breach:
a. By Total Eviction
of T, which terminates lease, and end T's obligation to pay rent
b. By Partial Eviction
of T (i.e. locks T out of basement), which does not
terminate lease; T can stay and pays no rent
to L. Rent apportioned if eviction by someone other than L.
3. By Constructive Eviction
- where L fails to provide a service L is supposed to provide, making premises uninhabitable.
- For T to be excused, three requirements:
a. L (not others) has to do it
b. Must be a substantial interference w/ the covenant of quiet enjoyment
c. Must be an abandonment of the premises w/in a reasonable time
Assignment - when T transfers everything, holding nothing back
1. Landlord sues Tenant for Rent - T is liable to L if there is either Privity of Estate (POE btwn L and whichever T being sued) or Privity of Contract (POC = agreement btwn parties, or where assignee assumes the obligations under the lease)
- In addition to rent, other covenants will run with the land if they touch and concern the land --> T required to comply with covenant
- T&C Test - if performance of covenant makes land more valuable or useful, then it meets T&C test and runs w/ land
2. Tenant sues Landlord - If L sells to a successor landlord, can T sue the original L and any successor L?
- Original L continues to be liable to T b/c of privity of K
- Successor L also liable, provided lease covenant runs w/ the land and there is either POE or POC
Sublessee is not liable to L because no POC and no POE (sublessor is deemed to have kept the estate)
Partial Taking - does not release T from obligation to pay full rent, but T gets an amount (condemnation award) = to the rent that will have to be paid over the remainder of the lease for the property taken.
Full Taking - extinguishes the lease and T is excused from paying rent. T shares in the condemnation award only to the extent that the fair rental value of the lease exceeds the rent due under the lease.
Landlord's Tort Liability
General Rule at common law: NO DUTY of L to T or T's invitees for injuries on the premises during the life of the lease. Five exceptions to know for exam:
1. Latent Defects - L is under a duty to disclose latent defects which L either knows or has reason to know of. No duty to repair.
2. Short Term Lease of Furnished Dwelling - L is liable for defects even if L neither knows nor has reason to know of them. 3 months or less.
3. Common Areas under Landlord's Control - L is liable if L failed to use reasonable care
4. Negligent Repairs - L liable for injury from L's repair of a defect on premises, even if L used all due care.
5. Public Use Exception - L liable for injury from defects on premises, if 3 req'ts met:
a. L must know or should know of major defects,
b. L must know or should know that T will not fix the defect, and
c. L must know or should know the public will be using premises
**T ALWAYS liable to 3rd party invitees for negligent failure to fix dangerous conditions**
- If attached item became a fixture, chattel CANNOT be removed by either seller or tenant
- KEY to determine a fixture - INTENT to stay with property as fixture.
- If no agreement regarding fixture, look at:
1. Degree of attachment;
2. General custom with item;
3. Degree of harm to premises on removal;
4. Trade fixtures - used in business is not fixture
**Washer & Dryer are never fixtures**
- a non-possessory interest in and involving a right of use. Two types:
- 1. Easement Appurtenant - easement directly benefits the use and enjoyment of a specific piece of land. Always a "dominant" and "servient" estate.
- 2. Easement in Gross - no dominant estate. Classic example: servient easement (utilities)
Creation of Easements
1. Express Easements - express grant of easement to another, or reservation of easement when land sold to another
- must be in writing, comply with SOF
2. Easements by Implication - look for:
a. Previous use by common owner
b. Absolute right of access situation (easement by necessity when property landlocked)
3. Easement by Prescription - arises like title by adverse possession
Transfer of Easement
Transferring the Benefit of the Easement
1. Appurtenant Easement
- goes automatically
w/ dominant estate, mentioned or not, and CANNOT be transferred separately from dominant estate
2. Easement In Gross
- commercial EIG can always
be transferred, personal EIG cannot
- Transferring the Burden of the Easement
- - Easements are always binding on subsequent holders of servient estates, even if easement is not in their deeds, providing the subsequent holder had notice of the easement
Use of Easements
- Terms of easement control on questions of use
- - If easement silent, two presumptions:
- 1. The easement is perpetual (lasts forever, unless otherwise stated)
2. Use presumed is that of reasonable development
of the dominant estate (kind of use that would have been reasonably contemplated by parties when easement created)
- Use can be used to benefit only
the dominant estate
Repair of Easements
- Holder of easements must keep it in repair and can always go on servient estate to repair it, even if the grant does not specifically provide right to enter & repair
- Holder of easement must make reasonable restoration of servient estate after repairs
Termination of Easements
Six ways an easement can end for reasons outside the terms of the easement:
1. Unity of Ownership, or Merger - whenever both dominant and servient estate come together in same owner, easement = terminated
2. A Valid Release - that complies w/ SOF and all deed formalities terminates an easement
3. Abandonment - intent to abandon must be manifested by taking some physical act on the property itself that would show intent to abandon
4. Termination by Estoppel - (1) representation of relinquishment by holder of dominant estate & (2) change of position in reliance by servient holder
5. Termination by Prescription - owner of servient estate must stop use and keep it stopped
6. End of Necessity - once necessity that creates easement by necessity to exist, so does easement
- Give the right to enforce someone else's use of the their land, two categories:
1. Covenants at Law (enforced at law --> $$ damages)
2. Equitable Servitudes (enforced in equity --> if P wants an injunction)
Covenants Running w/ Land at Law
that it run with the land.
to the person against whom enforcement is sought.
3. The covenant must touch
the land (i.e. - it must make the land more valuable/useful)
- a conveyance of the property from one party to another, two kinds:
- a. Horizontal Privity - always refers to the original parties to the covenant. Must have conveyance of the property between original parties.
- b. Vertical Privity - refers to those who subsequently attain the property subject to the covenant (the successor in interest) and the original party from whom they got the property
- Privity - Benefit/Burden in a Nutshell
+ If a successor in interest is a defendant
, then for P to get damages, the burden must run and need BOTH horizontal
+ If the defendant
a successor in interest, then for the benefit to run to a successor in interest plaintiff
and let P get damages, need ONLY vertical
(P wants Injunction)
To enforce an equitable servitude, you need:
that the restriction be enforceable by successors in interest;
- 2. Notice to the subsequent purchaser, and
- 3. The restriction must touch and concern the land
** No privity required**
Equitable Servitudes - Subdivisions
(Mutual Right of Enforcement)
- Two requirements:
- 1. Intent to create servitude on all the land in the subdivision. (Found in common building plan).
- three ways to get notice
a. Actual Notice
b. Record Notice
- where restriction is in the direct chain of title
c. Inquiry Notice
- held to know anything that a reasonable inquiry might have revealed
- Changed conditions, but cannot void restriction b/c of changed condition in area unless all lots
in subdivision are affected **
Equitable Defenses to Enforcement
(Equitable Servitudes ONLY)
1. Unclean Hands - P did same thing as D
2. Acquiescence - P let neighbor on other side do same thing
3. Laches - P sat by while D built office building and only now, after D finished, does P complain
4. Estoppel - P said earlier she did not mind if D did something
- 1. Hostile - being on property w/ no right to be there. Doesn't need "claim of right", can knowingly be a trespasser.
- X must be excluding others from possessing the property
- Possession must last for the statutory period (20 years)
- The kind of continuous use an ordinary owner would make
- open and notorious
- Must actually possess the land to get title (with two exceptions: constructive adverse possession and leasing of land not owned)
Adverse Possession (AP)
1. Doctrine of Constructive Adverse Possession
- if X goes on property under a "color of title" to a larger tract, but only possesses a portion, this can give title to rest of property if:
2. Leasing Land to Someone Else
- a. Amount possessed had reasonable relation to whole, and
- b. The property is a unitary, seamless whole.
- qualifies as possession for AP purposes
3. AP Against Concurrent Owners
- only when one excludes
the other, no the mere absence of the co-tenant. Exclusion begins the clock running.
4. Future Interest Situations:
a. Life Estate + Future Interest
- clock doesn't start against holder of future interest until life tenant dies (only get life tenant's interest if AP while he is alive).
b. Fee Simple Determinable
- the happening of the condition starts clock running for AP
- c. Fee Simple on a Condition Subsequent - clock won't start to run until Grantor exercises right of entry
- 5. Tacking - periods of AP can tack (add) together, but periods must pass directly from one AP to another AP. Can also tack periods of ownership (i.e. - AP doesn't have to be against same owner for statutory period)
- Being a minor, insane, or in jail
- If owner has disability when AP begins
, AP clock does not
start until O is free of pre-existing disability
- - If disability arises after AP begins, it is ignored.
- **No tacking of disabilities**
(2 Step Process)
1. Contract of Sale - governed by all regular K rules plus special rules
2. Deed - delivered at closing. Once deed accepted, the contract merges into deed and is destroyed, and all K provisions are lost unless included in the deed (or K says they survive)
Contract of Sale
(Statute of Frauds)
- Any contract of sale of an interest in property must be in writing
by the one who is sued
- Only need some
kind of signed writing, provided there is:
1. A description
of the property;
2. The names
of the parties; and
3. The price
Exception to SOF: Part Performance
- Two requirements:
- 1. The oral K must be certain and clear, and
- 2. The acts of part performance must clearly prove up a contract (i.e. P in possession and (1) paying full price, or (2) making improvements).
Contract of Sale
(Legal Effect Before Closing)
1. Risk of Loss
- If property is damaged or destroyed before closing
, but after K signed
, buyer loses
- even if fault-free seller still in possession
2. Death of Party Before Closing
- no effect
- - If seller dies before closing, buyer closes with seller's estate, seller's interest = personal property
- - If buyer dies before closing, seller closes with buyer's estate, buyer's interest = real property
- 3. Marketable Title - every land sale K has implied warranty that seller will give marketable title (not perfect title, but reasonably acceptable) at closing; three requirements:
a. Proof of Title
- abstract of copy of all deeds recorded in chain
b. Title Free of Encumbrances
- no easements, no restrictive covenants, no mortgages, no options, etc. that are not mentioned
+ Zoning not encumbrance, unless
property is in violation.
+ Housing/building codes not an encumbrance
c. Valid, Legal Title on Day of Closing
- only look to day of closing.
**Buyer's Remedies for Unmarketable Title
- Buyer must notify and give sell reasonable time to cure
, even if closing delayed. Accepting bad deed w/o cure = waives action/recourse on contract.
- If not corrected, buyer's remedies: (1) rescission; (2) damages; or (2) specific performance (buyer takes what seller can give and price gets lowered)
4. Time of Performance
- Generally, unless stated, time is not of the essence
, and performance must be w/in reasonable time
after date set for closing in the K. Breach = K unenforceable.
(Remedies for Breach)
1. Damages - difference btwn K price and value of land on day of breach.
- Buyer's deposit can be forfeited as liquidated damages if not more than 10% of sales price
2. Specific Performance - always available to buyer or seller on a land sales contract
(2 Requirements to Pass Title)
- Deed subject to SOF, seller must sign deed
- Description of land need not be very specific, but able to ID the property. If too vague = void and nothing transferred.
- Minor error is OK if property identifiable/locatable
- Land description by metes and bounds
controls over any other description
2. Delivery of Deed
- does not always mean physical
transfer, solely based on intent
to pass title.
- Recording deed = presumption of delivery
- Once delivery occurs, title passes - later returning/destroying deed has no effect
- Parole evidence may be used to show intent
- If grantor dies and still has deed in possession, presumption of no delivery
- Conditional Delivery
- three situations:
a. Condition in Deed
- deed says it will not become effective until death of grantor = valid delivery of future interest (i.e. = O to O for life, then to A)
- b. Oral Condition - if made orally at deliver, disregard.
- c. Delivery Conditional on Grantee Paying Purchase Price - valid if grantor delivers deed to 3rd party in escrow; grantor cannot get back once delivered; acceptance of deed by grantee presumed.
Covenants for Title
(General Warranty Deed)
Covenants for Title
- If grantor makes promises regarding title = covenants for title and deeds w/ 6 traditional covenants = general warranty deeds.
A. Present Covenants
- can sue immediately on these, thus are personal to grantee and do not
run w/ land.
1-2. Covenant of Seisin = Covenant of Right to Convey
- promise of seller that seller has title and possession and can validly convey both
3. Covenant Against Encumbrances
- Grantor promises no easements, restrictive covenants, liens, etc.
- B. Future Covenants - not breached immediately, only later, when grantee disturbed in possession (true owner arrives). Run with the land, can be enforced by all subsequent purchasers.
- 1-2. Covenant for Quiet Enjoyment and Covenant of Warranty - represent the promise that seller will protect buyer against anyone who later shows up and claims title
3. Covenant for Further Assurance
- "mop up" covenant. If seller forgot to do something to pass valid title, seller promises to do whatever necessary (i.e. sign deed)
Other Covenant Issues
1. Damages for Breach of Covenant
- damages are limited to purchase price received by the warrantor
, plus incidental damages.
2. Estoppel by Deed
- If A deeds property to B that he doesn't own, and A later acquires title, B will get title b/c grant gave implied covenant that title would transfer to grantee.
- BUT, if grantor transfers to BFP after getting title, original grantee loses - no estoppel by deed.
3. Deed to Dead Person
- invalid, but enforcement of sale K can still be had
1. Notice Acts - protect subsequent grantees who are BFPs who give value and who take w/o notice of earlier transaction.
- Recording is irrelevant, except as it may give notice
2. Race-Notice Acts - protect subsequent grantees who are BFPs for value who take w/o notice and are first to record.
3. Pure Race Acts - notice is irrelevant, whoever records first wins. Subsequent purchase need not even be a BFP; he can know about earlier sale and still win.
ID'ing Recording Acts
1. If quoted act on exam has"without notice" or "in good faith" = either notice or race-notice act
2. If the words"first recorded" or "recorded first" appear in statute along w/ "without notice" or "in good faith" = race-notice act
- If those words are not present and there is "without notice" or "in good faith" = pure notice act
3. If quoted act does not use the words "without notice" or "in good faith" = pure race act
Shelter Rule Exception
- The shelter rule protects anyone who takes from a BFP whether they are purchasers for value and no matter what they know
- Gain the rights/priorities of a BFP
-BFP - bona fide purchase "for value" and "without notice" (actual, record, or inquiry)
- given by the debtor (mortgagor) to a creditor (mortgagee). Sheriff sells land in court-ordered sale if mortgage isn't paid. Two situations treated as mortgages:
a. Absolute Deed with Separate Promise of Reconveyance Situation
- b. Sale/Leaseback with Option to Repurchase
- 2. Deed of Trust - given by debtor to a 3rd party trustee who holds it until the loan is paid off
- - if loan isn't paid, trustee may either get court to order a sale, or the trustee may sell property on trustee's own, at public auction
- 3. Installment Land Contract - debtor signs a contract promising to make payment and seller keeps title until loan is paid off
- Look for a forfeiture clause
- seller can cancel K, keep money paid, and get property back if debtor misses payment
Consequences of Having a Mortgage or Deed of Trust
1. Equity of Redemption
- at any time up to the foreclosure sale, debtor can keep the property. Debtor pays amount in arrears; but if an acceleration clause, debtor must additionally pay entire
2. Foreclosure Must be by Public Auction
- regardless of how sale occurs, whether by court or otherwise.
3. If Multiple Mortgages: Priorities Are
- first in time, first in right, unless recording act changes that
- If mortgage not recorded/recorded late, may have to apply recording act to find priority. Apply recording act just as if dealing with a deed.
- Purchase Money Mortgages given priority over other mortgages around same time, even if others record first. PMM's by seller have priority over 3rd party PMM's.
- - If owner does anything to increase a senior mortgage, then that mortgage loses priority over juniors, but only to the extent of the change.
- 4. Foreclosures - wipe out all junior interests (those later in time), but do not wipe out senior interests (those earlier in time). Interests include easements or leases.
- Junior interests do not
go with the land, will be paid off if there is enough $$ from foreclosure sale
- Senior Interests
- do not
get paid off when later mortgage is foreclosed; keep on going. New purchases takes property subject to
- Protections to Juniors
- have right to pay off any mortgage being foreclosed to keep their interest from being wiped out, thus, are necessary parties
to any foreclosure, and if not joined, then their interests not wiped out
5. Order of Use of Foreclosure Sale Proceeds:
a. Pay costs of foreclosure, including expenses and attorney fees;
b. Pay the mortgage that was foreclosed, including accrued interest;
c. Pay off Junior interests
, in order (pay 1st fully before paying 2nd, etc.)
d. Anything left to mortgagor.
6. If Mortgage is Foreclosed and Not Enough Money to Pay off Mortgage
- mortgagee can sue debtor
for balance due
Transfers of Security Interest
- Each party can freely transfer his/her interest in property
- 1. Mortgagor - can freely transfer title to property and mortgage tags alone, transferee takes subject to the mortgage
- - Mortgagor still personally liable on note even after transfer
- Unless grantee specifically assumes
mortgage, grantee is not
personally liable on it, but mortgage must be paid or mortgagee will foreclose (mortgagor still liable as a "surety"
- Any modification of the obligation by mortgagee and grantee discharges
original mortgagor of all liability
- can freely transfer the note, and the mortgage tags along with the note
(Right of Support)
Two ways land must be supported in present state:
1. Lateral Support - support from sides. Landowner has the right to land supported by the adjoining landowners, and strict liability results if land is not supported.
- Adjacent landowner strictly liable for support of adjacent land and for damage to improvements if the weight of the improvements didn't cause the collapse
2. Subjacent Support - support of the surface from the bottom. Strict liability results if surface is not supported.
- Holder of mineral rights is strictly liable for failure to support surface of land
- Right goes to land and improvements existing when mineral rights severed from fee simple, no protection for improvements built after mineral rights severed
A. Rivers and Lakes - 2 systems:
1. Riparian Rights (majority) - refers to those whose property borders on a lake/stream.
- Owner can use all water needed for domestic purposes
- If uses is non-domestic, owner is limited to reasonable use (can't impair quality or quantity)
2. Prior Appropriation (minority) - priority in time determines rights
- First in time takes. Anyone, not just riparian owner, who makes beneficial use of water, has the right to continue to use it, and that right is protected from those who come later, as long as use continues
B. Water Under Ground - "percolating water", "well water", or "ground water"
- Landowner entitled to reasonable use. Must use it on his property, not export elsewhere.
C. Surface Water - "runoff' or "flood water"; Two competing approaches:
1. Natural Flow - courts allow reasonable steps (ditches/drainage pipes) to deal with flood water
2. Common Enemy - can do anything, with floodwater, reasonable or not