PROPERTY IIPROF. LOPEZSPRING 2010

1. The Sale of Land2. The sales Contract

a. Anatomy of a sales transactioni. Four basic stages- Whether residential ( single family houses, condos, ect..) or

commercial (office buildings, apartment, farms, shopping centers, ect…) every real property sales transaction has 4 stages.

1. Locating the buyera. May use a real estate broker, who may in turn use a multiple

listing service 2. Negotiating the contract

a. Buyer executes a written contract that will satisfy the SOF and gives it to seller for signature

b. Buyer also gives a good faith depositc. The contract is likely to be a preprinted form d. Seller will accept or make counter offer

3. Preparing for the closinga. Called the executory period or executory interval b. Buyer will inspect the property, negotiate financing, and

evaluate title c. Buyer will ask for a loan with the bank

i. Bank will want a written promissory note signed by buyer and secured by the first priority mortgage

d. Buyer will also get title insurance on the property 4. Closing the transaction

a. Title is transferred to buyer when seller delivers the deed

b. Role of the attorneyi. Negotiated the deal, drafted sales contract, evaluated title documents, issued

title opinion, advising client about zoning, and tax, negotiating terms of financing, handling the closing, negotiating any disputes

ii. Attorneys still do these things for complex sales but in home sales the attorney's role has decreased

c. Role of the real estate brokeri. The unauthorized practice of law?

1. Brokers do now what lawyers use to is this unauthorized practice of law?

ii. Duties of Broker1. Like any agent, the broker owes a wide range of fiduciary duties to the

principal including: care, skill, diligence, loyalty, and good faithiii. Broker's right to commission

1. Governed by listing agreement 2. Three types of listing agreements

a. Open listing

i. Broker has no exclusive right to obtain a buyer, only gets commission if he is the first to find a reading, willing, and able buyer

b. Exclusive agency listingi. Agent is designated as the only real estate broker

authorized to procure buyers, so he is entitled to commission if another broker finds a buyer, but not if the seller himself finds a buyer

c. Exclusive right to sell listingi. Broker receives commission if anyone, even seller

himself finds a buyer d. Requirements for valid contract

i. Basic elements1. All must have offer, acceptance, consideration, reasonably certain

terms, and must satisfy the statute of fraudsa. Must identify both partiesb. Manifest intent to buy and sell c. Describe the propertyd. Purchase pricee. Other material terms

ii. The statute of frauds1. A typical statute of frauds

a. When a contract must be written and signed by the party against whom enforcement is sought

b. If contract should be in statute but does not meet all the requirements it is deemed unenforceable but not void.i. If defense does not object on SOF grounds they are

waived and contract can be valid 2. Requirements for enforceable contract

a. Essential terms of contracti. Identify the parties

ii. Include words showing intent iii. Specify the purchase priceiv. Adequately describe the property

1. Id the land with reasonable certainty b. Contained in memorandum or other writing

i. Need not be intended by the parties as an agreementii. May be made after the agreement

iii. May consist of more than one document iv. May be informal

c. Signed by party against whom contract is enforced 3. Exceptions to statue of fraud

a. Part performancei. Three potential actions which constitute part

performance:1. Taking possession of the property2. Paying all or part of the purchase price3. Making improvements

ii. Reliance arguments say it would be unfair to deny action to the party who has substantially changed their position on reliance on the oral contract

b. Equitable estoppel i. Where one party has been induced by the other to

substantially change position in justifiable reliance on an oral contract and

ii. Serious or irreparable injury would result from refusing specific performance

e. Contract provisions on titlei. Purchase of title

1. Buyer will want a contract provision which specifies the quality of title that the seller must deliver.

2. If there is no such provision the default standard applies, marketable title

3. If buyer discovers before the sale is consummated that the seller cannot deliver the required title, he may rescind the contract

4. Those expressed or implied provisions in the contract expire when the transition closes under the doctrine of merger

5. Accordingly if the buyer discovers defects after, he will have to rely on covenants of title in the deed or other sources of title assurance

ii. Implied covenant of marketable title1. General rule

a. If the contract is silent about the quality of title that the seller must deliver the default in the law requires marketable title or what is sometimes called Merchantable titlei. This is viewed as both an implied condition and an

implied covenantb. Does not demand that seller deliver perfect title

2. What is marketable titlea. Title that is free from reasonable doubt but not from every

doubti. Title is unmarketable if the seller does not own the

estate he purports to be sellingii. Title is generally unmarketable if it is subject to any lien,

easement, or other encumbranceb. Judicial definitions usually focus on the quality of title that a

reasonable person would accept3. Seller lacks title

a. When seller does not own the estate he claims to be selling b. More typically it is not this obvious and it appears that seller has

valid title but there is a small chance that the title may be defective c. Adverse possession

i. A number of states hold that title by AP is marketable where the seller proves there is no real possibility that the record owner will ever succeed in regaining title

ii. Some jurisdictions do not consider AP title valid until brought in quiet title action

d. Doctrine of implied covenant of marketability refers to adequate title not the condition of the land itself

4. Seller is subject to encumbrancea. Generally

i. Title is unmarketable if the seller's title is subject to any encumbrance

1. Encumbrance is a right or interest in land other than a present freehold estate or future interest therein, that reduces the value or restricts the use of the land

1. Mortgages, easements, covenants, tax liens, leases, encroachments, options, judgments liens, mechanic's liens, and water rights

b. Effect of land use regulationsi. All jurisdictions agree that the mere existence of zoning,

building, and other land use regulations does not make title unmarketable

ii. Most courts hold that violation of zoning ordinance does render the title unmarketable

1. The buyer should expect zoning but not expect that the property is in current violation of zoning

iii. Majority hold that violation of building code does not make title unmarketable

1. Common law does not like to hold seller liable for defects in physical condition

2. Caveat emptor says that seller has no duty to inform prospective buyer about defects

c. Effect of visible encumbrances i. Most courts hold that visible easements for roads,

power lines, sewer pipes, or other utilities do not affect marketability

ii. If buyer knows or reasonably should know of easement and enters into the contract then he agreed to accept the title subject to the easement

5. Express title covenanta. Contracts specify that the seller will deliver marketable title,

good title, clear title, insurable title (title that a title company is willing to insure)

b. Record titlei. Protects against adverse possession

c. Buyer approval clause6. Breach of title covenant

a. Seller is obligated to deliver marketable title at the time of closing

b. Buyer who learns about defects before closing must notify seller and give them a reasonable opportunity to cure the defects

c. If seller fails to remedy the buyer is excused from performing the contract and seller is liable for breach of contract

i. Buyer may ask for specific performance, recession, recovery of down payment, or sue for damages

f. Contract provisions on financingi. Negotiating the condition

1. Usually a buyer needs a loan from the bank, and if buyer cannot obtain such a loan they are excused from performing on the contract

ii. Vague and indefinite language1. When parties adopt a vague clause they fail to reach an agreement on

material terms2. Modern courts are more willing to fill in gaps with reasonable terms3. If this cannot be done the contract is deemed illusory and

unenforceableiii. Sufficiency of buyers effort to obtain loan

1. Buyer must make a reasonable effort to satisfy the financing conditiona. Seller must act in good faith, with reasonable diligenceb. Usually applying to 2 or more lenders satisfies this duty

g. Closing the transaction i. Tender of performance

1. Sellers duty to deliver deed and buyers duty to pay purchase price are concurrent conditions

h. Remedies for breachi. Specific performance

1. General requirementsa. Specific performance mandates that the breaching party

perform the sales contract i. This is usually the best remedy in sale of land contract

ii. Is a equitable remedy so it will only be awarded when traditional money damages are inadequate

iii. Court has wide discretion in equitable judgments 1. Defenses to equitable judgment: laches,

unclean hands b. Abatement

i. With the specific performance an will reduce the purchase price

2. Inadequacy of money damagesa. Even if buyer is given money he will never be able to get an

identical replacement so money damages are always inadequateii. Damages

1. Loss of bargain damagesa. Basic measure of damages for breach for real property sales

contract is difference between the fair market value of the property at the time of the breach and the contract price

b. English Rulei. Seller is not liable for loss of bargain damages if the

breach was caused by good faith inability to convey marketable title

ii. Buyer receives only payments made to the seller plus incidental damages

iii. If seller breaches for any other reason other than good faith inability to provide title, then buyer can get loss of bargain damages

c. American Rulei. Allows buyer to recover full loss of bargain damages

regardless of the seller's good faith2. Incidental and consequential damages

a. Incidental damagesi. Compensation for the out of pocket expenses incurred

in reliance on the contract 1. Costs of property inspection, escrow fees, title

examination fees, and attorneys feesb. Consequential damages

i. When breach caused a special, foreseeable loss to the non breaching party

ii. Lost profits are awarded only if they can be proven with reasonable certainty

3. Liquidated damagesa. Clauses within the contract which specify the amount of

damages due if the contract is breachedb. Offer the benefit of certainty and minimalize litigationc. Majority view: when liquidated damages clause is valid if:

i. Future damages are difficult or impossible to determine in advance

ii. At the time the contract was signed the specified amount of liquidated damages was a reasonable estimate of future damages

d. Modern trend is to compare the reasonable estimate with the actual damages

4. Role of buyers deposita. As a general rule breaching party is not entitled to its depositb. Modern trend allows breaching party to get deposit back if it

proves that the deposit exceeds the seller's actual damages iii. Rescission and restitution

1. Rescissiona. Cancels the contact so that no further legal force or effect and

the non breaching party is excused from performance2. Restitution

a. Law Restores parties to precontract state3. Condition of the property

a. Caveat Emptor (buyer beware)b. Seller's duty to disclose

i. Common law approach1. The seller of real property had no duty to disclose latent defects to the

buyer absent unusual circumstances i.e fiduciary relationship2. Rationale is based largely on difference between nonfeasance and

misfeasance3. Thus seller can remain silent but cannot mislead

4. Seller cannot intentionally misrepresent facts about the property in order to induce sale, this is fraud

5. Fraudulent misrepresentationa. A false statement of material fact made by the seller to the

buyerb. Known to the seller to be falsec. Made with the intent to induce the buyer to purchased. Which the buyer justifiably relies on in deciding to purchasee. To the buyers detriment or loss

ii. Modern trend towards requiring disclosure1. General principles

a. Most states require the seller of residential property to disclose known latent defects to the buyer under certain conditions

b. If seller breaches this idea the buyer can rescind the contract or recover compensatory damages

c. Seller of residential property who knows of a hidden or latent defect in the property that substantially affects the value or desirability of the property must disclose it to the buyer

d. Statutes in many states require the seller of residential property to have a written disclosure of such defects, but for commercial property it is still caveat emptor

2. Why require disclosurea. If there was no duty to disclose the buyer would have to have

expert inspection or expressed warranty from seller, both of which are increased transactional costs

b. Disclosure of duty saves the expense of the self-protective measures that buyer would have to take if there were no legal remedies

3. What must be discloseda. Material defects generally

i. Seller need only disclose significant or material defects1. Most use objective of what reasonable buyer

would consider defects2. Some use subjective of what the particular

buyer found as important defectsb. Physical or legal defects

i. Leaky roof, crumbling foundation, termite-damage, sliding hillside

ii. Some states also include zoning violations, building code violations and other legal conditions affecting the use and enjoyment of the land

c. Off-site conditionsi. Involve analysis of:

1. Proximity of the condition2. Magnitude of the risk3. And the gravity of the threatened harm

d. Psychologically impacted property i. Stambovsky v. Ackley

1. Case where the house was known to be haunted

ii. Reflections on Stambovsky1. Where a condition which has been created by

the seller materially impairs the value of the contract and2. is peculiarly within the knowledge of the seller

or unlikely to be discovered by a prudent buyer exercising due care

3. The seller's nondisclosure allows the buyer to rescind

iii. Statutory restrictions on duty to disclose 1. Statutes typically say that previous owner

having aids or the previous owners had a homicide or suicide do not need to be disclosed

e. Waiver of dutyi. A clear specific waiver will be enforced in most

jurisdictionc. Broker's Duty to disclose defects

i. Real estate broker representing the buyer has been required to disclose known defects or other material facts

ii. The buyer's broker as an agent owes a fiduciary duty to his principal which includes the obligation of full disclosure

iii. Majority of states do not impose a duty on seller's agent to disclose to buyerd. Builder's implied warranty of quality

i. The warranty in context1. Majority hold that as a matter of law an implied warranty accompanies

the sale of a new home by a builder/ developer2. Implied warranty of quality, implied warranty of fitness, implied

warranty of habitabilitya. Builder impliedly warrants the house has been constructed in a

workmanlike manner and is fir for human habitationsb. Does not impose strict liability on builder, and does not

guarantee that the home is free from all defectsc. Rather it allows buyer to recover if the builder failed to exercise

the standard of skill and care customarily exercised by professional builders

d. Warranty only applies to latent defects and not to obvious defects that a reasonable inspection would uncover

3. Policy rationalea. The buyer's pre-purchase investigation is not likely to reveal the

defect because buyer lacks knowledge and the defects are latent and do not become apparent for years

b. The buyer reasonably expects that the builder will construct a suitable home

c. The builder's expertise allows him to avoid defects through careful constructions, least cost avoider

d. Builder has ability to spread losses by charging higher prices4. Implied warranty does not extend to commercial property

5. Applies only to sale of new homes by professional builders developers, or other merchants

ii. Rights of successor owners1. Current trend is to recognize that a subsequent purchaser may sue

builder under implied warranty based off of same public policy reasons as initial purchaser

2. Builder is only liable for a reasonable period4. The mortgage

a. What is a mortgagesi. Title theory

1. The conveyance of an interest in real property as security for performance of an obligation

2. The obligations is almost always a loan of money evidenced by a promissory note

3. If the borrower fails to make the payments required by the note or otherwise defaults the lender may cause the property to be sold and apply the proceeds to satisfy the unpaid debt, this is called foreclosure

ii. Lien theory1. Treat the mortgage as a mere lien on the secured property to hold a

security interest, not title and the mortgagee can take possession only after foreclosure

b. Evolution of the mortgagei. Judicial foreclosure

1. Under court supervision, the foreclosing mortgagee was forced to sell the property at public auction and distribute any surplus sales to junior leinholders and the mortgagor

ii. Power of sale mortgage1. Contains an expressed provision by which the mortgagor consents to

foreclosure of the equity of redemption by public auction sale but without judicial involvement

c. The creation of a mortgagei. The loan process

1. Borrower completes written loan application 2. Lender investigates borrowers financial condition and appraisal of the

property 3. Lender will then issue a loan commitment which acts as acceptance and

creates an enforceable contractii. Execution formalities

1. Mortgage is viewed as the transfer of an interest in real property 2. What a mortgage must include:

a. The material provisions of the mortgage (names of parties, description of property, words of intent)

b. Must be set forth in a written document executed by the mortgagor

c. Mortgage must be delivered to the mortgagee3. Mortgage is fully valid and binding with out being recorded, but most

still record them to give notice to the world d. The secured obligation

i. Role of the obligation1. Mortgage is a legal nullity unless it secures an obligation2. Mortgage is a security interest to the deed3. The mortgage merely provides a remedy to compel performance

a. The mortgage and promissory note are inseparable 4. Usually mortgage secures repayment of a loan evidenced by a written

promissory noteii. The promissory note

1. A specialized contracta. A promissory note is simply a specialized contract between

lender and borrower b. It id's the parties, contains the borrowers promise to repay in

the stated terms and condition, is signed by the borrower c. is evidence of the debt

2. 4 Key componentsa. Amountb. Interest rate

i. Can be fixed or adjustable ii. State usury laws

1. Place legal ceiling on the interest rate a lender may receive

2. Relatively ineffective todayc. Term

i. Typical term is 25 or 30 years d. Amortization schedule

i. Specified method by which the borrower repays the loan

e. Foreclosure of mortgagei. Foreclosure in context

1. Judicial foreclosure is available in all states and dominate in about half2. Can be a long slow expensive process3. Five points of similarity in most jurisdictions

a. The mortgagor receives written notice b. The mortgagor retains right to redeem property by repaying

entire debt until the end of the process when the equity of redemption is eliminated

c. The foreclosure process ends in a public sale by auction d. Any surplus sales are given to junior leinholders or the

mortgagore. If sale fails to cover the debt the mortgagor will be liable for

deficiency judgmentii. Power of sale foreclosure

1. Arises out of expressed contract provision2. Mortgagor can bring suit to cancel the sale only where the price is so

grossly inadequate as to shock the conscience of the court3. Some state require mortgagee to make a good faith effort to obtain a

fair and reasonable price f. An alternative financing device: the installment of land contract

i. Nature of installment land contract1. Buyer agreed to pay seller purchase price in installments over a period

of years2. In event of default the seller gets property and all payments

5. The deed

a. The deed in contexti. Deed defined

1. The basic document used to transfer an estate or other interest in land during the owner's lifetime

b. Types of deedsi. Three basic types

1. General warranty deeda. Provides the most title protectionb. Six covenants

i. Covenant against encumbrances1. Grantor states there are no mortgages,

easements, liens, or other encumbrances on the property 2. Special warranty deed

a. Contains the same six title covenants but applies them only to defects caused by the acts or omissions of the grantor

b. Affords no protection for acts or omissions of third parties3. Quitclaim deed

a. Has no title covenantsb. Grantor does not warrant that he owns the property or if he has

any title that is good titlec. Merely conveys whatever right or title the grantor may have in

the propertyc. Requirements for valid deed

i. Essential deed components1. General principals

a. Basic requirements:i. In writing

ii. Signed by the grantor1. No set form is needed

iii. Identify the grantor1. If the grantor expressly or impliedly authorizes

the recipient of the deed to insert the name of the ultimate grantee, most courts find the deed valid after the name is added, until that point it is void

iv. Identify the grantor and granteev. Contain words of conveyance

1. Grant, convey, transfer, givevi. Describe the property

2. Description of the landa. Methods of describing land

i. Use to have to describe all property in detail, modern rules are less strict but you still must describe the property

ii. Metes and bounds1. Most rudimentary method, still used in eastern

statesiii. Government surveyiv. Plat or subdivision map

3. Nonessential deed componentsa. Consideration is needed in valid contracts but not in valid deedsb. Recordation is irrelevant, an unrecorded deed is valid, it is

customary to record thoughc. Acknowledgement public notary is used in recording deeds but

not necessary for the deed to be validd. Witnesses are not requirede. Seal is only require in a few states

ii. Delivery (for valid conveyance there must be delivery of the deed)1. General principals

a. Physical delivery is not always enough, grantor's intent is what mattersi. Words and actions

b. Deed is not effective until it is delivered, an undelivered deed is void and passes no title to the grantee even if they are bona fide purchasers

c. To deliver the deed the grantor must manifest by words or actions an intent that the deed be immediately effective to transfer an interest in land to the grantee

d. If grantor intends the deed to take effect only upon death no delivery has occurred thus the deed is a nullity and the property will be divided according to will

2. Presumptionsa. Delivery is presumed if the deed is recorded or the grantee has

physical possession of the deed b. Common situations

i. Where grantor retains deed or grantee 1. If grantee has it there is a rebuttable

presumption of effective delivery, 2. If grantor holds it still there is no such

presumptionii. Where grantor gives to third party

3. Deed in a box casesa. Similar issues as constructive or symbolic delivery in gift giving,

very difficult to say what the court will do 4. Conditional delivery to grantee

a. Most courts follow the common law view that a grantor my not condition delivery to the grantee

b. Most courts remedy a condition by dropping it and vesting absolute title in the grantee

5. Delivery to third partya. Sales escrow

i. Although a deed cannot be conditionally delivered directly to a grantee but it can be conditionally delivered to a third party

ii. Grantor conditionally delivers the deed to escrow agent who delivers it to the grantee when the contract conditions are met

d. Interpretation of deedsi. Central rule is to follow the intent of the parties

1. First the document itself, then extrinsic evidencee. Recordation of deeds

i. Grantor must execute the deed in the presence of a notary public or similar official who signs the acknowledgement form

ii. The deed then becomes effective through deliveryiii. The clerk will stamp the deed

f. Effect of forgeryi. Forged deed is completely void and conveys nothing to a grantee or even a

subsequent bona fide purchaserg. Effect of fraud

i. Fraud in the inducement1. Inducement by fraud is voidable

ii. Fraud in the inception1. When fraud prevents the grantor for knowing that he executed a deed2. Most courts hold this void for all purposes

h. Estoppel by deedi. Doctrine applies when grantor uses a warranty deed to purportedly convey title

to land he does not own to an innocent grantee. ii. If the grantor later acquires title to the land it automatically passes to the

grantee6. Fundamentals of land title

a. The problem of conflicting title claimsi. Problems arise in three situations

1. 2 people claim present possessory estate 2. Conflict between present possessory estate and someone claiming a

non-possessory interest like an easement, lien, or covenant3. Two non-possessory interests who debate their respective priority

ii. The general rule is that the first who first delivers will prevail over anyone who acquires an interest later

iii. All state have modified this rule through recording actsiv. Three basic types of recording acts

1. Notice (about half of the state)and use the BFP doctrine2. Race-notice (about the other half of states) also use BFP doctrine but

say BFP must be first to record3. Race (Only two state) do not recognize the BFP exception

v. First exception bona fide purchaser doctrine1. In a title dispute between a first in time claimant and a later bona fide

purchaser for value the bona fide purchaser prevailsvi. Second exception shelter rule

1. One who acquires an interest from a bona fide purchaser also prevails over a first in time claimant

b. The general rule first in time prevailsc. First exception to the general rule: subsequent bona fide purchaser prevails

i. Nature of the exception1. A bona fide purchaser (BFP) is one who purchases an interest in land for

valuable consideration without notice of an interest already held by a third party

2. In title dispute between a first in time owner and a late BFP the BFP prevails

ii. Relativity of title1. Title is relative not absolute

d. Who is a bona fide purchaser? : notice jurisdictioni. A subsequent purchaser for value without notice of prior interest

1. A BFP is a subsequent purchaser who pays valuable consideration for an interest in real property without any notice of an interest that a third party already holds in the land

2. Key partsa. Subsequent purchaserb. For valuec. Without notice of prior interest

ii. A subsequent purchaser1. Almost anyone who acquires an interest in land2. Anyone who acquires an easement, lease, lien, mineral interest,

mortgage, restrictive covenant, or any possessory or non-possessory interest 3. Applies only to subsequent purchasers, prior purchasers are first in time

and protected under common lawiii. For value

1. Defining valuea. Donees and devisees and heirs are not purchasers for valueb. Grantee need not pay full market value, but must pay more

than nominal valuec. The smaller the purchase price the greater the risk that it will

not be held adequate2. Debt as value

a. A mortgagee or other creditor who makes a loan and receives an interest in real property to secure repayment of the debt is considered a purchaser of value

b. Exceptionsi. Pre-existing debt is not seen as value

ii. Creditor who obtains judgment on a lien 3. Notice after partial payment

a. In most jurisdictions the buyer who receives actual notice of a prior interest after paying part of the purchase price is considered a BFP for the payments before notice but not for those after

iv. Without notice of the prior interest1. A notice statute protects subsequent purchaser for value who has no

notice of the prior interest

2. Purchasers knowledge is measured when the deed or other instrument is delivered

e. Who is a bona fide purchaser? : race-notice jurisdictionsi. A subsequent purchaser for value without notice of the prior interest who

records first1. A subsequent purchaser for value without notice of the prior interest

and who records his interest first 2. Race notice jurisdiction only add the one requirement

f. What constitutes noticei. Source of notice

ii. Actual notice 1. Knowledge of the prior interest, or a person who knows that a prior

interest exists2. Might obtain actual notice through any method written or oral or

nonverbal iii. Record notice/ constructive notice

1. Notice of any prior interest that would be revealed by an appropriate search of the public records affecting land title even if they never did a title search

iv. Inquiry notice 1. Defined

a. Based on purchasers duty to investigate suspicious circumstances

b. If a purchaser has actual notice of facts that would cause a reasonable person to inquire further he is deemed to know the additional facts that inquiry would uncover whether he inquired or not

c. Arises when the purchaser fails to investigate suspicious circumstances

2. Notice from possession of landa. General principles

i. In most states the purchaser is obligated to make a reasonable inspection of the land before purchaser

ii. Failure to inspect will constitute inquiry noticeiii. Acts constituting possession

1. Court looks at factors similar to that of Adverse Possession

b. Notice from reference in a recorded documenti. In most states a reference in recorded document to an

unrecorded document is sufficient to give inquiry notice3. Imputed notice

a. Arises from a special relationship between two or more persons, if one has actual knowledge of a fact the others are also deemed to know the fact

g. Second exception to the general rule: the Shelter Rulei. A grantee from a bona fide purchaser is protected as a BFP even though the

grantee would not otherwise qualify for this statusii. BFP transfers his protected status to subsequent purchasers

h. Special rule for race jurisdictions: first purchaser for value to record prevails

i. Under race recording statutes the first purchaser for value to record prevails,ii. Priority is determined simply by which purchaser wins the race to the recorder's

officeiii. Notice is irrelevant in race jurisdiction

The recording systemThe recording system in contexti. The recording acts in 48 states provide that a later purchaser is charged with

constructive notice of a prior recorded interest even if they failed to search the records

ii. The system is simple in itself but is complex because not all recorded documents give constructive notice

iii. Title searches can be long, burdensome, and expensiveb. The purpose of the recording system

i. Protects existing owners from loosing their property to later purchasersii. Protects new buyers

1. Provides confidence needed to investc. Anatomy of the recording system

i. Extends to all interests in real property, not merely freehold estatesii. Government officials have very little control over the recorded documents, they

merely are passive custodians1. Thus some documents are invalid

d. Procedure for recording documentsi. Mechanics of recording

1. Almost all state require that the document be acknowledged before a public notary

2. Grantor must have signed the deed 3. And it must have been witnessed 4. Document must take the form of a type of document that affects the

title to or possession of real property, a. Mortgage, deed , judgment

e. Procedure for searching title i. Title search using grantor-grantee index

1. Overviewa. Step one: search backward in time in the grantee-grantor indexb. Step two: search forward in time in the grantor-grantee indexc. Step three: read and evaluate documents that affect title

ii. Title search using track index1. In a track index all entries are organized according tot the identity of the

parcel involved, regardless of the names of the partiesf. Recorded documents that provide constructive notice

i. Four requirements1. It meets the formal requirements of recording2. It contains not technical defects3. It is recorded in the chain of title4. It is properly indexed

g. Recorded documents that do NOT provide constructive notice

i. Defective document1. Invalid acknowledgement 2. Incorrect name

a. Doctrine of idem sonanai. When an improperly spelled name sounds substantially

like the true name the spelling error is ignoredii. The title searcher must search not only under the correct

name but all variations that sound like the correct name3. Incorrect property description

a. Generally the description must be sufficiently accurate that a title searcher could both find the recorded document and determine that it concerned the land in question

ii. Document outside the chain of title1. The chain of title generally

a. Recorded documents that cannot be located using the standard title search are deemed outside the chain of title and they do not provide constructive notice to later buyers

b. This encourages those who record title to do so correctly 2. Prior document recorded too early

a. Any document recorded before the grantor obtained title is not in the chain of title

b. Thus under majority rule a title searcher need only search the index during the period after the grantor obtained title

3. Prior document recorded too latea. Prior deed recorded after the grantor covered title to a

subsequent purchaser is not in the chain of title and does not give constructive notice

b. Again the initial grantee was in the best place to avoid miscommunication so they should bear the burden

4. Prior deed from grantor outside chain of titlea. Prior conveyance outside the recorded chain of title, commonly

called a wild deed does not give constructive notice5. Deeds from common grantor of multiple lots

iii. Improperly indexed documents1. If someone tries to record but there is a clerical error, indexed

erroneously, or non-indexed the court will say the document still gives constructive notice because it was not the person's fault

8. Methods of title insurancea. Title assurance in context

i. Title is a set of intangible, legally enforceable rights relating to a specific parcel of land

ii. Three methods of title insurance1. Covenants of title in deeds2. Title opinions and abstracts3. Title insurance

iii. None of these offer complete protections b. Covenants of title

i. What are title covenants

1. A deed usually contains express promises by grantor about the state of title to the land being conveyed, these promises are known as covenants of title or title covenants

ii. Scope of title covenants1. Six title covenants

a. Covenant of seisinb. Covent of right to conveyc. Covenant against encumbrancesd. Covenant of warrantye. Covenant of quiet enjoyment(very similar to covenant of

warranty)f. Covenant of further assurances (does not usually apply )

2. The first three are present covenantsa. They are breached if at all at the very instant the deed is

delivered to the granteeb. Statute of limitations begins running when the deed is delivered

3. The final three are future covenants a. Are concerned with future acts or omissions b. Run with the land to remote grantors c. Breached if at all when grantee actually or constructively

evicted by someone holding superior title d. Statute of limitations runs when the breach occurs

4. Discussion of individual covenantsa. Covenant of seisin

i. Warrants that the grantor is the owner of the estate described in the deed

ii. Even a buyer who purchases with full knowledge of the title defect can recover for damages for breach of this covenant

iii. Guarantees state of title at the time of the conveyanceb. Covenant of right to convey

i. Warrants that the grantor has the legal right to transfer title

ii. Overlaps a lot with covenant of seisin c. Covenant against encumbrances

i. Nature of covenant1. Warrants that there are no encumbrances on

the land conveyed 2. No rights or interests in third parties that would

reduce the value or restrict the use of land ii. Ordinances and regulations

1. All jurisdictions say that ordinances and regulations are not encumbrances

iii. Obvious and visible encumbrances1. Most courts will say visible encumbrances are

not warranted d. Covenant of warranty

i. Grantor's promise to defend the grantees title against other claimants

ii. Grantor agrees to indemnify the grantee who suffers an eviction or similar interference with possession of land by someone with superior title

e. Covenant of quiet enjoymenti. Warrants that the grantees possession and enjoyment

of the property will not be disturbed by anyone holding superior title

ii. Now is identical to covenant of warrantyf. Covenant of further assurances

i. A promise that the grantor will execute any additional documents and take any other actions that are reasonably necessary to perfect the grantee's title

iii. Rights of grantee's successors1. Present covenants

a. Majority holds that the grantee's successor cannot sue the original grantor for breach of a present covenant

2. Future covenantsa. Do run with the land to the grantee's successors

iv. Remedies for breach of covenants 1. Grantor is liable for compensatory damages if any title covenant is

breached a. Damages cannot exceed original purchase price

c. Title insurance policiesi. What is title insurance

1. Is a contract of indemnity between the issuing company and the property owner

2. Insurer promises to compensate or indemnify the insured against losses caused by covered title defects

3. Is retrospective, it protects only against title defects that already exist at the time title is transferred, not those that might arise in the future

d. Registration of title i. Torrens system

1. Government agency issues a certificate of title that establishes land title Chapter 9—Judicial Land Use Controls: The Law Nuisance

A. General principle —a person may not use his own land in an unreasonable manner that substantially lessens another’s use and enjoyment of his land. A nuisance is different than a trespass that involves an interference with exclusive right of possession.

B. Two types of Nuisance —Public & Privatea. Public Nuisance —are nuisances substantially affecting the rights enjoyed by

citizens as a part of the public. To constitute a public nuisance—nuisance must:i. Affect a considerable number of people or an entire community

neighborhood.ii. Present in a public place where people frequently congregate or where

the member of the public are likely to come within range of its influence iii. Examples: factory discharging chemicals which pollute water supply iv. Factors to consider for unreasonableness of public nuisance :

1. Whether the conduct substantially interferes with public health, safety, peace, comfort or convenience

2. Whether the conduct is proscribed by statute or ordinance (Case: Spur)

3. Whether the conduct is of a continuing nature or has produced a permanent or long lasting effect

v. Parties that can sue —any member of the affected public, only if that person can show special damage—an injury or damage different from what other members of public have suffered.

b. Private Nuisance —nuisances causing substantial interference with private rights to use and enjoy land of an individual or small number of persons. In order to give rise to liability, interference must be substantial, it must also be either: intentional and unreasonable OR the unintentional result of negligent or reckless or abnormally dangerous activity.

i. Substantial Interference —If P’s damage consists of his being inconvenienced or subjected to unpleasant smells, noises, etc, this will be “substantial” damage only if a person of normal sensitivity would be seriously bothered.

ii. Defendant’s mental state —must show that D’s conduct was either intentional OR negligent, reckless, or abnormally dangerous (which embody unreasonableness)

iii. Unreasonableness —the relevant inquiry concerns the level of interference that results from the D’s conduct. Even if D’s conduct is intentional, P will not win in nuisance unless he shows that D’s actions are unreasonable. Takes into account the nature of the neighborhood—(Example: Steel mill in industrial park would not be unreasonable where it would be in a residential neighborhood)

1. Intentional (Restatement)—courts should consider whether the gravity of the harm outweighs the utility of the actor’s conduct.

2. Considers —utility and gravity of nuisance iv. Parties that can sue —only landownersv. Lateral and Subjacent Support

1. Generally —every landowner is entitled to have his land receive the necessary physical support from adjacent and underlying soil.

2. Lateral support —the right to support from adjoining soil. a. This support is absolute—once support has been

withdrawn and injury occurs, the responsible person is liable even if he used utmost care in his operation.

b. Absolute right exists only with respect to land in its natural state. Ordinarily, there is no right to support structures on the land (i.e. buildings) pg. 104; pg 645 book

c. Example—A and B are adjoining landowners. A very carefully constructs a large excavation almost to the edge of his property. This causes B’s soil to run into A’s

excavation, impairing the surface of B’s property. B’s right to lateral support has been violated, and he may recover damages.

3. Subjacent support —the right to support from underneath the surface

a. Arises only where sub-surface rights (i.e. mineral rights) are severed from the surface rights. When such a severance has taken place, the owner of the surface interest has the right not to have the surface subside or otherwise to damaged by the carrying out of the mining.

b. Structures existing —the surface owner has the absolute right to support, not only of unimproved land, but also support of all structures existing on the date when the severance took place.

C. REMEDIES 1. Doctrine of Balancing of the Equities —Comparison injury of plaintiff as compared to injury

of the defendant and public. (Aka—comparative hardship/equitable hardship, has an apparent efficiency objective to avoid the greater harm (social cost).

2. Damages —if the harm has already occurred, P can recover compensatory damages1. Temporary damages —compensation awarded to pay for injuries sustained as the result

of another party’s occasional wrongful acts.3. Injunction —Court order requiring a person to do or prohibiting that person from doing a

specific act. To obtain an injunction, P must show that the harm to him actually outweighs the social utility of D’s conduct.

Non-possessory Interest in Land – Easements, Licenses, Real Covenants, Equitable Servitudes

9. Licensesa. Not an interest in landb. Does not have to comply with SOFc. Merely a privilege that is revocable at the option of the licensor, to enter the land of the

other without being considered a trespasser10. Easements

a. Easement in contexti. A non possessory right to use land in the possession of another (such as for

ingress and egress) ii. Expressed easements arise only when a landowner agrees to burden his land

iii. The remaining four all arise as a matter of law without any expressed agreement b. What is an easement

i. Defining easement1. A non possessory right to use land in the possession of another

ii. Elements1. Does not give the holder any right to possession but merely the right to

use the land for a particular purpose2. Easement is an interest in the land not simply a contractual right

a. This means an easement is subject to the statute of frauds

3. Easements burden the land in the possession of anotheriii. Dominant tenement/ dominant estate/ dominant land

1. The land benefited by the easement iv. Servient tenement/ servient estate/ servient land

1. The land burdened by the easementv. Classifying easement

1. Affirmative or negativea. Affirmative easements

i. Authorize the holder to do a particular act on the servient land

b. Negative easementi. Entitles the dominant owner to prevent the servient

owner from doing a particular act on the servient land2. Appurtenant or in gross

a. Appurtenanti. Benefits the easement holder in using the dominant

landii. It is seen as attached to the dominant land and not to

any particular owner of that land b. In gross

i. Is personal to the holder and benefits the holder in a personal sense whether or not he owns any other parcel of land

ii. It is attached to the holder not the land 1. It involves only servient land there is no

dominant land 3. Classification depends on intent of parties

a. Access easements and easements for use or enjoyment are almost always appurtenant

b. Law favors appurtenantc. If intent of parties cannot be determined the easement is

presumed an appurtenant 4. An easement appurtenant is automatically transferred when the

dominant tenement is transferred while an easement in gross remains with the holder

c. Express easementsi. Nature of easement

1. Voluntarily created in a deed, will, or other written instrument2. Easement by grant

a. When a grantor conveys or grants an easement to another3. Easement by reservation

a. When grantor coveys land to another but reserves an easement in the land

ii. Creation of easement1. By grant

a. Must comply with statute of fraudsi. In writings

ii. Identify partiesiii. Manifest intent to create easement

iv. Describe the landv. Signed by grantor

2. By reservationa. Same formal requirements as above by grantb. At common law it can only be reserved in favor of the grantor

and never to a third partyi. Many courts have abandoned this rule

iii. Policy rational1. Protects the personal liberty of landowners

d. Easements implied from prior existing usei. Nature of easement

1. Sometimes called implied easement or easement by implication2. Statute of frauds does not apply 3. Can be created by grant or reservation

ii. Creation of easement1. Required elements

a. Severance of title to land that was held in common at one timeb. An existing apparent and continuous use when severance

occursc. Reasonable necessity

2. Severance of titlea. Land that was in common at one time is now divided an one

parcel must go to a new owner and the other retained 3. Existing apparent and continuous use

a. When the land was common the owner had to use one parcel to benefit the other and

b. It must appear the parties intended the existing use to continue c. One cannot obtain an easement in ones own land, this is called

a quasi-easement , and describes existing use of dominant and servient land while both were owned by the same person

d. Apparenti. Uses that are discoverable through reasonable

inspection even if not readily visiblee. Continuous

i. Parties would reasonably expect that it will continue after severance of the title

4. Reasonable necessitya. Easement must be convenient or beneficial to the use and

enjoyment of the dominant tenement but need not be absolutely necessary

b. Is met if the owner would expend substantial money or labor in order to provide a substitute

iii. Policy rational1. Promotes productive use of land and continued use of land

e. Easement by necessityi. Nature of the easement

1. Arises from operation of the law based on circumstances without expressed agreement

2. Does not fall in statute of frauds3. Requires high degree of necessity when the title is severed but does not

require prior use4. Almost all involve roads to landlocked parcels

a. Courts have not extended this to modern utilities 5. Two modifications

a. Servient owner usually gets to decide the location for easement so long as its reasonable

b. Easement endures only as long as necessity endures ii. Creation of the easement

1. Required elementsa. Severance of title of land that was commonb. Strict necessity

2. Severance of title3. Necessity at time of severance

a. Traditional view: strict necessityi. Severance caused property to be absolutely landlocked

1. Parcel must be entirely surrounded by privately owned land without touching a public road

2. Owner must not hold an easement or other legal right of access to cross the adjoining land

ii. If owner has any legal means of reaching the land regardless of how inconvenient, expensive, or impractical it may be there will be no strict necessity

iii. Strict necessity must exist at the time common ownership was severed

b. Minority view: reasonable necessityiii. Policy rationale

f. Prescriptive easementsi. Nature of easement

1. Closely related to adverse possession in that both share the central concept that property rights in the land of another can be acquired by conspicuous long-term use

2. Involves statute of limitationsa. Tacking and tolling

ii. Creation of easement1. Required elements

a. Open and notoriousb. Adverse and under a claim of right

i. Non-permissive usec. Continuous and uninterrupted for the statutory period d. For statutory period

2. Few courts require active use, and also the exclusive element is not that important

3. Open and notorious usea. Such that a diligent owner who was present on the land at the

time would be able to discover itb. Must not be concealed or hidden from view

c. Not necessary that the owner have actual knowledge4. Use that is adverse and under claim of right

a. Objective testi. Claimant need only use the land as a reasonable owner

would, without permission of the servient owner and the claimants subjective intent is not relevant

b. Subjective testi. Requires that claimant have good faith belief that he

has the right to use the landc. Proof of open notorious continuous and uninterrupted creates

presumption that use was adverse and burden shifts to owner to show consent i. Some will not apply presumption if land is wild and

unenclosed 5. Exclusive use

a. Claimants use is independent of use by othersb. In most cases this just means use must be separate and

distinguishable from use by general public6. Continuous and uninterrupted for statutory period

a. the need only be as frequent as is appropriate given the nature of the easement and the character of the land

b. Usually statutory period is between 10 and 20 yearsiii. Policy rational

g. Easements by estoppel or irrevocable licensesi. Nature of the easement

1. Usually an owner who gives a license can revoke it at any time2. If however the licensee expends substantial money or labor in

reasonable reliance on the license and the licensor should reasonably expect such reliance the license can become irrevocable by estoppel

3. Last only as long as necessary for licensee to recover the value of his investment

ii. Creation of irrevocable license1. Required elements

a. Licenseb. Licensee's expenditure of substantial money or labor in good

faith reliancec. Licensor's knowledge or reasonable expectation that reliance

will occur2. License

a. Can be expressed or implied3. Reliance by licensee

a. Often consist of improvements to servient land b. More likely to be found reasonable if the parties clearly

intended to create a permanent right of access4. Knowledge of licensor

iii. Policy rationaleh. Other types of easements

i. Through subdivision

ii. Eminent domain iii. Implied dedicated property

i. Scope of easementsi. Turns on intent of the parties

ii. Manner, frequency and intensity of use of easementiii. Use of easement to benefit land other than dominant land

1. Easement holder cannot use the easement to benefit any other parcel other than the dominant land and a normal remedy if he does will be an injunction

iv. Change in location or dimensions of easements1. Location and dimensions may change only if the owners of both lands

agree j. Transfer of easement

i. Easement appurtenant1. Any transfer to the dominant land also transfers the benefits of the

easement unless there is a contrary agreementii. Easement in gross

1. Is freely transferable unless parties should not reasonable expected this k. Termination of easement

i. Mergerii. Written release

iii. Abandonment1. Mere non-use is not abandonment2. Owner must intend to abandon and relinquish his rights

a. Owner stops using it for a long time b. Takes action that clearly manifest an intent to relinquish

iv. Prescriptionv. Destruction of servient tenement

vi. Estoppelvii. Eminent domain

viii. Misuseix. Lack of necessityx. In general

1. Parties can impose an expressed limitation , the easement holder might release his rights

2. If the owner of the easement acquires the servient land the easement ends through the doctrine of merger

3. Can be terminated by eminent domain or estoppel l. Negative easements

i. In general1. Entitles the holder to prevent the owner of servient land from doing a

particular act ii. Traditional approach

iii. Modern approachm. Licenses

i. Informal permission that allows the licensee to use the land of another for narrow purposes

ii. Not an interest in land but rather a personal privilege

iii. Statute of frauds dose not apply and it can be created orally iv. Licensor may revoke license at any time

n. Profits a prendre i. Right to enter land of another to remove timber, minerals, oil, gas, gravel, game,

fish or other physical substances ii. Includes right to sever and remove substance from land, this differs from

easementsiii. Profits are governed by same rules as easements

11. Real Covenantsa. Birth of private land using planning

i. Like equitable servitudes, real covenants extend burdens and benefits of land use covenants to the successors of the original parties

ii. Unlike equitable servitudes which are usually enforced through injunction, real covenants usually have money damages as a remedy, real covenants are settled in an action at law for breach of contract

iii. Unlike an easement it is not an interest in the land of another b. Elements

i. A covenant, signed in writingii. Intent, evidenced by words assigns or successors

c. What is a real covenanti. Defining a real covenant

1. Is a promise concerning the use of land that benefits and burdens the original parties to the promise and also their successors and is enforceable in action for damages

2. It is said to run with the land, but in reality it runs with the estate in land3. Promisor's successors are bound to perform the promise, and the

promisee's successors are able to enforce the promise d. Creation of a real covenant

i. Perspectives on the real covenant1. Distinguish between original parties and successors2. Distinguish between promisor's burden and promisee's benefit 3. Three scenarios

a. Original promisee might seek to enforce the covenant against the promisor's successorsi. The issue is whether the burden runs

b. The promisee's successor could try to enforce the covenant against the original promisori. Issue is whether the benefit runs with the land

c. The promisee's successor seeks to sue the promisor's successori. The issue is whether the benefit and burden run with

the landii. Original promisee v. promisor's successor: does the burden run ?

1. Requirements for burden to run a. In order for a burden to run with the land and thereby bind the

promisor's successor you need 6 elementsi. Covenant must be in writing

ii. The original parties must intend to bind their successor s

iii. The covenant must touch and concern the landiv. Horizontal privity must exist v. Vertical privity must exist

vi. The successor must have notice of the covenant2. Covenant in writing

a. Writing that complies with Statute of Frauds3. Intent to blind successors

a. Original parties must have intended the covenant to bind successors

b. Intent is found in express language , words such as assign or successors is good to have

c. Intent can be found in circumstances and conduct d. Many courts presume intent

4. Touch and concern land a. Defining touch and concern land

i. Use of the land 1. Burden must relate to the land 2. Promise must exercise direct influence on the

occupation, use or enjoyment of the premises ii. Negative covenants

1. Restricts the use of the promisor's land,2. usually satisfies the touch and concern

requirement3. Covenants not to compete do not meet the

touch and concern requirement iii. Affirmative covenants

1. Require the promisor to perform some affirmative act

2. Usually the payment of moneyb. Special problem: what if the benefit does not touch or concern

i. Burden does not run if the benefit is in gross or fails to touch and concern the land

5. Horizontal privity a. For burden to run with the land the original parties must have

horizontal privityb. We consider the relationship of the original parties to the

promise and ignore successors for horizontal privityc. Three competing views

i. Insist that there be a landlord tenant or similar relationship involving mutual interest in the land

ii. Majority view extends the doctrine to include all successive interests, grantor-grantee

iii. Some state abandon the requirement altogetherd. Mutual interests

i. Mutual interest in the same property, an example is an easement

e. Successive interestsi. Grantor grantee relationship

f. No horizontal privity required6. Vertical privity

a. Relationship between original covenanting party and his successors

b. Of successor succeeds to the entire estate in land held by the original grantor, vertical privity exists

c. Anything less than the entire estate there will be no vertical privity

7. Notice to successors a. Arises out of recording statutes not from common law

covenantsb. One who latter acquires interest without notice of a prior

adverse claim is protected as a BFPc. Actual, record (constructive), inquiry, imputed notice

iii. Promisee's successor v. original promisor: does the benefit run?1. Requirement for benefit to run

a. It should be easier to benefit successors rather than burden them

b. Four elementsi. Must be in writing

ii. Original parties must intend for it to benefit successorsiii. Benefit of covenant must touch or concern the land iv. Must have vertical privity

c. Horizontal privity and notice are not requiredd. Also the vertical privity is relaxed and will be found even when

the successor received less than the entire interest of the grantor iv. Promisee's successor v. original promisor: do the burden and benefit both run ?

1. Requirement for burden and benefit a. Look to burden requirements, if they are met odds are the

benefit requirements are met and they will both run and the covenant will exist between the two successors,

b. The only requirement that will involve more analysis is the intent part, in this case the parties must intend both to bind and benefit their successors

e. Termination of real covenantsi. Can end automatically if parties set a time limit i.e. 30 years

ii. The party benefited might release his rightiii. Eminent domain could end it iv. Estoppel v. Doctrine of merger could end it

vi. Abandonment1. When the conduct of the person entitled to the benefit demonstrates

the intent to relinquish his or her rightvii. When changes in the conditions in the neighborhood of the burdened land have

so substantially changed that the indented benefits of the covenant cannot be realized

f. Remedies for breach of real covenant i. Compensatory damages

1. The difference between the fair market value of the property before and after the defendant's breach

ii. Special or consequential damages could also be recovered 12. Equitable servitudes

a. The equitable servitude in contexti. Primary tool for enforcing private land use restrictions

ii. Restriction of use of land enforceable in equity iii. It is easier to enforce a promise as a equitable servitude than a real covenant

because horizontal and vertical privity are not required iv. Remedy is injunction and no need of privity of estate

b. Elementsi. Writing that complies with SOF

ii. Intention to bind the landiii. Notice

c. Methodsi. Declaration of restriction filed with recording office (usual method)

ii. All home owners get together covenants conditions an restrictions CCRiii. Owner in subdivision puts restriction on some and the intent of common

development is manifest in inquiry noticed. What is an equitable servitude

i. Defining equitable servitude1. A promise concerning the use of land that benefits and burdens the

original parties to the promise and their successors and2. Is enforceable in equity

ii. Distinguished from other doctrines1. Three factors distinguish equitable servitudes from real covenant

a. Standard is easier to meetb. Broader defenses to equitable servitudesc. traditional remedy for violation is injunction not damages

2. It harder to tell the difference between an equitable servitude and negative easement

a. Both might involve a promise to refrain from actingb. Both allow injunctive reliefc. Both are interests in land

3. Elements required in ES differ from negative easement and there are different defenses

4. Also courts do not like negative easements restrict the likelihood of it being used

e. Creation of an equitable servitude i. Perspectives on the equitable servitude

1. Two fundamental rulesa. First: you must distinguish between original parties and their

successors i. Original parties are usually bound by contract law but

the successors are not and would only be bound in property lawb. Second: each ES has a burden and a benefit

ii. Original promisee v. promisor's successor: does the Burden run?1. Requirement for burden to run

a. Four elements to bind a promisor's successors i. Promise must be in writing or implied from a common

planii. Original parties must intend to bind successors

iii. Promise must touch or concern the landiv. Successors must have notice of the promise

b. Neither vertical nor horizontal privity is needed 2. Promise in writing or "common plan"

a. ES are interest in land and thus the ES must satisfy the Statute of frauds

b. There is a special exception called the common scheme doctrinei. When developer manifests a common plan to impose

uniform restrictions on a subdivision most courts will find implied ES

3. Intent to bind successors4. Touch and concern5. Notice to successors

a. Arise from recording statutes iii. Promisee's successor v. Original promisor: does the benefit run

1. Three elements required for benefit to runa. In writingb. Original parties intend for the benefit to run c. Promise must touch or concern

iv. Promisee's successor v. promisor's successor: do the burden and benefit run?1. Both benefit and burden must run

f. Special problem, equitable servitudes and the subdivisioni. Creation of subdivision restrictions

ii. Implied burden: the implied reciprocal covenant and the common planiii. Implied benefit

g. Termination of Equitable servitudesi. Changes in zoning

1. Do not terminate but large changes in conditions mightii. Defense in general

1. Release, abandonment, merger, and eminent domainiii. Anti-discrimination protections

1. Racial covenantsa. Under 14th amendment and the Fair Housing Act A and B

cannot enter into an ES to agree not to ever sell to a black man 2. Single family residence, covenants and the group home

a. Most courts also do not enforce these because they are against public policy

iv. Changed condition 1. Nature of defense

a. If conditions change such that the benefit no longer exists then the ES no longer exists, utilitarian rationale

b. Obsolete restrictions interfere with the productive use of land

2. Special problem the border lota. Changed conditions outside of the community that only affect

border lots, will not invoke the changed condition defenseb. If defense was allowed then changed conditions would slowly

encroach on entire neighborhoodc. The border lot exception does not apply if the changed outside

conditions are so large that they affect all property in neighborhoodv. Other defenses

1. Acquiescencea. Plaintiff who ignores violations by one person but not for the

defendants will loose 2. Estoppel

a. If plaintiff manifests an intention not to enforce a land use promise and the defendant relies on this conduct reasonably to his detriment then defendant has defense of estoppel

3. Lachesa. When plaintiff unreasonably delay in enforcing the promise

4. Relative hardship a. Relative hardship doctrine: because this is equitable relief the

courts will balance equities and hardships5. Unclean hands

a. If plaintiff violates promise to one and then seeks to enforce it against another

h. Remedies for breach of equitable servitudesi. Restatement (third) of Property

i. Creation of servitudes1. Basic requirements

a. Parties intend to make ESb. Comply with SOFc. Servitude is not illegal, unconstitutional, or against public policy

2. Do not need privity or touch and concern 3. Special issues

a. Benefit and burden for negative easements automatically runb. Benefit burden for affirmative covenants run only with vertical

privity c. Servitudes in gross are permitted

13. Zoning in general a. Police power

i. The inherent governmental power to promote the health, welfare, safety, and morals

b. Zoning definedi. All forms of government land regulation

c. Zoning ordinancei. Enables city council or other local legislative body to

1. Adopt a comprehensive plain 2. Enact zoning ordinances3. Delegate administrative authority

d. Administering the ordinance

i. Administered by a local agency usually called a zoning board ii. Basic functions

1. Considers appeals from decisions made by zoning officials 2. Authorizes landowner application for variances and special exceptions

iii. Variance1. Special deviation from the strict enforcement of the ordinance

e. Constitutionality of zoningi. Constitutional objections to zoning

1. Deprived owner of property without due process of law2. Violated owners rights of equal protection3. Took property without just compensation

ii. Village of Euclid v. Amber Reality Co.1. Firmly established the constitutionality of zoning in general

f. Nonconforming usei. Is a use of land that lawfully existed before the ordinance was enacted but that

does not comply with the ordinance ii. Most courts bar expansion of a nonconforming use

iii. Terminating nonconforming use1. Abandonment

a. Owner intends to abandon the useb. The use is discontinued for a substantial periods

2. Destruction a. Structure containing the use is destroyed

iv. Amortization1. Gives the nonconforming use a fixed period of time to operate the use

g. Doctrine of vested rightsi. In most states the owner who obtains a building permit and makes substantial

expenditure in good faith reliance on the permit obtains vested right to use regardless of any later change in law

14. Tools for Zoninga. Modern approach to zoning

i. Goes on a lot-by-lot basis rather than blind adherence to comprehensive planii. Flexible zoning

b. Zoning amendments i. Role of the amendments

1. Zoning ordinance may be modified by zoning amendment adopted by the city council or other local government entity

a. Might place land in a whole new zoneb. Might change uses that are allowed in a zone

ii. Standards for amendments1. Legislative judgment

a. Because separation of powers principle requires judicial deference to legislative judgments the decision is largely insulated from later judicial review

b. Zoning amendments are presumed valid absent proof that they were arbitrary or unreasonable and a court will hold the amendment as valid even against a constitutional due process or equal protection argument

b. Spot zoning

i. Rezoning that confers special benefit on a small parcel of land regardless of the public interest or the comprehensive plan

ii. If a zoning amendment violates the spot zoning doctrine it is invalidiii. Factors

1. Size of parcel2. Benefits conferred on parcel compared with surrounding parcels3. Injury to surrounding landowners and public in general4. Any changes condition in the area5. Whether rezoning is in accordance with comprehensive plan

iv. Spot zoning is more tolerated in modern flexible approachc. Change or mistake rule

i. Not often used anymoreii. Rezoning is only appropriate to correct a mistake made in original zoning

or if physical conditions have changed c. Other constraints on amendments

i. Judicial review of quasi judicial action1. Decision by local legislative body that affects only one parcel of land is

essentially judicial not legislative in character ii. Zoning by electorate

1. Public can vote on rezoningc. Variances

i. Role of variance1. An authorized deviation from strict enforcement of the zoning

ordinance in an individual case due to specific hardship.2. Allows a particular parcel of land to be used in a way that would

otherwise violate the ordinanceii. 2 Types of variances

1. Area variancea. Allows modification of height, location, setback, size, or similar

requirements2. Use variance

a. Allows a use that normally is prohibited in the zone b. Many jurisdictions prohibit use variances

iii. Standard variance1. General rule

a. In specific cases such variances from the terms of the ordinance as will not be contrary to the public interest, where, owing to special conditions, a literal enforcement of the provisions of the ordinance will result in undue hardship and so the spirit of the ordinance shall be observed as substantial justice done

b. Test for granting variance has 2 issues: hardship to the property owner, and protection to public interest

2. Hardshipa. The owner cannot obtain reasonable return under the existing

zoning due to some special characteristic of the property itself that is not generally shared by the surrounding parcels

b. Hardship must stem from the nature of the land not from owners need

c. Hardship cannot come from buyer's own actionsi. Most will allow variance even if purchaser buys home

knowing it violate zoning, court reasons that denying variance will hurt society by lowering the productive value of the land

3. Protection of public interesta. Focuses on the impact the variance will have on the

neighborhoodb. Whether variance will alter the essential character of the area

iv. Procedure for obtaining variance1. Owner applies, board provides notice to public, public hearing 2. Issuance of variance is an administrative decision that is quasi-judicial

a. It is easier to get a variance than defend it in successive litigation

d. Special exception (conditional or special use)i. Role of special exception

1. Use that is authorized by the zoning ordinance if specified conditions are met

2. Represents a legislative decision that while the particular use is appropriate in the zone as a general matter, certain restrictions are needed to ensure that it does not harm surrounding uses at its specified locations

3. Done on a case by case basisii. Special exception distinguished from variance

1. Special exception allows use authorized by zoning ordinance, prevents harm to surrounding uses

2. Variance, in contrast, allows use that deviates from ordinance and relieves the property owner from unusual hardship

iii. Standards for special exception 1. Use to be that zoning ordinances would be detailed and leave little

room for discretion2. Many ordinances are vague though and courts are divides as to whether

the vague ones are validiv. Procedure for obtaining special exception

1. Same as getting a variance 2. Judicial attitude towards special exceptions is much more favorable

than it is towards variancese. New zoning tools

i. Contract zoning1. Usually invalid as spot zoning, but modern trend is beginning to allow

themii. Conditional zoning

1. City makes no official promise, it identifies the conditions that must be met before rezoning is approved but in theory does not legally bind itself to rezone the land

2. Modern trend accepts these as welliii. Floating zones

1. City approves creation of new zoning but does not specify its location

2. Invalid in most statesiv. Cluster zones

1. Places a limit on the density of a residential subdivision 15. Land use Controversies

a. Federal questioni. Constitutionality is the ultimate constraint on zoning power

ii. Equal protection1. Challenges to equal protection are reviewed under a strict scrutiny or

rational basisa. Strict scrutiny

i. Applies when an ordinance or other regulation discriminates against a suspect class or infringes on a fundamental rights

ii. Ordinance is valid only if supported by compelling state interest

b. Rational basisi. A regulation will be upheld if it is rationally related to a

legitimate state interest, usually public health, safety, welfareiii. Due process

1. Procedurala. Focuses on the fundamental fairness of the procedure used to

deprive a person of life, liberty, or property2. Substantive

a. Examines the substance or content of the governmental decision as opposed to the means by which the decision was reached

b. Similar review on a relational basisb. Freedom of speech

i. Distinguish between content based and content neutral land use regulationii. Content neutral regulations

1. On the time , place, and manner of the speech are upheld whena. The government interest is substantialb. The regulation directly advances that interest c. The regulation is no broader than necessary

2. Note the standard is compelling interest not substantial iii. State constitutions

1. Decisions based on state constitutional grounds cannot be overturned by federal court

2. State courts are far more willing to strike down regulations based on substantive due process

c. Family zoningi. Usually justified on the basis that it reduces traffic, noise, congestion, and

overcrowding ii. Also protects the residential character of neighborhood

iii. Issues1. College students living together2. Non-profit

iv. Village of Belle Terre v. Borass1. Upheld family zoning

2. Ordinance was mere social and economic and did not involve a fundamental right or suspect class, thus the standard is that the ordinance need only need not be arbitrary or unreasonable

3. Marshalls dissent argues that the logic behind the family ordinance is flawed and the means are not rationally related to the end goal of controlling density

4. State courts usually follow Marshal and prohibit family zoning d. Group Homes

i. Small non-profit facility 1. Pro: delivers better care than hospitals at less cost2. Con: increases noise traffic ect. And increase crime and violence

ii. Fair Housing Act1. Used often to shoot down ordinances against group homes2. Exception :

a. Act does not apply to reasonable restrictions regarding max number of occupants

3. Court held the ordinance was not a max occupancy restriction but rather a land use restriction that did not fall in FHA's exception

e. Exclusionary Zoningi. Land use controls that tend to exclude low income and minority groups

ii. Ordinances that demand large lot sizes and minimum floor space iii. Justification for these type of statutes

1. Protects aesthetic value2. Protects property value3. Promote strong tax base and quality public services

f. Aesthetic Zoning i. issue

1. Does police power permit municipalities to regulate aesthetics2. Majority holds that aesthetics alone are not appropriate governmental

purpose 3. Cities can regulate billboards, junkyards and other unsightly uses bases

on aesthetic considerationii. Structures

1. Typical criteria includea. Appearance of surrounding areab. Specified design standardsc. Impact on property value

2. Stayanoff v. Berkelya. Court held ordinance as legitimate exercise of police power

using essentially the same basis of Due Process Clause b. Bad aesthetics lower property value and that’s a reasonable

state interest g. Signs

i. In general municipalities may regulate signs under the police powerii. City of Ladue v. Gilleo

1. Ordinance may be invalid for prohibiting too much speech or on the basis that it prohibits too little speech

2. Ordinance was struck down because it entirely foreclosed a traditional and important medium of expression, residential signs

16. Eminent domaina. Eminent domain in context

i. Federal, state, and local governments have the inherent power to take private property for public use over the

b. Takings clause of the Fifth amendmenti. Scope of the takings clause

1. Constitution does not expressly grant eminent domain power to the federal government rather it restricts eminent domain power

2. Rational is if there is something to restrict than there is something 3. Nor shall private property be taken for public use without just

compensation4. 14th amendment makes the restriction on taking applicable to states5. Two restrictions

a. Taking can only be for public useb. There must be just compensation to the owner

c. For public usei. The problem of defining public use

ii. The public purpose test1. Public use is defined by the purpose underlying the governmental action2. As long as property is taken for a legitimate public purpose, a purpose

within the scope of the government police power, the public use requirement is satisfied

3. Kelo v. City of New Londona. Supreme court said the city can condemn an occupied home

and then convey it to a private company as part of an economic development project

d. Without just compensationi. Defining just compensation

1. Fair market value standarda. The amount that a willing buyer would pay in cash to a willing

seller 2. Impact of owner's sentimental attachment or special need

a. Does not impact the just compensationii. Future land uses

1. Property must be valued at the highest and best use for which it could be adapted not merely its existing use

iii. Goodwilliv. Partial takings

e. Eminent domain procedure