1. Property, possession and ownershipa. Concept of Property

Justification for private property—why do we permit it? Most people don’t oppose notion of private property but just want redistribution of property not the actual notion of private ownership

o Incentives Under private ownership more incentive than under communal ownership:

to protect property against exploitation to use it to full advantage environmental costs of polluting diffused under collective system thus

not internalized by polluters which would detero Just desserts

One who labors should enjoy fruits of this But does this mean fruits of this production goes to children in will? If can’t transfer ownership then might

Exploit the property because state would take it Consume the property/wealth

Private property ownership integral to democratic societyo Not every polity that every nation that has private property is a democracy BUT can’t

have democracy without significant private property ownership i.e. China has private property and not democratic

o In state without private property citizens come to state as beggars instead of right holders then challenge to state could result in withdrawal of goods

substantial check on power of governmento Corporations, labor unions, churches etc.—when they own property they limit the power

of government—may not limit it in a good way but they do limit it Bundle of rights in fee simple absolute

o Right to possess or occupy Limitations on the right to occupy bc can’t build on the land, etc due to:

Zoning ordinances Restrictive covenants

o Right to use as one sees fit Limitations on right to use as please

Zoning ordinances—e.g. gov’t says single family use only whereas was worth much more for commercial purposes

Environmental laws Private nuisance laws—D can’t use his property to unreasonably

interfere with use of P’s propertyo In using your real estate have obligations to neighbor

Restrictive covenantso Future owners are bound by zoning ordinances etc bc when

buy are bound by notion in contracts with restrictive covenants Constitution says that gov’t can’t take private property for public use without

paying fair value but can often limit use of land to point where value of it is seriously impacted

o Right to exclude—right not to let others in—may only be able to use it as gov’t says but have right not to allow others in

Limitations on right to exclude Fire or police Safety hazard

When dealing with residential property right to exclude is at its strongest Wisconsin case—north side of property owned by elderly couple had

lake with narrow road. Owner of lake lot nearby buys mobile home but it can’t be moved through narrow road. Mobile home dealer asks couple if they can put motor home on the lot until the snow subsides

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and will pay them for it. Put mobile home there anyway. Owners tell police and mobile home dealer prosecuted for trespass. Then sue in civil court and jury finds 100k for the couple even though no damage—punitive judgment because infringed on right to exclude. Couple clearly unreasonable yet right to exclude nearly absolute even if unreasonable

When commercial real estate right to exclude less absolute Businesses can’t exclude people from premises based on race, creed,

color, religion, etc.o Right to alienate or transfer as one sees fit——nearly absolute—common law doctrine

called unreasonable restrain on alienation doctrine right to sell or give away while alive (inter vivos) or transfer after death through (incident to death)

will tenancy in common—cheaper will because once one dies other takes

over title without a will—poor person’s will trusts intestate succession if no will

o goes into probate limitations on right to alienate despite nearly absolute right

lot split ordinances—if own lot inside a city in a subdivision, can’t split it and sell part to one person, part to another, etc.

eminent domain—gov’t can force you to sell your land if it wants it housing discrimination—can’t discriminate between potential

purchaserso but decision to leave upon death based on some type of

discrimination is sacrosanct—different than dealing in marketplace

gift tax—deterrent/restrictions on amount one can give in gifts—collected once the donor has died—exemption from gift tax for gifts to charities—this imposes limitations on inclination to alienate property

estate tax—deterrent/restrictions change people’s behavior during life—if know that will incur significant costs from transfer may try to exploit it more during life

subletting—can’t sublet without permission of owner—restraint on alienation and in some states those laws have been found to be unreasonable restraints on alienation and are only valid if landlord turns you down on a reasonable basis (i.e. subletter unlikely to pay rent)

o if you enter into a lease and the market favors you—rents go higher—you can’t reap the benefits of that

o but some leases are VERY pro tenant because they involve anchor tenants in shopping centers who have significant bargaining power (Target, Kmart, Nordstrom’s, etc.) and they can sublease out

o Kmart’s stock has gone up even as its business has dwindled because it owns fixed rent leases on thousands of locations because when it signed the leases it was an anchor tenant—the leases did not have restrictions on alienation so Kmart can rent out to someone at a much higher market value thus valuable assets

b. Adverse Possession

Two parties making claims to lando Record owner—recording act requires person who acquires interest in real estate to

record that interest

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o Adverse possessor In minority of cases have whole hog adverse possession, but majority are boundary line disputes

with two adjoining parcels of real estate both of whom have true owners but one true owner has extended fence, structure, etc. a minor amount onto the other party’s land—boundary line disputes inevitably trigger adverse possession claims

Policy behind adverse possession—why do we have adverse possession?o People shouldn’t sleep on their rights—if didn’t think to recover property within statute

then didn’t value the property—plus there is chance of estoppel relianceo Estoppel reliance theory—adverse possessor may rely to their detriment on the fact that

no one lives there AP who is innocent might make improvements to land and invest money only

to find out that it belongs to someone else This doesn’t apply to knowing APs but only innocent APs

o Pro development concept the govt values real estate development thus allowed adverse possessors to

gain titles if they had made improvements to land, etc not as relevant today esp from environmental point of view

o efficiency if fence is on other’s property make assumption that it belongs to that person on other hand could just go back to record’s office instead of going through

entire AP trial AP statutes—exceptions and limitations

o Some allow recovery for AP in shorter time if AP has paid real estate taxes (CA)

Not applicable to boundary disputes generally though in foreclosures can be relevant—foreclosure sale may be defective and not give an actual title to the buyer but since buyer thinks he has title and pays real estate taxes, he can gain title by AP

Easement by prescription can be gained without paying taxes but not AP thus no title—can gain title by adverse possession if pay taxes

In CA no AP at all unless pay taxes though can have easement by prescription

AP has color of title Deed to land—AP thinks gives him title but doesn’t Some papers can’t even be color of title bc grantee knows it’s

fraudulent Color of title may help AP get title to whole land when only used part

o Monroe v. Rawlings—hunters bought land at tax sale and even though purchase invalid, gives them color of title which helps them gain AP to whole land even though had only used part of it

o Some land/people not subject to adverse possession Land owned by government

Can argue this is because we all own the government land But in contrast land owned by warehousers is subject to it even

though many shareholders would lose, unions, pensions, etc. so this isn’t that strong of an argument

To justify this doctrine must assume that government is incompetent because basically saying that no one is ensuring that the land is not being taken over whereas we do expect private citizens and corporations watch land

Basically the argument for not subjecting govt land to AP is at odds with efficiency standards

Future interests—piece of land owned by A for life and remainder to B in fee simple absolute. C takes over by AP but can only take title to life estate, not

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future interests. Future interest holder doesn’t have same level of responsibility to take over the land when the AP took over thus policy reason not to give AP future interest. Future interest can only be effected if it was created after AP went into possession (first started occupying).

Mortgages—if O gives mortgage after AP goes into possession then mortgage can be wiped out as well as title owner.

Disabilities—not subject to AP if under age of majority, insane, imprisoned for less than life in prison or execution (though life in prison does not limit AP)—statute of limitations doesn’t apply to these owners. But if disability occurs after AP goes into possession AP can still can title (take land as find it).

o Constructive adverse possession—not really adversely possessing but law treats them as if they were

If AP uses part of land but not rest then owns rest of it IF has color of title but if has no color of title then no AP for the rest of land

AP and litigationo Supposedly there is instant in time when title leaves true owner and flies to adverse

possessor but the only way we determine whether that transfer took place is litigationo If title did pass did then owner owes rent to adverse possessor if lived there past point

where AP took title To acquire title by adverse possession must satisfy two things:

o Statute of limitations must have expired so that record owner can no longer claim titleo For full period of statute adverse claimant must demonstrate five elements of adverse

possession Statutes can range from 5 (CA)-20 (MA) years though most are 10-15 In CA AP must also pay taxes to gain AP (though can gain easement of

prescription if meet statute and elements but no paid taxes) Though sometimes argue that if built property on disputed land and

assessor assumed part of APs land then essentially paid taxes on it bc assessor took value of that property into acct when calculating taxes

Five elements are:o Actual—must actually use land as typical landowner in that area would

Is AP doing what a reasonable possessor would do as per a reasonable person in that community (Monroe). Must consider

Weather Population Type of land (i.e. residential or not) Monroe v. Rawlings—hunters used seasonably which was normal for

rural land. o Open and notorious

Give notice to the true owner so has opportunity to repossess land Make possession known to the world Not same as actual notice—form of constructive notice—are actions designed

to put true owner on notice Manillo v. Gorski—encroachment of steps not enough to meet

notorious requirement—didn’t put other side on notice o Exclusive

Exclusive of the true owner. If AP and true owner are both using property in reasonable way then negate AP.

Courts more and more permitting some use by third party as well as use by AP—that does not necessarily destroy exclusivity

Porter v. Posey—third parties had used tract but true owners hadn’t so no exclusivity problem

o Hostile Without the owner’s permission—doesn’t mean must be angry, mad, etc.—not

hostility in that sense

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If get permission at any point the AP clock stops tickingo i.e. if one side grants other easement to use land that will

avoid AP, but if easement only 5 years then clock starts ticking at that point

Can’t be AP if by through or under the owner In sense treat the person who does the right thing—ask owner if can

use land—worse than one who does not ask permission State of mind? Different jurisdictions have four different tests

1. Claim of right “thought it was mine”—must have “claim of right” i.e. think he owns it—must be innocent in good faith and have made mistake

o Essentially must be mistake which is often the case esp in boundary line disputes

2. “knew it wasn’t mine”—must be an intentional wrongdoer/knowing thief—must know it is not one’s own land but still try to own

o Jurisdictions that like this theory say this is the way one shows adverseness—ME view

o Policy argument would be to restrict AP to real land grabbing and not include boundary line disputes

3. emerging view “intent to claim as one’s own”—must be an intent to claim as one’s own but assumes that doesn’t matter whether intentional or mistaken—from time went into possession claiming it as one’s own—more efficient than 1 but less than 4

o Manillo v. Gorski—encroaching steps are hostile bc intent to claim land as her own but AP case fails anyway bc not notorious—small encroachment can’t be notorious

4. hostility element of AP can only be destroyed by permission or license—doesn’t even consider state of mind but asks whether AP objectively uses land as reasonable person in that community would have. Most efficient means to establish AP

o Nome 2000 test—same as Monroe for actual requirement—AL natives use land and other party tries to argue can’t have had hostile possession bc their culture doesn’t believe in owning land, ct rejects, says used land as owner would have thus hostile

o Whitcomb—squatter case—once court labels someone a squatter can’t get title by AP bc at most view selves as expectant licensee—expecting to stay on land until owner tells them to go

o Continuous Be there for statute of limitations and must be continuous Permission will stop AP but AP can choose not to accept permission which

makes his AP more hostile Once find actual, usually also continuous bc if actual possession is seasonal

then seasonal interruptions don’t affect continuity. Tacking

Record owner 1 lives for 4 yrs transfers to RO2 3 yrs who transfers to RO3 3 yrs

AP 1 lives for 3yrs AP2 for 4 yrs AP3 for 3yrso Fact that record owner changes is of no significant to AP—

does not stop clock from tickingo BUT transfer from AP1 to AP2 to AP3 CAN make a

difference bc if the three are disconnected entities (no

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privity) then may not be able to tack on the different APs to make up the requisite time bc does not count as continuity

o How could the APs be continuous/privity? AP1 dies and leaves land in will to AP2 and AP1

believes land belongs to her AP1 may just say leave all assets to AP2 which is

good enough too (quitclaim or warrantee deed) If no will govt provides one and default will can

provide privity AP1 sells property to AP2 and disputed tract

described in deed AP1 sells property to AP2 and disputed tract NOT

described in deed—basically oral transfer as to that piece—courts find privity here bc piece in privity w/rest of land whereas if were whole land situation courts weary of oral transfers (below)

Written deed ties fact situation down Porter v. Posey situation—not privity of

people but privity of land o How could APs not be continuous?

True owner takes AP to court which stops clock Oral handoff between AP1 and AP2—no privity True owner goes in and tells AP that he has

permission to be there—then no longer AP But if AP says no, I don’t want permission, could

enhance AP AP goes to true owner and says please don’t sue—

does that indicate anything? No. AP rules for tenancy are different than normal ownership

o Presumption in tenancies is that there is NOT AP and this must be rebutted by Constructive ouster

Sells part of land which implies acting in disinterest of outtenants—but is this fair if outtenant doesn’t know about it?

Outtenant stops getting checkso Wright v. Wright—Aitchey sold land and purported to sell it

all even though really only sold his part of it, also outtenants didn’t receive check from Aitchey for a long time which should have put them on notice, plus Aitchey openly hostile

Thus court finds there was constructive ouster thus AP from tenancy in common

Irony is if he were nicer person his heirs may have lost the case

Actual ouster Person physically kicks others off land or keeps them from coming on Actual ouster—kicking others off land

AP applies when true owner has fee simple defeasible as wello Easier to prove if determinable, harder to prove if SCS

In re. 88 acres

2. Transferring Propertya. Intervivos

Voluntary transfers—two types of deedso Warrantee deed not worth anything unless title is good so sellers pay for buyer’s title

insurance that way if title turns out to be bad have reserves to go after

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o Quitclaim deed passes everything seller has to buyer but still if title turns out to be bad no cause of action against seller bc quitclaim deed—generally gov’ts won’t give warrantee deeds so more important to get title insurance and make sure title policy doesn’t have certain exceptions

Involuntary transferso Seller doesn’t want to sell the property at the last minute is forced to due to contracto Gov’t wants to buy land and seller doesn’t want to but have to so long as gov’t pays fair

market valueo Mortgage or tax foreclosure o Adverse possession

b. Intestate

Definitionso Heirs—someone who takes your property if you die without a will

By and large people who take under intestate succession get percentage of every asset in the estate

Can still have heir even if have a will because there are people who WOULD have taken your property if you didn’t have a will

o Consanguinity—related by bloodo Affinity—related other than blood i.e. in lawso Ancestor—people from whom one descend lineally—parents, grandparents, great

grandparents and on—also called ascendantso Descendants—people who descend from one lineally—children, grandchildren, etc.—

also called issue—this includes adopteeso Lineally consanguinity—ancestors and descendantso Collateral consanguinity—related by blood but not lineally consanguineous—brothers

and sisters, aunts and uncles, etc. related by blood and share common ancestoro Default will—each state has a default will statute when there is no willo Per stirpes—each person takes by representation—if heir dies then his descendants take

by representation if three children then all three take equally but if two children alive and third dead but leaves two children, then two

original children take one third and grandchildren each take one sixth—even if just said “to my children” and one dead, would probably go to his or her heirs

o Per capita—each person takes an equal amount even if heir dies Thus in above example the children and grandchildren would share equally

o First cousins—share same grandparents, first cousin once removed—first cousin’s child, second cousin—share same greatgrandparents, second cousin one removed—their child

o If die without any heirs at all property escheats to the state Some states go to a certain degree of consanguinity before property escheating

to state whereas others go to the nth degree before it goes to state Some say only after no heirs go to stepchildren

Intestate succession statutes—same as default will statute—what policy concerns should legislature keep in mind

o Favor spouse over children? In hypothetical will state wants to favor minor children bc otherwise state pays

for themo Do we count how long marriage has lasted?

Generally we don’t—80 yo who gets married and dies walking down the aisle treated the same as 40 year old marriage—but should we?

o Domestic partnerships Some states provide for them and some do not

o Ask what normal decedent want if die without a will

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o Try to minimize costs of probate by cutting off at certain degree of consanguinityo When does state get their money

Practice problems—who gets the money when woman died with 150k?o survived by husband and two sons

assuming husband is father of sons, all to husband (A) assuming husband if father of only one son, first 60k to husband and then spouse

gets one half and remainder among two sons equally (thus husband 45+60=105, each son 22.5) (C)

assuming husband if father of none of them, first 20k to husband and then spouse gets one third and remainder among two sons equally (D)

o survived by husband, daughter, three grandkids (children of deceased daughter) assuming husband is father to both daughters, all to husband (A) assuming husband is father to one daughter, first 60k to husband then husband

gets one half and daughter gets one quarter and three grandkids split last quarter (C)

assuming husband is father to no daughters, first 60k to husband then husband gets one third and daughter gets one third and three grandkids split last third (D)

o survived by son, daughter, grandchild (child of deceased daughter), and two grandchildren (children of son)

third to son, third to daughter, and third to child of deceased daughter. None to children of living son (A)

o survived by husband only all to husband (E) and 13

o survived by husband and mother all to husband (E) and 13

o survived by two nieces (children of deceased brother) and two first cousins to the nieces bc if no spouse and no children and no parent, to brothers sisters or

their kids (G) plus they are level 3 and cousins are level 4

o survived by third cousin and stepson to cousins as there are no surviving descendants of grandparents and the cousins

are next of kin and only to stepkids if no other next of kin (I,J)o grandmother, niece (daughter of deceased brother) and aunt

to niece because if no spouse or children to brothers and sisters and their lineal descendants (G)—not to grandmother or aunt

c. Testamentary

Probate transfers—within jurisdiction of probate courto By willo Or intestate succession

Non probate transfers—less court fees than probate but still pay taxeso Joint tenancyo Tenancy by entiretyo Payable on death bank accountso Trusts

Beneficiaries of trust have equitable title and trustee has mere legal title—could be to settlor for life then remainder to my children because when settlor dies trustee transfers

o Life insurance Wills

o Sometimes need witness, sometimes don’t o Normally in executing a will use the requirements of the most rigorous state in the union

because person might have will in one state and have property in another state, etc., or might move

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o Provisions in will regarding real estate are governed by the law of the state where the real estate is located

Revocation of willo Most common way is to write a new one because later of two wills will govern

Always have revocation clause in later willo Also can just physically destroy the will

Problem with that is there are usually other wills floating around which is why don’t want many copies of same will

o Divorce sometimes revokes willso In some states marriage revokes a pre-existing willso In all states except LA can cut out children from will entirely but not in LA

Sometimes when parent cuts out child will leave nominal amount to make clear not an oversight

In most cases if leave children out can get away with it though children will try to contest and if will is revoked then default will goes into place

o Surviving spouse harder to cut out than children Usually get forced share which is same amount would have gotten if there had

been no will (default state will) Example: husband and wife have three adult children and five years ago wife

inherits 1mil from her father. Wife dies and her will leaves everything to the spouse. Husband then remarries. Husband then makes out will and leaves everything to kids. Year later, he dies. New wife now entitled to one third of his estate because can’t cut spouse out and must use default will which gives her about one third or a half depending on the statute

Also if spouse left less than the forced share can ask to revoke will and get entire forced share—will look and see how fare if elect against the will

Could also have prenuptial agreement Intentional killings

o Killer cut out of will under UPC and act as if he disclaimed intestate share

3. Present and Future Estates in Land

Estateso Freehold

Fee—potentially infinite duration OR of uncertain duration Simple—not much meaning anymore except to distinguish from tail

o Absolute—largest bundle of rights no restraints on alienation (ability to transfer) will be transferred by will or intestate succession

upon death cannot contain words of defeasance i.e. be subject to

any conditiono Defeasible—express words of defeasance and if condition

occurs reverts or may revert back Determinable—automatically reverts Subject to condition subsequent—right to revert Subject to executory interest—future interest in third

party subject to condition Tail

Life o Nonfreehold

Tenancies Fixed, periodic, at will, sufferance

a. Fee Simple Absolute

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Fee simple absoluteo Examples: From O:

“to A” “to A and her heirs” “to UCLA for law school” “to A and her heirs for religious purposes”

could be interpreted as a condition or could just be viewed as fee simple absolute because just wish of owner

o History Used to be “to A and his heirs” because “to A” conveyed life estate but now “to

A” is sufficient Had “heirs” in it so as to ensure that land would remain in the family—in a

sense series of life estate in surviving sons—but don’t know who eldest son would be until A died—makes it impossible to transfer a fee simple absolute bc no one really owns one thus not good for public policy

Courts thus said that Words of purchase=to A Words of limitation=and his heirs

Thus “heirs” describe only the quality of A’s estate to be infinite and A has a fee simple absolute and has complete freedom alienation immediately

b. Fee Simple Defeasible

Fee simple defeasable—courts do NOT favor these and will construe ambiguity with presumption against restriction—must have magic language so long as or until to be unambiguous

o Determinable—O immediately reenters when condition occurs Examples: From O:

“to A and her heirs so long as land is used for X religion then back to grantor”

“to A and her heirs until liquor is sold on premises” “to A and her heirs so long as don’t marry outside of X religion” “to A so long as land used for church purposes”

o Even if don’t say “back to grantor” probably good enough key words: until, so long as, but

O has future interest called possibility of reverter which is contingent upon event happening

Wood v. Board of County Commissioners of Fremont County—deed to land to Fremont County “to Fremont County for purpose of constructing and maintaining a hospital as a memorial to WWII veterans”—City sold land and no longer used as hospital

o Court says this deed is NOT a fee simple determinable because the language isn’t in there—no “so long as” or “until”—not even any condition subsequent language like “on condition that”—no defeasible fee at all

Fee simple defeasible can also be in life estates Example: From O

o “to A for life so long/unless as liquor not sold on premises” O has both

o Possibility of reverter that cuts of A’s life estateo Reversion—gets land after A dies

CA has no determinable, only subject to condition subsequent because wants to increase alienability

Says can have fee simple on condition subsequent every thirty years but if don’t record notice every thirty years then it dies.

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o In one case ct gives family 5 years to file intent to have right of entry and the five years expire and they are late in filing

o Ct says that since other atty never mentioned that family was four months late thus assume that they had done it in time and that they have a right of entry. They get the building back even though not fee simple determinable.

o Subject to condition subsequent—O has right to reenter property when condition occurs but must actually make action to reclaim title otherwise doesn’t revert—has choice of whether to reclaim or not

Examples: From O: “to A and her heirs but if liquor is sold on premises O has right to

reenter and take back the property” “to A and her heirs on condition that liquor is not sold on premises”

o could be read as condition subsequent but could also be read as restrictive covenant

o subject to executory limitation—O gives third party right to re-enter or automatic reversion

examples: From O “to A until liquor sold then to B” “to A until liquor sold then right of entry to B”

o Restrictive covenants—NOT officially a fee simple defeasible but way to restrict certain activities on land but if condition broken no reverter or right of entry—instead original owner only has right to enforce the covenant and will probably get an injunction

Court will often find restrictive covenant where there is ambiguity thus not enough to find either determinable or subject to condition subsequent

But usually only has precatory language—wishing and doesn’t express a particular right to re-enter or explicit language about what would happen once triggering condition occurred

Example: From O: “to A and heirs but A promises not to sell liquor on the premises” “to A and her heirs for religious purposes”

o could be interpreted as a condition or could just be viewed as fee simple absolute because just wish of owner

“to A and her heirs on condition that liquor is not sold on premises” o could be read as condition subsequent but could also be read

as restrictive covenant Woods v. County—could have argued that it was a fee simple absolute

subject to restrictive covenant (conceding not defeasible) and it is being violated thus there should be an injunction against whoever took over the land to operate it like a hospital

Courts don’t like fee simple defeasible bc limits alienationo The only way a fee simple absolute can be conveyed in fee simple defeasibles is if both A

and O agree to convey the fee simple absolute If convey a fee simple defeasible the new owner of it can only convey the same,

so if says “to A until liquor sold on premises” and then A conveys to B who leases to C and sells liquor, title immediately reverts to A

o Government may condemn the land if doesn’t like the will, give notice, pay for fee simple absolute title and wait for the parties to fight over the title

Why do we care whether fee simple determinable or fee simple subject to condition subsequent?o AP different—easier to prove AP in reverter than right of entry

Easier to get AP in determinable bc immediately trespasser while with condition not AP until right of entry asserts ownership

In re .88 Acres—Harrington conveyed land to town of Shelbourne so long as the town builds a town meeting hall. Years later town meeting hall then burns down and town authorizes and creates on the property a

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school. Now town wants to sell but wants to sell fee simple determinable, not defeasable

o City argues that has fee simple absolute based on AP because title flew back to Harrington once began using it against purposes set out in deed.

o Harrington said can’t have AP against public land. But court says statute was intended to keep private owners from gaining title to public land by AP and not intended to keep a city from gaining title by AP.

This seems kind of unfair because if public can’t lose land by AP why can it steal land by AP.

o Good example of how easy to get AP by possibility of reverter In subject to condition subsequent, can only gain AP if the holder of right of

entry asserts that right. If holder does NOT assert the right then no there is no AP. Thus AP clock would only start ticking if holder of right of entry

asserts the right and current owner remained in possessiono but would a holder of right of entry allow that to happen?

Some states create reasonable time limitation for person with right of entry to assert that right and if that time passes then current owner owns fee simple absolute

Reasonable time might be equal to statute of limitationso Rents and profits

If fee simple determinable and condition is violated and title flies back to owner of possibility of reverter, from that very minute current owner is trespasser and holder of possibility of reverter owns it. They have right to get rents from that trespasser

If instead right of entry, until holder of right of entry tries to enforce it no right to rents and profits.

o Waiver and Estoppel—weighs in favor of current holder w/right of entry bc if he doesn’t enter may waive his right even if the current holder can’t get AP

Conceptually more difficult to waive possibility of reverter bc it occurs automatically then to waive right to assert right of entry

For right of entry in some states if wait too long waive right of entry Also certain conversations may waive right of entry bc may basically

be saying waive right of entry in future but not determinableo Ex: from O to A so long as no liquor on premises and A then

serves liquor and O tells A thinks is good idea. If right of entry then conversation alone may be enough to waive right of entry, but if fee simple determinable still problem bc of automatic nature

o O can waive title on determinable by giving deed to A but just saying that thinks breach of condition is good idea probably not enough

c. Fee Tail

Fee tailo Examples

From O: “to A and heirs of his body” “to A and heirs of his body, then to B and his heirs”

o History

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In England when said “to A and his heirs” could have meant life estate to A and each of heirs and go down the line and if no more descendants back to O

Court didn’t read it that way and instead said “to heirs” were just words of limitation and thus “to A and his heirs” meant fee simple absolute

Court wanted to create something to convey land to A and his children but if he had no lineage then to B

First called it fee simple conditional—conditional upon him having a child and once has child can convey in fee simple absolute

Establishment didn’t like this system because wanted land to descend to lineage and if no lineage back to original owner—with conditional so long as had child could do whatever wanted which wasn’t objective

What really wanted was series of life estates in the surviving eldest male issue and when the line runs out reversion to O

Created fee tail to convey this objective: to A and his direct heirs and if they died out then to B

Who could make this a fee simple absolute? O could because they have reversion—could convey the reversion to A otherwise would need all of A’s issue to agree to fee simple absolute

but some are obviously not born environmentalists would love the fee tail bc land used at most for crops, trees bc

can’t convey fee simple absolute fee tail worked for 200 years then court began to have problems with it again

and tried to disentail land using devices bc didn’t want it tied up had A execute deed conveying his interest to X and then X convey back

to A and then A would have fee simple absolute even though it doesn’t make any sense—violates notions of property law

hostility to the fee tail in the US bc represented everything English—aristocracy, land tied up, etc.

most states have leg to render fee tail obsoleteo some say remainder that follows executory interest so “to A

and heirs remainder B” means A has fee simple subject to executory interest and B has ex int cont upon A not having kid

o some don’t even have remainder so A would get fee simple, B nothing

next largest group leg changes what would be fee tail into life estate w/remainder in fee simple absolute to heirs but q of whether only A’s kids get it or can be A’s grandkids can get it if alive when A dies

third group of states say first taker gets fee tail and lineal descendants get fee simple so A can’t transfer any more than life estate

four states recognize fee tail as in England except tenant in tial has power to convey estate in fee simple absolute and all future interests limited to take effect upon termination of fee tail by failure of issue

four states also say estate in fee simple conditional would be created by language which would have created fee tail in England

Examples: o O conveys to A for life, then B for life, then C for life, then D and his heirs….o compared to O conveys to A and the heirs of his body (meaning life estate in A and

remainder in fee simple absolute to A’s surviving issue per stirpes): assume A is 21 years old at conveyance

In first instance land is tied up but in way that law would not view as violating public policy bc if can get B, C and D to agree to it A can convey fee simple absolute—even though says to D and heirs that means fee simple absolute so no problem in that area—also if D died money would go through his will or intestate succession or to whoever he sold it to—NOT to C

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In second instance (fee tail) land is tied up in way that does violate PP—until A dies and she has no issue at that time bc can’t get future heirs to agree to convey fee simple absolute bc they do not have rights to it until A dies and all of A’s issue are present to make the decision

If A were 90 instead still couldn’t convey fee simple absolute but if he still didn’t have any kids might take chances that wouldn’t have any kids and thus own fee simple absolute

d. Life Estate

Examples: O conveys land to A for life, until death, etc. Transferability

o A can sell life estate but buyer will probably demand physical exam of o Life estates can get invol transferred when there is a judgment against Ao Mortgages—Difficult to get a mortgage on a life estate because if A dies then mortgage

company has nothing—usually gets holder of remainder to sign mortgage tooo Can only grant easements for A’s life as well

Meaning—A has present interest and has right to possess and rights to rent and profits but not right to exercise dominion and control the way an owner would—must take into acct holders of future interest

e. Future Interests

Future interests in grantoro Possibility of reverter—only exists following present fee simple determinable estateo Right of entry—power of termination—only exists following present fee simple estate on

condition subsequent o Reversion—future interest in grantor that is not either of the above—comes after life

estate Interests in someone other than grantor (can usually be called third party but technically shouldn’t

say third party because sometimes the future interest can be neither grantor nor third party)o Remainder—four conditions must be met in order for remainder to be met—must satisfy

ALL four rules and if any of those are violated it is an executory interest 1) remainder must be created at same time and by same document that creates

prior estate 2) remainder must follow freehold estate that is not defeasible, thus must follow

life estate or fee tail (but very very rare)—can’t follow fee simple absolute bc then would violate rule 3

3) remainder must not have capacity to cut short prior estate but only upon natural termination

Kind of only applies to life estates bc if fee simple then automatically fee simple defeasible and violates rule 2 already

4) no built in time gap btwn termination of prior estate and remainder taking possession

o Executory interest or limitation—any future interest in other than grantor that is not a remainder—so if one of four remainder rules violated then executory interest

Destruction of contingent remainders v. failed contingent remainderso Example: O to A for life then to B if B graduates from law school. B has contingent

remainder in both of these (meets rules) but it is unvested bc contingent upon graduating law school. Will revert to O if B doesn’t graduate from law school. Plus there could also be reversion in O if A dies before B graduates from law school. Then O has it until and if B graduates law school. Law didn’t like the way this worked bc unclear whether O or B gets it if B graduates.

Under CL destroyed contingent remainders if not vested by time prior life estate ended

Now still law in some states and in others turns into executory interest

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o In contrast, if said O to A for life then to B if B graduates from law school by A’s death then still contingent remainder but it immediately fails if not graduated by A’s death so no issue of whether or not it still exists and does not have to be destroyed

Even in states that destroy contingent remainders can still fail Examples:

o O to A for life. 3 days later all interest in property to N. N does NOT have remainder because violates rule 1) not created at the same

time and by the same document as the prior estate—instead has identical ownership interest but is called executory instead of remainder bc O conveyed reversion to N

o O to A so long as land not divided and if it is divided then to B. B does not have remainder because violates rule 2) remainder can only follow

either a life estate (99.9% of time) or a fee tail but NOT a fee simple of any kind (defeasible i.e. determinable or condition)

o O to A for life but if A gets a divorce then to B B does not have remainder bc violates rule 3) remainder cannot have capacity to

cut short prior estate and here cuts short A’s life estate by saying B gets upon A’s divorce thus B has executory interest even though follows life estate

o O to A for life then if B turns 21 to B B does have remainder but it is contingent—like law school interest

o O to A for life then one month after A’s death, to B and her heirs B does not have remainder because violates rule 4) remainder cannot have time

gap built in between termination of prior estate and remainder taking possession—one month kills B having remainder thus must be executory interest—during that one month reversion in O then executory interest in B

o O to B to take possession when B reaches 21 B does not have remainder bc violates rules 1), 2) and 3) because

1) not created at same time and in same document that creates prior estate. O still has fee simple determinable and this was not created at same time B’s interest was (prob long time ago).

2) remainder not following life estate or fee tail—following a fee simple defeasible instead thus not allowed

3) B’s interest cuts shorts O’s interest because if B never reached 21 O would have fee simple absolute thus if he does turn 21 then he cuts short O’s estate

thus executory interesto O to A for life then B for life then C and her heirs

A has present interest B has remainder because doesn’t violate any of the rules

1) created same time 2) follows life estate 3) doesn’t cut A’s short 4) no time gap in sense this is contingent upon B outliving A but doesn’t specify this

so not considered contingent remainder even though implicit in the deed—instead call it vested remainder just bc has no express condition precedent

C has remainder bc doesn’t violate any of the rules (has fee simple absolute in the future)

1) created same time 2) follows life estate 3) doesn’t cut B’s short 4) no time gap

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C’s interest is NOT contingent at all—need not outlive A or B because it is a vested remainder in fee simple absolute and if C dies it will go to whoever gets C’s property in his will

o To Boone county school board for school purposes Fee simple absolute OR at most restrictive covenants

o To Boone County school board on express condition that land be used for school purposes

Either fee simple condition subsequent OR just restrictive covenant Assume land used for 30 yrs then stands vacant

if fee simple subject to condition subsequent then condition violates and O has right to take title back

if restrictive covenant also violated O just has right to damages, relief, maybe injunction (equitable relief

Assume land used as school for 30 yrs then building used by school board for storing then question is whether condition really violated and if so same analysis as above

o To first Methodist church on condition that land be used for Methodist uses and if ceases to be so used then land reverts to O

Fee simple determinableo To first Methodist church on condition that land be used for Methodist uses and if ceases

to be so used then O has right to reenter Fee simple subject to condition subsequent Assume that by later deed O transfers all right, title and interest in same land to

first Methodist church Now fee simple absolute because one party owns the fee simple subject

to condition subsequent plus the right to re enter Assume that by later deed O transfers right title and interest in property to Mary

then Mary purchases Methodist church’s interest in land Now fee simple absolute bc Mary had the right to re enter (executory

interest, not remainder bc not same time) and the fee simple subject to condition subsequent

o To John provided he never uses alcoholic beverages and if he ever shall do so land passes to daughter Mary

Fee simple subject to executory interest—title flies if he uses alcohol What happens to land if John dies without having a drink though? Does the

restriction apply to John’s successor or not—in all probability ct would grant fee simple absolute to John’s successor bc condition satisfied during his life

f. Restrictions on Alienation

The following discourage alienation but do not place unlawful restrictions on ito O leaves land to A, B, C as tenants in common

Could only sell through action in partitiono O leaves land to A for life, then B for life then C for life then to D and her heirs

Could only sell if all parties agreed and this is more difficult than above bc difficult to partition land including future interest thus hard to get fee simple absolute sold

o O leaves land to A so long as property used for church purposes Ironically A is completely free to alienate but short of O joining deed will be

difficult bc fee simple determinable—not many people want to buy land for church purposes—pool of prospective buyers reduced significantly—NOT restriction on alienation, use restriction instead

o Due on sale clause—indirectly restricts alienation bc can’t transfer mortgage

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enforceable bc congress made statute after cts said unreasonable restraint on alienation (unless turning transfer down for security reasons i.e. new owner not reliable)

Lenders now have control over who possesses the land and can take advantage of changing interest rates

o Consent requirements for assignment/sublease Now enforceable in majority of jurisdictions whether or not reasonable

At some point restrictions on alienation can become unlawful and are void such as:o Disabling restraints—makes transfer literally impossible

Almost always unenforceable in fee simples, life estates, and leaseholds O leaves to A and her heirs but A has no power to transfer and any

attempted transfer will be void o Unreasonable/disabling restraint on alienation

O leaves to A for life or in lease but A has no power to transfer and any attempted transfer without O’s consent will be void

o Similarly void—even if only have life estate or leasehold it is still unreasonable restraint on alienation

o Forfeiture restraints—grantor seeks to create estate which automatically terminates upon attempt to alienate or which is subject to power of termination held by grantor in such an event—basically present estate subject to future interest (reverter or right of entry)

Unenforceable in fee simple estates unless limited in time and scope O leaves to A and her heirs but if A attempts to transfer without O’s

consent then reverts back to O—fee simple determinableo A can transfer but will lose the land and title will flyo Unreasonable restraint

O leaves to A and her heirs but if A attempts to transfer without O’s consent then O has right of entry—fee simple subject to condition subsequent

o Similar except subject to condition subsequent and still unreasonable

Sometimes enforceable in life estates O leaves to A for life and if attempts to transfer without O’s consent

then O has right to entryo Court more willing to uphold forfeiture restraint on life estates

bc don’t last long anywayo Beach v. Beach—court won’t partition life estate of mother in

daughter’s house which is restraint on alienation bc she can’t sell her part

if viewed as disabling restraint void if viewed as forfeiture might be upheld bc is only life

estate where ff allowed (esp considering mother’s age—not tying up land for that long)

if viewed as promissory probably allowed Almost always enforceable in leaseholds

O leases to A for ten years and if tenant attempts to transfer without consent of O he has right to reenter

o This type of forfeiture restraint IS enforceable 90% of time and deemed reasonable restraint on alienation

o BUT if A transfers without O’s consent and O never says anything about it then the lease is valid or if there is no termination clause in the lease then it is valid

If O does find out then he can choose to terminate lease if such a provision is in k

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o Promissory Restraints—grantor seeks to create contractual promise by grantee not to convey an interest in land—but not an automatic reversion or right to reentry like in forfeiture restraints

not viewed as suspiciously as disabling or forfeiture restraints bc nothing happens to the interest in property—at most triggers in future interest holder a right to damages or injunctive relief—kind of like restrictive covenants

Unenforceable in fee simple estates unless limited in time and scope but once limited chances for being upheld increase

Almost always enforceable in leaseholds O grants lease A so long as A promises not to transfer land without O’s

consent—promise but no automatic reversion or right to reenter

4. Protection of Future Interests

What default rules does the law use to protect future interest holders when present and future interest holders are at odds

o Present interest holder has right to possess and use but not right to exercise dominion over owner and is not allowed to create waste

o In general holder of present interest may not unreasonable impair value of future interest o Though right to possess includes right to exclude future owner can get ct order to go on

property to see if waste is being created but NOT allowed to bring potential purchasers on property thus right to possess somewhat limited

a. Law of Waste Law of waste—applies to life estates and leaseholds

o For life estates law of waste governed by default rules i.e. case law defining reasonable Sometimes life estate will be written “to A for life without impeachment for

waste” which is attempt to exculpate life owner from being liable for waste o For leaseholds law of waste governed by contract and landlord tenant law, not case law—

whole set of different rules than other sets of present and futures interests—we will consider later

o Harder to sue for waste if only have contingent interest But Brokaw allows it

Types of wasteo Voluntary waste

Affirmative waste—tearing down buildings, stripping forests etc. generally this is considered waste

i.e. A tears down 6 mil viable building to make park—might even be punitive damages since intentional

testator’s intent is a consideration for whether the actions are considered affirmative or ameliorative waste

Brokaw v. Fairchild—P has life estate of NYC house. If he has children who survive P, they inherit, but if that doesn’t happen, then goes to his siblings. Pretty unlikely that siblings will ever inherit bc P has 4 yo child who will probably survive him yet ct still takes their interest into acct. P says can’t get adequate return unless makes it apt.

o P says best interests of everyone to change into apt. bc more revenue, won’t continue to lose money on its upkeep as now

o Court says P can’t tear it down. Why? Testator’s intent—in Brokaw’s will he conveyed “his

home” to P and court thinks this means that tearing it down would be waste bc would change the inheritance based on the testator’s intent (even though no financial injury)

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Distinguishes from Pabst, saying that Pabst was accidental and also was business owner

Even if court said it wasn’t waste P would still have difficulty building this? Still needs a mortgage and if can’t get consent of future owners then bank might not lend him the money w/o consent of future owners—need consent of siblings AND child bc they still have future interest in property

Legislature changed this rule (see below) Ameliorative waste—sometimes tearing building that owned life estate in was

not considered waste because improved value of property for future owner Pabst—Pabst had life estate in house and tore the house down but after

did that realized only had life estate and owner of remainder sued Pabst for waste. Pabst said increased value of property by tearing it down so remainder owner should not be upset. Court said no waste bc future harm benefited if anything

After Brokaw leg said if person had life estate for >5 yrs and demolition would increase value and his actions were reasonable, then not waste—instead ameliorative waste

o Permissive waste—failure to act when law imposes duty to act—have duty to turn over principle of property, reasonable wear and tear excepted

Default rules: A life estate holder, B future interest holder Cap on A’s liability is greater than rent being paid OR fair rental value

thus A doesn’t have to make repairs that exceed fair rental value A takes property as he finds it thus if property dilapidated when finds it

can turn it over in same condition At minimum A must keep property wind and water tight—entitled to

reasonable wear and tear but must have roof, windows and paint bc otherwise may lead to destruction of principle

A should pay taxes but B might get a tax bill every year to be sure that holder is paying the taxes bc future interest void if state forecloses

A has no obligation to insure even though if he doesn’t can harm future holder just as much as not paying taxes

o If natural disaster occurs and A not neg, has no obligation to rebuild which makes us think B should insure in order to protect his interest

If A and future holder have mortgage on property has to pay the interest on the mortgage to protect future holder

o but this is not as relevant today bc we have a 30 year evenly amortized mortgage where pay same payment but more int in beginning than end

o pre-1935 most mortg were balloons where paid interest only and principal was due in full at end of period so made sense to have pay only interest bc then passed on principal debt

o but now would have to split up monthly payments otherwise life tenant would be improving property by paying principal so not fair to life tenant

o Still many areas that law has carved out that are NOT considered waste can cut down reasonable amount of trees for income open mine doctrine—if mine already open when get life estate can continue to

take out reasonable amount but if mine NOT already open can’t open without future owner’s consent even if very valuable

law of emblements—owner of life estate dies but there are still crops on land—life estate owner’s children reap benefits of crops, not future owner

Damages

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o Assume B had fee simple absolute and A did tears property down. Measure damages by diminution in value of whole property. i.e. before tort property worth 500k, after tort property worth 300k. Now A liable for 200k

o Assume A for life, B future interest and the same thing happens. Now B not entitled to 200k bc doesn’t get the property for n years until A dies.

Measure A’s life expectancy and if 20 yrs then B has right to receive 200k in 20 yrs which is worth less than 200k—don’t speculate as to what land will be worth in 20 yrs so value it today then NPV amt

Use interest rate that includes both rate of return on safe investment and inflation added together like 10 yr US Treasury bond

Give B NPV of 200k such that if she invested it in compound interest rate fund it would end to be exactly 200k—life estate owner would get rest of it

Question is what interest rate to use—future interest holder wants it lowo Assume A for life, B future interest IF graduates from law school. Same thing happens.

Some cts would not allow B to sue for damages bc her interest is so speculative BUT look at Pabst—very little chance siblings would inherit but court

took them into consideration Many cts require future interest holder must be nearly certain to take land Contingent future interests holders can seek injunctive relief unless highly likely

will never take but standard is higher for damages—presumption goes the other way for injunctive relief than for damages—presumption that can get injunction

o Assume O to A so long as liquor not sold on premises Unlike the example above where A only had life estate and B has vested

remainder here A has fee simple and O only has contingent remainder A can exercise dominion in 1st ex but not second bc life tenant only has

possession and ownership, not dominion Therefore can make argument that O has no right to sue for waste bc

whatever A does to property has nothing to do with O Only time O may have cause of action against A for waste is if A does

something to diminish value and then A sells liquor and title reverts to O bc until then A exercises dominion not mere possession, ownership

o Assume A for life, remainder to B vs. to A and B as tenants in common

b. Unproductive Property Partitioning—default rule is that it is only allowed in concurrent interests, not future ones

o Concurrent interests both have possession at same time thus law must deal with it and partition so long as one party wants it

o Future interests don’t have possession at same time so more difficult Which party should have more compelling argument for partition? What if future interests not born yet? Life tenant because has current possessory interest and future interest holder has

no right to possession now In essence partition accelerates future interest to the present

When can future and concurrent interests be partitioned? o In some states the following factors are considered and court of equity determines

whether the partition/sale should occur Waste Unproductive land Necessity of life tenant

Land not producing enough income to pay taxes (or support life tenant?) –Deterioration

Interests of the remaindermen Baker v. Weedon-- Weedon married had two daughters. Then married Anna but

had no kids. Left life estate to wife and if she dies to her issue if any then to grandchildren sharing equally. Anna goes to court and says wants property sold

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so she can get her share and get income from invested share. Grandkids want to wait a few years bc land value appreciating quickly (normally would be opposite).

Appellate court says given property values about to increase shouldn’t sell now bc not in best interests of all parties but should sell part of land to provide Anna with income

o Strange that ct assumes land will increase in value bc never know future value

If this happened today and Anna unable to live on the income she had and court denied partition Anna would have gone on welfare and government will get paid back bc get lien on her life interest—problem is when she dies life estate gone so lien worthless—in all likelihood social welfare office would come in as party and ask for partition so taxpayers don’t have to pay for her when she has an asset

o In others (CA) only allow partition if in best interests of all parties But if going to court clearly all parties don’t think sale in best interest Basically telling parties what best interests are—nonsensical standard

o Some states don’t allow at all (CO) unless statutorily specified Beach v. Beach—19 acres of land in rural CO. Daughter owns log home and

allows parents to build addition on it and live there for life and she will inherit when they die. Father dies and mother and daughter no longer good relationship. Mother wants to partition land so she can sell and move away.

Ct says state statute does not overturn common law which disallows partitioning of nonconcurrent interests

o Statute does not specifically say deals only with concurrent interests bc common law only allows partitioning of conconcurrent interests thus if legislature is going to change a common law rule they must be explicit—not enough to be silent on the matter

Also says partition makes no sense because essentially destroys daughter’s remainder interest (kind of like CA rule—looking at interests of all parties) because

o If partition land then daughter either forced to live with whoever buys the addition on foreclosure or bid higher than all of the others and buy out interest

o Court could have forced daughter to buy out life estate but didn’t forced daughter to mortgage mother’s life estate

c. Time Value of Money

Right to receive stream of payments in future isn’t worth number of payments times installmento Always less bc of time value of moneyo i.e. $1 mil for 20 years is really worth $11.7 mil today o the higher the inflation the less it’s worth in the future

Example: pension plano right to 60k year until die OR all of it nowo assume 20 yr life expectancyo based on table N=20, at 6% X=11.4699 times 60=688k; at 10% X=8.5136 times 60=510ko if take lump sum payout bet that inflation will go up and/or interest rates will go up

Example: L leases building to T for ten years with rent of 8k a year. After five years T abandons the building and refuses to pay any more rent. L relets to T2 who signs a lease for five years at rent of 6k a year. L sues T for damages. How much recover?

o Landlord entitled to recover difference between lease rental and fair market rental

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usually determined by what landlord obtained when rerented though landlord could purposely lease to friend for very low amt and then would have to figure out actual fair market rental

o 8k-6k=2k stream of money for N=5 years at 6% X=4.212 times 2k=8.4k; at 10% X=3.79 times 2k=7.6k

Example: O conveys farm to A for life, remainder to B. Fair market value of 50k. Highway dept wants land and pays FMV. How should be divided btwn A and B where A has life expectancy of 20 years so B has right to money 20 years from now

o N=20 at 6% X=.3118 times 50=15.6k so B gets 15.6k, A gets 34.4ko N=20 at 10% X=.1486 times 50=7.1k so B gets 7.1k, A gets 42.9o Thus future holder actually has minority of interest even though seems like true ownero Seems more fair to put it in bank acct and then divide because then at least takes into

account when A actually dies instead of speculating Example: Anna and three grandchildren case but say ct orders property sold in partition. Worth

350k and sells to third party in partition sale for that amt. She has life expectancy of 10 years.o N=5 at 6% X=.5584 times 350=195.4k so grandchildren split that and Anna gets 154.6ko N=5 at 10% X=.3855 times 350=135k so grandchildren split that and Anna gets 215ko So Anna wants higher interest rate and then invest proceedso Even with short life expectancy Anna owns close to or more than halfo Usually would not go to ct to split up small amt of money and just try to divide without

going to court because court fees not worth it

5. Marital Estates and Concurrent Interestsa. The Marital Estates

Rights of surviving spouses—if will didn’t account for spouse these rights took over Common law—right of curtesy and dower

o Only applied to lando Dower—given to surviving widow

Smaller than curtesy 1/3 of lands H owned at any time during marriage but only for life

o Curtesy—given to surviving husband All of lands W seized also only for life Curtesy initiate as soon as issue born

o People would only buy land if both spouses signed because otherwise when one died may elect dower rights and choose to take ownership of that particular piece of land

Modern law—right to elect against will but NOT in comm property states o Same for husband and wifeo Applies to personal property as well as lando Fee simpleo 1/2 or 1/3 of estateo applied to estate owned at death ORo conveyed by gift in fraud of marital rights

i.e. H leaves 500k in land and 500k in checking acct in H’s name H deeds land to mistress in gift before death—this is considered gift in fraud of

marital rights—then leaves rest of money to daughter W elects against will and argues that she gets 1/3 not just of 500k H gave to

daughter but also 500k value of land bc argues that gift is in fraud of marital rights

Can look bk on whole marriage and examine gifts—not transactions for fair market value—and include those in value of estate

Problem can be for buyer that surviving spouse might say that it was not a transaction for fair market value bc not fair cons.

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This is why buyers of land from married couples always try to get both spouses to sign bc then can’t argue gift in fraud

Entire value of land will still go to Paula so the 1/3 value of land will come out of daughter’s estate

If 1/3 of gift adds up to more of actual estate then court might have to sell the land to give W her fair share and daughter and Paula might have to split the remainders—depends on whether set gift aside completely or just enough to give W fair share

But would ONLY consider setting aside gift if had to sell it to give W fair share—otherwise W’s share must come out of actual estate

o Some states have augmentation instead of fraud on marital rights similar to fraud on marital rights but is double edged sword—can make pot

bigger OR smaller unlike gift in fraud which can only make it bigger i.e. H has bank acct 500k, 500k land and deeds land to wife while alive H leaves estate to daughter in will so she gets 500k W elects against will because thinks can get 1/3 of daughter’s 500k Augment estate to include land so entire estate is valued at 1mil So now W already has more than her 1/3 so she gets nothing from daughter’s

500k so has nothing to elect against but does not keep her from only getting 1/3—she gets the land she was deeded

but just can’t elect for more Example: H and B married and B inherits 1mil. B dies, H remarries S who has 5

kids and is a widow. H leaves his estate to his kids with B. H dies. S elects against the will (if in a non community property state) and can inherit 1/3 of the money and leave it to her kids.

Even if H had given gift of most of 1mil to his kids so his estate was much less S could STILL elect to have 1/3 of the augmented estate which includes the gift in fraud of marital rights

b. Concurrent Estates: Joint Tenancy, Cotenancy, Tenancy In Entiretyi. Joint Tenancy

Joint tenancy is an undivided interest in the whole and has rt of survivorshipo Used to be that “to A and B” created joint tenancy but now most states have statutes with

cotenancy as default and must be express language to create joint tenancy Conveyance “jointly” may not be enough—may need “as joint tenants”

o Undivided interest in whole o Requires four unities

Time—grantees must have acquired interest at the same time Title—by the same instrument or document Interest—must have equal interest Possession—same right to possess every grain of sand of Blackacre

o Formalistic approach which follows four unities strictly whereas modern approach which is more malleable

Used to be that grantor couldn’t convey joint tenancy to himself and another person because since person couldn’t convey to himself bc unity of time and title destroyed—other person gets interest at different time and by different instrument than grantor did—used to use straw party so grantor conveys entire interest to straw party then straw party convey joint tenancy

No longer have to engaged in straw party transaction bc can convey to self and other in joint tenancy

Modern approach not as concerned with four unities as with the intent of parties Basic joint tenancies are or may be severed by

o 1) conveyances

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o Voluntary inter vivos conveyance—becomes tenancy in common instead—but if there are two remaining joint tenants then their relationship remains as joint tenants

Example: Parent and child as joint tenants. During life parent conveys his half interest to third party with deed. The child has half interest but has no right of survivorship because the joint tenancy was severed when parent deeded to third party. Now child and third party share tenancy in common.

Example: A, B, C joint tenants. A deeds her third to R. B and C remain joint tenants so that if B dies then C takes over B’s interest and owns two thirds and owns tenancy in common with R.

Example: A, B, C joint tenants. A gives her third to B. B now owns 1/3 as tenant in common and that interest goes to his heirs. B and C own joint tenancy. If B dies then half to C, half to his heirs. If C dies all to B in fee simple absolute

Crowther v. Mowther—wife conveys to her son but lawyer tells him not to record deed unless wife dies first bc otherwise will sever joint tenancy and she won’t have right of survivorship. So he never records it. Court says doesn’t matter whether recorded or not, she severed and son gets her half instead of husband. Sort of having it both ways bc if husband died first she would still have had rt of survivorship bc would never have brought up the deed.

In CA require some written and recorded instrument to sever joint tenancy (before death) regardless of whether conveyance or not, just some written intention to sever—forces parties to decide whether want to sever or not—can’t have both ways

Though there is deathbed exception—if deed only signed three days before death than have certain time after death to record

Crowther would have come out other way—failure to record would have means joint tenancy not severed. Keeps parties from having it both ways like in that case.

Patience v. Snyder—Derrick, and Patience buy house as joint tenants but then Derrick moves out of the house and Diana continues living there—Derrick terminally ill and executes and delivers a deed to new girlfriend’s mother. She then goes to record it. Gives deed to county clerk at 11:15am and then at 12:54pm gets deed back and goes to pay the cashier and it gets stamped. Derrick died at 11:55am same day.

o Patience says she owns whole house bc third party didn’t effectively comply with statute to sever joint tenancy

Can’t use deathbed exception bc deed was delivered 8 days before he died

o Statute says not recorded until deposited in office with proper person of record

o Court holds not officially recorded so joint tenancy in effect DESPITE obvious intention of party to sever so clearly relying only on formalistic approach

o 2) voluntary transferso Voluntary inter vivos transfer by one joint tenant

even when deal is not completed when one party sells severs joint tenancy from both modern and formalistic view bc

modern—intent to sever and formalistic unity of interest is missing (seller has lesser title then

remaining joint tenant bc when make sale agmt lose equitable title and other joint tenant has complete title)

Doesn’t matter whether seller or other jt dies first—severed either way Thus if deal completed, then definitely intent to sever (modern) and

lack of unity of title (one jt has title, other doesn’t) and even if deal not closed same from modern POV and formalistic still break in unity of title bc lose equitable title at time when EMC signed but before closing

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o Voluntary intervivos transfer by both joint tenants (Earnest money contract) then Formalistic—does not sever bc both lose same amt of title thus still

have symmetry of interest Modern—trickier question—depends on intent and how the group

wanted money divided—if wanted division then probably severs but if want in joint bank acct then no sever

o Estate of Philips v. Nyus—P and N own jt. P and Ns convey part of the jt to other party. P died before the final closing of that transaction.

If there is severance of joint tenancy then P’s successors in interest get his portion of the price

If there is not severance of joint tenancy then N’s take entire property and get his portion of the property as well

Court takes formalistic approach—says unity of interest NOT destroyed because ALL joint tenants lose equitable title at the same time (after EMC signed) so no asymmetry in terms of interest

o 3) involuntary transfero Involuntary transfer can also sever joint tenancy i.e. foreclosure—but again if two

remaining joint tenants they remain as joint tenants Example: A, B joint tenants. A wants loan and asks for mortgage on land. A

signs promissory note plus mortgage to bank. A defaults and bank forecloses on land. Sells at auction to third party. Third party and B now tenants in common

Doesn’t even have to mortgage bc that was voluntary—could just be default on credit card and same results from execution sale

o 4) mortgageso Mortgage by one joint tenant

and are in title state (doesn’t matter which jt dies first) Formalistic approach—no longer unity of title—one only has equitable

title whereas other joint tenant has full title so mortgagee has rt to half property

Though intent approach more difficult bc prob intended to pay off mortgage and remain in house

And are in lien state (MAJORITY) non mortgagor dies

o no severance, mortgagee has rt to total property o Brant v. Hargrove—lender has rt to all property bc mortgage

did not sever joint tenancy mortgagor dies—two approaches

o Anti lender approach—mortgage worthless bc surviving joint tenant takes whole title

o Partial severance approach—mortgage valid but only on half of property and surviving joint tenant gets remainder

o mortgage by both tenants no severance in either title or lien state bc

Keep same title interest—both may lose legal title in title state but both have same

Intent is NOT to sever but stay together, just like in EMC but actually even stronger case

o 5) leaseso Lease by both tenants

Formalistic approach

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No change in ownership occurred because no longer fee simple absolute—landlord now owns reversion BUT the interests are still symmetrical—no upset of unity of interests

Intent approach No intent to change survivorship—only leasing land for certain amount

of time and continue to own it—not contemplating ending relationship bc leases have a clear end

Where if had chosen to sell land there is at least contemplation of end of relationship and STILL don’t presume severance so certainly not in this case

o Lease by one tenant If applied Nelson’s rule no severance bc lease is nullity until other party signs on CA says unilateral lease does NOT sever joint tenancy as do some other states Formalistic approach

Could argue unity of interest severed bc now one jt owns reversion and other owns fee simple absolute

Intent approach Lessor tenant probably didn’t intend to sever relationship so using this

approach might not find severance Middle ground

Could look at unity of interest at TIME of death so if lease ended before other party died then no severance but if was in place at time of death then severance

This is logical but makes no sense in terms of intent What if lease initially rejected by one party but later consented to?

Could argue mini severance o 6) criminal proceedings

Joint tenancy when one jt kills the other What behavior should we punish?

o Any intentional killing? But can’t include self defense which is intentional—

some killings are privileged o Some statute says must be willful or/and unlawful killing but

Nelson thinks it should be willful and unlawful bc otherwise excludes self defense

o Other statutes say must be felonious and intentional killing—some drunk drivers would be excluded then, but maybe we want that

What should burden of proof be?o If have criminal conviction then we know that is enough bc

heaviest burden of proof—beyond a reasonable doubto But if don’t have criminal prosecution or have not guilty

verdict then have separate civil proceeding dealing with estate with preponderance of the evidence standard

Majority of states follow UPC and say killing severs jt, parties become tenants in common

Some states say doesn’t sever, killer can inherit all Some states say kill has nothing except life interest in one half, no

survivorship Minority of states say constructive trust for those who would have

inherited estate without killing for either full half or half property o Killer has life estate but then it passes to victim’s heirs

Lakatos jurisdiction says treat killer as predeceasing victim so killer gets nothing, not even his half

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Lakatos v. Estate of Billoti—Frank Billotti and wife owned three parcels, two as joint tenants one tenancy by entirety. He murdered her and kids and convicted of second degree murder. Only heirs to her estate are her parents. Frank died but before his death conveyed two prop in joint tenancy to his mother. Dead wife’s parents filed complaint seeking partition of three parcels owned by her daughter and husband. Trial ct ordered wife’s mother to be sole owner of the cotenancy one but denied request for joint tenancy ones so Frank and Rose owned the two joint tenancy parcels.

o Trial judge interpreted statute to mean that killer husband still had right of survivorship

WV slayer statute listed several ways that the killer would be assumed to have predeceased the victim (thus no right of survivorship) but joint tenancy was excluded from the list

Judge just said if legislature had meant to include joint tenancy they would have included it—can’t assume forgot about joint tenancy bc big area of law

o Appellate court interprets statute to include joint tenancy Says word “otherwise” should be read to include

joint tenancy This isn’t great statutory interpretation

considering that joint tenancy is most common form of ownership in WV and legislature probably wouldn’t have just left it out

Could have just said that for public policy reasons joint tenancy should be included

o As a result now assume Frank died before his wife and her estate gets it all because in a jurisdiction that treats killer as dying before victim

1988 court of appeals in TN decision where H and W owned house as tenants by entirety and husband killed wife. Question is who owns house—kids or father?

o Court said husband owned house and was never appealedo 7) divorceo Divorce decrees sometimes sever joint tenancies and sometimes do not

In some states presumption that divorce decree severs joint tenancy and most divorced people would assume that the joint tenancy was severed

Judges may allow feelings to get involved in these cases when make statements about whether or not divorce severs

Mann v. Bradley—Married couple have joint tenancy in property and divorce decree says joint tenancy severed 1) upon mutual agmt 2) if Betty remarries or 3) youngest kid hits 21. But wife dies before the property sold. H says no severance, he takes all. Kids argue for severance because they would then inherit wife’s half

o Court says parties contemplated permanent dissolution thus the intent was the sever the joint tenancy bc they intended to sell the property within a relatively short time

o Suppose H had died first and he had new wife. Court would probably NOT have found severance even though similar situation bc parties had still contemplated dissolution, but then second wife would inherit it and court might not want that.

o This case may have more to do with the judge’s feeling about what was just then anything else—may have gone other way if

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question was whether new wife got half or kids got all instead of kids get half or husband gets all

Other states presumption that it is not terminated and there must be specific statement that it is terminated because joint tenancy is not tied to marriage like tenancy in entirety thus it is not affected by divorce

Clearly intent approach bc formalistically the jt has been severed bc after divorce only one person living there so unity of possession gone

Porter v. Porter—Mary Jane and Denis porter married in 48 and bought house in 63 under joint tenancy. Divorced in 70. Final judgment of divorce contained references that Mary Jane had exclusive occupancy of residence. After divorce, Denis married Martha and remained married to her till died in 83. No modification to divorce decree.

o Ct says granting of exclusive possession of house to appellant did not destroy joint tenancy because of the modification clause that allowed later change in divorce decree

Court takes modern approach—no real intent to sever joint tenancy bc would have specifically clarified intent—decree had modification clause allowing for modification later but specifically did not have intent to sever at that point

Viewed divorce decree as temporary division of property, not intent to actually destroy unity of property

Under formalistic approach would have severed bc no longer unity of possession

o 8) wills do NOT sever joint tenancy—must be a deed or written document like deed

Nonseverable joint tenancies are not severable like basic joint tenancies—only in MI and OR o starts to approach tenancy in entirety—same language that would otherwise create basic

joint tenancy creates this nonseverable type o purchaser of one half of nonseverable joint tenancy thus essentially has life interest with

contingent future interest (if person he bought from survives other one) If A conveys to N, then N has right to property during life (rents and profits) but

if A dies first then B takes over and N’s interest ends whereas if B dies first A has conveyed not only present life estate but also right of survivorship so N owns all of the property

Conveyance is just same as basic joint tenancy conveyance: To A and B for their joint lives then remainder to the survivorLiterally no way to sever this except death

o Albro v. Allen—Commercial proper deeded to Allen and Albro (as joint tenants with full rts of survivorship). Conveyance in most states would be normal severable joint tenancyAllen agrees to sell her share to Kinzer. Albro then sues for injunction to prohibit Albro from completing sale.

Ct overrules lower ct, says that life estates are alienable and that Allen can sell her life estate to Kinzer BUT it will not destroy right of survivorship thus Kinzer only buying a life estate with chance of survivorship if Albro dies before Allen

If this was regular joint tenancy Kinzer would own half interest in the land because the joint tenancy would be severed when Allen conveyed to him thus Albro would have no right of survivorship

Instead Kinzer basically only owns life estate because the joint tenancy is NOT severed by conveyance—he has contingent interest in future estate but not full interest

In both joint tenancy and tenancy in common each party has right to force partitiono Can partition in kind or partition by sale. o Courts used to prefer partition in kind when mostly rural land

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but when hard to divide land by value may have partition by saleo With much real estate today can’t have partition in kind so have partition by sale

Current joint tenants have advantage at sale bc they come to sale with money in their pocket bc they already own part of it and don’t have to pay for that part

o Example: A, B, C joint tenants. A wants to develop land for shopping center and B and C disagree. A can file partition action if they don’t agree with her or buy her out. Usually preference for partition in kind v. in sale bc arose when most land rural

Mortgage role in severing joint title in detail o Title theory—minority of states—as soon as mortgage is signed mortgagor retains

equitable title and mortgagee gets legal title Titles don’t come back together until mortgage paid off by debtor or third party

buys at foreclosure and mortgage is paid off Gives lender more power before foreclosure sale to get at rents—power usually

only used w/commercial real estate—usually don’t try to get into possession of residential home

If have joint tenancy in title theory state and both parties get mortgage title CLEARLY not severed bc

Formalistic approach—though there has been a change in the title they both lost legal title and still together have equitable title

o Like earnest money contract (when both parties agree to sell property) because parties act jointly

Modern approach—Even stronger case of maintaining joint tenancy then earnest money contract bc at least in EMC have intent to get rid of land and thus have to split up profits—here intend to KEEP the land and just get mortgage

If have joint tenancy in title state and ONE party gets mortgage Formalistic approach—Joint tenancy severed bc unity of interest

severed (one party has legal and equitable title and one has just equitable title)

o if foreclosure occurs there is mortgage on that half of property and surviving joint tenant has no rt of survivorship

modern approach—trickier bc may not have actually intended to sever bc mortgage suggests wanted to keep house so mortgagor may have right of survivorship depending on ct

Brant v. Hargrove if in title theory state o Formalistic approach—If Nick died first then mortgagor has

right only to his half under formalistic approach bc unity of title severed

o Modern—trickier bc may not have intended to actually sever bc mortgage suggests wanted to keep house so since she died first mortgagor may have right to whole property if he has rt of survivorship

o Lien theory—lien created on land but no bifurcation of title and only time original owner gets title back is if property is foreclosed

If have joint tenancy in lien state and ONE party gets mortgage and mortgagor joint tenant dies first then two options

anti lender approach—unity of interest NOT severed and survivor has right of survivorship and mortgagor has no interest in land anymore

o mortgage was essentially contingent interest partial severance approach—survivor owns all of the land subject to the

mortgage on a half interest in the land so they can only recover up to half of the property value

if non mortgagor dies first joint tenancy NOT severed and mortgagor has right to ALL of land Brant v. Hargrove under lien theory (real result)

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o Formalistic approach—nick didn’t lose title so unity of interest still present—no upsetting of unities thus joint tenancy not severed

o Modern approach—same—Nick didn’t intend to severo So Brant’s get the entire house on foreclosure bc Nick alone

lent them money since ct found that his wife and joint tenant never validly signed the mortgage

Basically saying that if debtor’s title improves then mortgagee benefits from it—if acquire property after mortgage then mortgage is then on that property too if clause in it

ii. Tenancy In Common

Tenancy in common—separated interest in the whole and no right to survivorshipo Now default to “to A and B” creates cotenancy o Undivided interest in fractional part of wholeo No four unities

only require unity of possession doesn’t have to be equality like in joint tenancy bc no unity of interest thus one party can own 1% and other 99%

o Interest follows will bc no right to survivorshipo In tenant—in possessiono Out tenant—out of possession

Three types of equitable causes of action—remedies DEPEND on type of relief soughto Accounting—brought by out tenant—not happy with how land is being handled

Generally in tenant who is living there doesn’t owe out tenant rent because he has right to live there too and chooses not to

Exceptions if in tenant ousted out tenant then

o Adverse possession starts ticking—in tenant becomes adverseo Out tenant no longer has possession thus can demand rent

Contribution action in placeo when in tenant asks for contribution from out tenant his

contribution can be reduced by rental value due out tenanto Treats this as a partition action thus each party should pay

their shareo Esteves v. Esteves—Ps, parents of D, bought house together

with D and took title as tenants in common. Purchased for 34.5 with 10k from each and 14.5 mortgage. All lived together briefly then Ps lived there for 18 years and paid out 62k in mortgage, taxes, sewer charges, and homeowner’s insurance. Ps sue for contribution.

Ct says D should pay half of in tenant’s expenses but get money for rent bc to reject rent credit and nonetheless require contribution to operating expenses is unfair.

But in this case in tenants are asking for contribution to mortgage, taxes, insurance, etc and thus out tenant deserves credit to that contribution based on rent

If in tenant is acting like landlord and getting rento Must pay half to out tenant if rent is for full half

If in tenant runs business in building and getting profits and out tenant then brings accounting action

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o Does out tenant has right to half of profits? Should he also have to share half of operating losses? Courts don’t like that question

o Court usually just give out tenant half of fair rental value instead of half of profits

o Contribution—brought by in tenant—wants contribution to protect jointly owned asset In tenant generally has right to contribution from out tenant as regards taxes and

mortgage, especially taxes but in tenants cannot usually get contribution for repairs which are treated somewhat like improvements

Contribution usually not allowed for improvements in contribution action If in tenant adds addition to house of 100k and in tenant has been

paying rent to out tenant and then asks for 50k contribution from out tenant

o Can’t get contribution when it involves an improvement upon a property bc if out tenant didn’t have much money then in tenant could essentially force out tenant to sell interest in cotenancy—improve someone out of ownership

o Partition—brought by either party—same as divorce to marriage—wiping hands of each other—have one final accounting and add up and subtract all items for lifetime of joint ownership

At partition improvements and repairs are taken into account even though not taken into account in contribution

At partition point give in tenant who paid for improvement the increase in the value of the house

In tenant wants credit for 100k addition—to what extent do we credit for improvement—give in tenant extra by amt property value increased

If in tenant increased rental value by his own improvement then he doesn’t want to have to pay half of the increased rental value—wants to pay same as what he paid before and court usually allows this

Ct generally favor partition in kind over partition sale hesitate to kick someone off the land which is the result if person in

possession cannot purchase the land bc doesn’t have enough money at a partition sale

partition sale should only be ordered when: physical attributes of land such that partition is impracticable or inequitable, interests of owners would be better promoted by sale

o again, this rule makes little sense bc if interests of owners better by sale then wouldn’t be in court

o court deciding best interests of parties rule in favor or partition in kind makes less sense now that no longer

rural society and most real estate is not capable of physical partition bc of real estate

Would expect that if majority of ownership cotenants want partition in kind they will get it, but not always

courts may be swayed by person in possession of property for a long time being forced out

Delfino v. Valeancis—P and D own as cotenants real property 20 acres and house. Ps own 99/144 int and D owns 45/144 int. D occupies dwelling and portion of land and wants to hold on to her house and garbage hauling business. Ps want to develop prop into residential lots. Asked to partition property bc Ds business not allowed in residentially zoned area and Ds want to develop as residential district. Trial ct ordered partition by sale bc said Ds business illegal anyway and so might as well zone and kick her out.

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o Ct agrees, says physical partition is feasible and in best interests of parties bc sale would not be in D’s best interest.

Only two owners and promotes best int of parties. o Ct says Ds business not illegal so can’t say she would have to

stop it even in absence of rezoning bc she wouldn’to If look at majority rules then Ps would win since together they

represent 2/3 of parcel and lose Also probably more efficient to sell and put garbage

business elsewhere Clearly court is swayed by the fact that D lived there

her whole life and had still owned significant part of property

Courts generally uphold restraints on partitions (either by sale or in kind) bc they are not unreasonable restraints on alienation

Example: one tenth interest in land in Tahoe. All cotenants. Each owner has week in good and bad parts of year. If one party exercises partition by sale it will ruin the situation.

o Not restraint on alienation bc tenants can resell interests into another party.

o It is a disabling restraint on partition but not an unreasonable restraint on alienation

Example: husband leaves property to wife and says that children can’t partition while wife is alive

o Same situation—restraint on partition but not on alienation Only time court may say restriction of partition is unreasonable is if it

is too long or for forevero Even perpetual restrictions on partitions are allowed in

condominiums—can’t put elevators, common areas, etc. on auction block

Cotenants and leaseso when one cotenant signs lease does it bind other cotenant?

Cotenant has right to lease without other cotenant’s signature cotenant that did not sign the lease cannot eject lessee Carr v. Deking—Joel and George (father) Carr owned land as tenants

in common. Leased land for 12 yrs to Deking pursuant to a year to year oral agmt receiving one third of crop as rent where Carrs paid for one third of fertilizer. In 1986 Joel told Mr. Deking that he wanted cash, not crops. Deking went to George and made ten year agmt to continue crop share lease except now Carr wouldn’t pay any fert. Joel said didn’t authorize lease therefore not bound by it.

o Joel said public policy should prevent prospective lessees from going behind back of one cotenant in common.

o Deking says George Carr had right to enter into lease with respect to his one half interest in property and Joel could not bring ejectment action without George’s agreement.

o Court said Joel could not eject Deking bc didn’t sign lease but that he could opt into the contract

but he can opt into contract and can also seek partition

Can physically split land in half then lessee would only be renting half the land

What if land is not of equal value across? Would have to partition in a very strange way bc parties can’t agree on even split

May have to partition by sale—third party buys ito Does that party have to honor lease? Uncertain

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o If he does, then price of property will decrease dramatically and other jt will have exactly the result he wanted to avoid

Nelson thinks that lease not signed by both parties is not binding but if nonsigning cotent reaps benefits of lease (accepts money) then it becomes binding—in this case if Joel hasn’t taken a cent then not binding

But this is NOT the law Fiduciary duties among cotenants

o when one acquires outstanding superior title he must hold it for benefit of other cotenants IF they offer to share cost of acquisition

same rule also applies to spouses of cotenants Massey v. Prothero—Cotenants of real property inherited from parents. (P)

agreed to give Lewis deeds to property and that Lewis would conduct probates so that surviving children would receive inheritances. But Lewis never did. After parents death diff family members lived in home rent free but were obligated to pay taxes. One sibling never paid taxes on it and after his death prop put up for sale by county. Lewis discovered this before sale and tried to prevent sale but was told to wait and buy prop at sale. He did buy it and never told his family members so only his and his wife’s name are on the deed. Mary sued to quiet title to property in names of surviving cotenants including lewis.

Court said that as cotenant lewis purchased sale for benefit of surviving cotentants thus took no greater title than before, thus did not have title against rest of fam.

D argues that at least his wife’s title is good but ct disagrees bc same rule applies to spouse

Not AP either bc not open and notorious which btwn cotenants means must actually “bring knowledge” home (Wright v. Wright)

But does say other cotenants need to reimburse him for what he paid at tax sale

o But if mortgage sale sometimes that cotenant allowed to keep superior title bc other cotenants if adults had same chance to purchase

Only cases that go other way usually involve fraud o And can’t use straw party to get around this rule

i.e. if cotenancy severed by third party purchasing at tax sale then one cotenant cannot later acquire title from third party if acting in collusion with him but CAN do so if not acting in collusion bc cotenancy ceased to exist and bought w/o fraud

o but if one cotenant defaults on separate debt and there is execution sale and other cotenant buys her third of land he gets to keep it because the other debt is a separate obligation, thus he has no fiduciary duty to her in that case

For rental purposes consequence is just whether get rental value or not Killing in cotenancies

o doesn’t affect right of survivorship but may affect will similar to above where assume killer died before victim

o UPC says forfeits will, elective share, homestead allowance—estate passes as if killer disclaimed intestate share

iii. Tenancy in Entirety

Tenancy in entirety—only in purest form in 6 states and modified form in 15 otherso Has four unities PLUS a fifth—marriage—bc only available only to husband and wifeo unless both husband and wife consent no one can pierce tenancy in entirety

Example: H and W have tenancy in entirety. H conveys to A. no meaning—does not destroy title

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Example: H goes to bank to get mortgage. Default and bank forecloses. N buys at the sale. N has bought nothing bc tenancy in entirety can’t be pierced. The mortgage was worthless

Most banks require signature of both H and W bc there is no 1/2 of property—it’s all or nothing.

Example: H is doctor and gets sued. Tort collectors now after her. Still can’t pierce the tenancy in entirety unless debt in both H and W.

o Thus H and W in high risk professions often do tenancy in entirety to avoid paying max malpractice insurance bc keep some of their property secure

o Do H and W need to retain property for life of marriage in order to keep the property safe from debtors?

No. W can file for bankruptcy bc only other asset they have is 50k in bank. Trustee appointed. Submits form to W and asks her to list all of her assets so that tort creditor can recover. Trustee gives 50k to tort creditor and bankruptcy court says W is discharged of all pre-existing debts bc can’t obtain that property. H and W then sell the land, get their 2mil and put it in bank account.

o Homestead laws—in some states one house is exempt from creditors (i.e. FL) so people buy biggest one house they can and never risk losing it from creditors

Three types of tenancy by entiretyo Pure tenancy by entirety—neither party may act independently so as to affect the other

party’s interest in any way—any attempt to convey deed, give mortgage, or judgment from creditor is completely void

o Modified (MA—Coraccio)—if not talking about home but instead other property then one party can act independently either voluntarily or involuntarily BUT the purchaser ONLY gets right of survivorship if H dies after W—contingent future interest and NO present interest (like lien state in mortgages)

Coraccio v. Lowell Savings—P filed action against bank bc bank took second mortgage from her husband on property owned by her husband as tenants in entirety. P bought prop. Bank gave H money and put second mortgage on prop without Ps signature. Then loaned H more money and got second mortgage from him alone. He defaulted and bank foreclosed.

Modified tenancy state—MA Spouse may convey or encumber his or her interest in prop held as

tenants in entirety. Nothing prevents one of co-owners from mortgaging interest in

tenancy. o Does not require consent of both spouses.

BUT bank ONLY gets right of survivorship If we were in NY or NJ bank would get half of rents during life plus

right of survivorship if H dies after W—same would apply if conveyance or judgment sale

o Modified (NY and NJ)—H and W have cotenancy for life, remainder to the survivor (like in Albro v. Allen)—one party can sell but purchaser only gets a life estate plus the right of survivorship—so half of rents during life of person who purchased from and remainder if seller dies after the other cotenant—present interest and contingent future interest

Killing in tenancy in entiretyo Treated same as joint tenancy above o NC take approach where killer only has one half of life estate, no survivorship

c. Community Property

Only in 8 or 9 states, mostly in West In traditional common law whichever party has title owns CANNOT elect against will in community property states

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In contrast, in community property states H and W have some property that they own in common and some that they own separately

o Own community property 50/50o Best way to figure out what is community property is to first look at what is separate

property and by process of elimination rest if community propertyo Presumption in community property states in favor of community propertyo Can contract out of community property through prenup

Separate propertyo Property owned before marriage o Property received as gift or probate (through will or intestate succession)o Income, rents or interest from separate property

Some debate about this but most states treat it as separate If assume income, rent or interest was community property unfair in

sense that interest is in part compensates owner for inflation and if treat as community then essentially reduce value of principal each year

Community property—essentially tenancy in common—no right of survivorship like in joint tenancy

o Most important community property is income from serviceso Interest, income, rents off community property

Transmutation—changing property from separate to community or one’s separate to other’s separate property or community to separate (though this last is very hard to do because presumption is in favor of community)

Why do we care why property is community or separate? Because it affects: o law of wills

surviving spouse has no right to elect against the will in community property states—spouse already has right to half of community property and can’t elect against deceased half of community or separate property

o intestate succession if person dies without will spouse gets all of community property and gets

intestate succession share of separate property o divorce

each spouse gets half of community property and own separate property generally law favors community property so unless transactions are crystal clear

courts will favor community property many states which do NOT have community property (thus are common law

states) nonetheless have Uniform Marriage and Divorce Act which can be somewhat like community property. It is of two varieties

one institutes a community property regime for divorce purposes even though not community property pre-divorce (use terms marital property instead of community property)

o in divorce marital property split 50/50 so for divorce purposes are community property states

other equitably distributes property however and whenever acquired and whether property is name of husband wife or both and takes into consideration length of marriage, prior marriage, prenuptials agreement, health, age, skill, other sources of income etc.

o not community property states but look to ALL property for equitable divisions

o control during marriage real estate

spouses exercise joint control over community property—need signature of both parties to make conveyance because

o buyer should make sure get signature if buy from married couple because never know whether is separate or community

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separate control over separate property but still buyer should get both in signatures because of fraud on marital rights or augmentation

person property either spouse can deal with third parties and bind the other spouse by

selling it—third party does NOT need both parties signatures to have good title whereas with real estate need joint action

o purchases purchasers should be sure to get two signatures bc if that property happens not to

be community then person may argue that was fraud on marital rts once have both signatures protected whether comm prop or not

o rights of creditors if in NON community property state than creditor can only collect from property

in the debtor’s name—look to title if in community property states then can collect from debtor’s separate property

and half or all of community property depending on purpose that caused debt family or community purpose doctrine

o if the debt (whether contract or debt) is created by an individual spouse for a family or community purpose then can reach that spouse’s separate and all of the community property

o if not for family purpose then can reach that spouse’s individual property and half of community property

6. Landlord Tenanta. Nature and Creation of Leaseholds

Leaseholds used to last about ten years and leaseholder essentially had ownership with reversiono Usury law—used to be immoral to charge interest on lent moneyo As a result people found way to get around this by making tenant technically a lender

who stays on land while landlord (borrower) pays “rent” which was really interest until he pays the debt off and moves onto the land

Modern leaseholds o amalgam of property law and contract law

Probably more like contracts because material breach by one party allows other party to sue for damages

Suppose have commercial lease in office building and tenant signs lease for ten years for space on first floor. LL agrees to remodel common areas then breaches by failing to remodel common areas

Contract law—LL breaches so tenant can opt out of lease and sue for damages

Property law—covenants in lease are independent of each other so tenant’s obligation to pay rent is separate from LL’s duty to remodel thus tenant can’t sue for damages or opt out of lease

o But implied covenant of quiet enjoyment is exception—covenant to pay rent IS dependent on covenant of quiet enjoyment even under prop law

o Could put provision into lease to make it like contract law where if either party breaches other party can sue, but usually one sided and says if tenant violates lease LL can term and sue for damages

Some say this distinction is not real, just figment of imagination of a few courts and scholars but this is still the dispute

o Unlike life estates which are one sentence leases are pages long and full of contractual provisions—even more so in commercial than residential leases

o Landlord has right to rents and a reversion

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o Tenant has rental obligation and right to possess Sometimes tenant has substantial asset on balance sheet if value of right to

possess exceeds the rental obligation under the lease—bonus value But part of value is freedom to alienate which is usually forbidden in residential

leases Differences between lease, license and easements

o Lease Interest in land Right to possess in land Identifiable, specific area that can’t be changed Can exclude others Specifically enforceable Transferable unless specific language to contrary and survives death of parties Tenant cannot be forced out without taking legal action

o License NOT an interest in land Right to use, not possess Revocable by grantor who can just take the license away if he wants to

power to revoke but not right to revoke in contract may say grantor cannot revoke but if grantor did revoke it isn’t

specifically enforceable and licensee can only get damages, not what he bargained for

Contractual right not in rem right in land At most enforceable by damages, not specific damages May not be transferred, doesn’t survive death Defense to criminal or civil action for trespass Tickets to entertainment events, permits to hunt or fish on land (though could also be

easement), parking arrangements, department store concessions (certain areas like ones that sell rugs, etc.), hotel guests, maybe even college dorms though usually somewhere btwn leasees and licensees

Licensee can be forced out without legal action by using self help i.e. changing lockso easement

Interest in land Incorporeal NOT possessory (even though seems like possession when have power

lines and sewers are 6 ft underground and have been there for decades) Usually exclusive Irrevocable Specifically enforceable Transferable Roadways, power lines, sewers

o How analyze whether lease, license, easement? Language of k as well as usage Friend v. Gem—Gem was discount chain which sometimes housed other stores

within its store. Either as licensor (which it thinks it is) or as landlord enters into arrangement with Biderman’s furniture for Biderman’s to be housed within Gem store. Friend is employee of Biderman and gets injured on her way to the Gem cafeteria in an area clearly controlled by Gem. She sues Gem for negligence. Standard of care on Gem is lower if Biderman is licensee than if Biderman is tenant so case turns on whether it was licensee or tenant.

Court says Biderman is a tenant, not a licensee. o What cuts against it being a lease?

Contract is described as a license in the wording No clear boundaries btwn Biderman and other stores Agreement says Gem can move Biderman’s area around

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Gem’s employees have right to go into Biderman’s space to go into cash register (to be sure it is getting correct percentage of sales)

o What cuts in favor of it being a lease? De facto there is specific space allotted to Biderman’s

even though in theory agmt says can revoke at any time This is a slim reed based on nature of agmt and likely

court was motivated by wanting woman to be able to get judgment

Harkins v. Win Corp.—Harkins stayed in Win’s hotel as lodger/hotel guest for eight months, then stopped paying weekly rent. Hotel changed lock (used self help) to eject him. Harkins sues in tort saying that law against self help should apply to lodgers as well as tenants.

Court refuses to change law and says that he was not a tenanto Had use, not possessiono Had people changing his sheets, maid service, espo Says rationales for forbidding self help in landlord tenant

relationship don’t apply here Not similar potential for violence in self help bc not

as many possessions on the street Not as hard to find similar dwelling for possessions

bc less likely to have as many possessions and easy to find another motel

Roomer doesn’t have equivalent need for equitable remedy

Roomer has less need to remain in accommodation while litigation goes on

In CA once someone stays in motel for more than 30 days there is a tenant relationship

Why do we care about whether is license or lease?o Standard of careo Security depositso Terminationo Eminent domain law—when state condemns leased building

lessee may get part of condemnation award (especially if FMV of premises is more than rent—bonus value) bc it is an interest in land

in contrast, licensee won’t get an interest in land o specific performance

only lease can get specific performance bc license is at most a contract where can get damages

o ejectment using self help licensor can use self help but landlord must take legal action

landlords used to use self help and resulted in violence so now must use legal steps (otherwise guilty of tort) which have become more efficient and inexpensive than before called summary proceedings

result is that it disadvantages a landlord to have a lease Four tenancies that exist under landlord/tenant law—rent is NOT required in tenancies though if

not specified that there is no rent otherwise ct will read in implied duty to pay rent o Fixed term tenancy

Lease for a fixed term regardless of whether monthly or in advance payments Technically LL has reversion with right of entry to secure rent Can be terminated by surrender by tenant or release by LL or condemnation Otherwise just terminates automatically at end of term NO notice required to terminate bc terminates automatically though could turn

into a periodic tenancy once landlord accepts rent

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o Periodic tenancy Leasehold that could last forever Month to month is most common form though can be six month to six month or

year to year as well Requires notice to terminate by both parties (usually 30 days enough for month

to month tenancy) Unlike fixed term tenancy does not expire once time runs but continues until

terminated by appropriate notice so can go on forevero Tenancy at will

Seldom expressly created though sometimes it is Created by agreement, taking of possession with consent of owner,

entry into possession under a void lease prior to making periodic rental payments

No pattern of rental payments, no agreement as to rental periods only lasts as long as neither side terminates Either side can terminate with no requirement of notice

Tenant can terminate by moving out without reasonable amt of time or by assigning it to someone else

LL can terminate by ending lease, conveyance of fee but usually tenant is given reasonable time to get out

Death of LL or tenant effects termination o Tenancy at sufferance

Never expressly created—only occurs when tenant holds over from fixed term tenancy

Court could instead of made holdover a tenant a licensee to prevent AP but instead created tenancy at sufferance

not really a tenancy at all—just describes relationship btwn owner in fee and tenant who was in possession rightfully, now wrongfully

serves to distinguish holdover tenant from person whose intrusion has no basis in right at all

Lasts until demand for possession by LL or until LL elects to have other than tenancy at sufferance

Once tenant holds over he can be either trespasser or tenant depending on how the landlord treats him

If trespasser tenant only owes damages equal to reasonable market value of property

If tenant, he owes damages equal to value of lease that landlord specified and tenant’s failure to respond to lease is considered acceptance of that value of lease

How do tenancies switch from one type to another?o Statutes of frauds requires contracts to be in writing including ones concerning land and

if trying to enforce lease must include term, rent, description of property and signed by party to be charged which is party against whom trying to enforce lease so usually both sides sign because never know who will become plaintiff

o When a lease violates a statute of frauds bc it fails to include term or description it is void but not completely—what might have been a fixed term tenant becomes a tenant at will

Law could have made these tenants mere licensees but it doesn’t Tenant at will can become periodic tenant

Must pay rent and if landlord accepts it for a few months then become periodic tenant despite lease that doesn’t meet statute of frauds

Tenant at will can even become fixed tenant Part-performance doctrine—if tenant or landlord get to point of

significant detrimental reliance (i.e. pays rent, makes improvements to property or landlord makes business arrangements based on the tenant’s rent) then bar of statute of frauds comes down and party trying

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to enforce lease may be able to establish oral agreement through testimony, extrinsic documents, etc.

o If tenant at sufferance and holds over then court may either find tenant is periodic tenant OR trespasser depending on actions of both parties

If landlord sends tenant eviction notice with wording that if don’t leave then owes certain rent then court may find landlord is treating tenant at sufferance as periodic tenant thus tenant owes that rent and his silence is taken as acceptance at that rent (David Props)

If instead court finds landlord treating holdover tenant as trespasser then tenant only liable for fair market value of property, not the rent the landlord specified (though could in that case also be liable for punitives)

David Properties Inc. v. Selk—Selk, elderly man, sold to David Prop land on which was located small house. DP paid some cash, rest in five installments plus interest in mini mortgage. After S sold property to DP he continued to live there with DP’s permission. After time DP filed ejectment suit which resulted in written lease agmt which said DP leased to S house occupied by him to end on 12/31 1959, consideration for one dollar. S didn’t vacate and continued to live there for 2 more years. DP sent S letter after month and half saying if don’t vacate you owe me 300/mo (more than prop worth). S admits got letters but continued living there. No reason why. Then DP missed final 9k payment., said would only pay 9k less 6,600 due in rent from S. S then filed to foreclose mortgage. DP said not indebted bc S owed him 7,200 plus interest.

In mortgage legal and equitable title passed to David Properties bc lien theory state so technically Selk owns nothing yet stays on the land

o At this point Selk could either be tenant or a licensee based on what owner chooses to do. Hard to tell exactly what he is but definitely there by permission

o DP doesn’t want to make him a trespasser unless owner wants to kick him out because otherwise might be AP so default rule is he is either licensee or tenant

After DP sent letter telling him to vacate S was just a tenancy at sufferance (no payment of rent that might change it to periodic tenancy)

o If court finds that DP treated S as trespasser damages are limited to reasonable rental value of premises

o If instead court finds DP treated S as period tenant then damages are equal to value of rent in lease agreement specified by landlord and silence is acceptance

Court finds DP treated S as tenant thus he is liable for the rent specified by landlord even though never agreed to the amount bc silence is considered acceptance

o But letter did specifically it was NOT a lease so maybe trial judge right in saying holdover is NOT periodic tenant bc landlord says isn’t a lease—this is a difficult case

b. Duties respecting title, possession, fitness and repairi. Covenants, Implied Warranty, Duties

Covenant of quiet enjoyment—one of most important parts of leaseo Landlord has obligation to deliver possession

Mutual dependence—if covenant of quiet enjoyment is violated tenant has right to opt out of lease and sue for damages (despite contract/property law distinction) below so duty pay rent is dependent on cov of quiet enjoyment

But if covenant is breached and ct finds not part of cov of quiet enjoyment then Contract law—tenant could sue bc breached covenant

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Property law—court might say that the particular covenant is independent of duty to pay rent so tenant has no cause of action IF the covenant was found NOT part of cov of quiet enjoyment

o Does landlord have duty to provide title or right to actual possession? i.e. if earlier tenant holds over does landlord have duty to eject that person or

does tenant have duty to eject that person majority rule (English/Adrian): landlord has duty to deliver physical possession

on the day of lease and failure to do is breach of cov of quiet enjoyment and triggers tenant’s right to damages

intuitively makes sense because tenant should not have duty to eject prior possessor

landlord also in better position to prevent holdover than new tenant tenant has right to difference btwn rent reserved in lease and the fair

market rental that he has to go out and find tenant may also have right to loss of prospective profits if can prove Adrian v. Rabinowitz—court take majority rule and says landlord has

duty to eject holdover tenant, not new tenant, and thus tenant has right to difference in rent and would have right to lost profits but not certain enough in this case

minority rule (American) is that landlord only has to deliver legal right to possess, not actual possession

reasons for this may be that tenant should take some responsibility but intuitively doesn’t make sense for tenant to eject prior tenant

in effect in these cases new tenant gets all rights landlord had so new tenant can collect rent from old tenant

o Covenant of quite enjoyment protects against actual eviction—once possession is delivered, landlord has implied obligation

not to interfere with tenant’s possession and that no third party who has better right to land (i.e. mortgagor) will interfere with tenant’s possession—protects against ACTUAL eviction

Lease is junior to mortgage so mortgagor CAN take over building BUT tenant has cause of action against LL for breaching covenant of quiet enjoyment

Does NOT protect against trespassers with no relationship to LL because he has no better right to land than tenant and LL has no duty to protect against him

partial actual eviction which is when LL makes area unavailable to tenant because of construction, etc.

Tenant can terminate lease, move out, sue for damages OR tenant can stay in premises, stop paying all rent until partial actual

eviction ends (then start paying again) and STILL sue for damages Problem with moving out is that ct may find there was no partial actual

eviction i.e. no breach of covenant thus still owe rent and then have to pay rent when not living there

constructive eviction (not actual eviction but treat it as if it were) Action by LL that substantially interferes with tenant’s enjoyment of

land—constructive to actual eviction is like trespass to nuisance law Can be number of interferences—odors, dirt, disrepair, etc. Tenant MUST leave promptly in order to sue for covenant of quiet

enjoyment in commercial lease o but in residential lease may not have to leave to have cause of

action because can instead rely on implied warrantee of habitability as opposed to breach of covenant

If do leave run risk that ct may find covenant of quiet enjoyment not breached and then will owe back rent even though not living there

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Barash v. Penn Term Real Estate—high rise building rents to lawyer who wants it open 24/7. LL says will air condition during the day but tenant alleges that LL has agreed to circulate fresh air on evenings and weekends. He claims absence of fresh air is violation of covenant of quiet enjoyment and refuses to pay rent. He’s arguing that it is partial actual eviction bc he didn’t leave the premises.

o If lease specifically said LL agreed to circulate fresh air then clear violation of that covenant

o Lease didn’t specifically say that and court found that if anything, constructive, not actual eviction took place and since P didn’t leave premises he had no cause of action

o Even if had left might not have been found to breach covenanto Can’t contract against covenant of quiet enjoyment in residential setting and probably not

in commercial either Duty to operate

o Can be explicit or implied though courts usually don’t read in implicit duties to operate LL obviously want duties to operate them bc get percentage of rent (if in

percentage lease) and if tenants have duty to operate they will bring in more revenue which affects other tenants—plus if they fail to operate LL want ability to evict them bc affects whole center

o Anchor tenants generally able to avoid duties to operate because they are in control of leases most of time though in outlet shopping centers often see duties to operate

o Signs that there is implied duty to operate Nominal fixed rent and low threshold for percentage rent

o Signs there is not implied duty to operate Express language Parties contemplated idea and did not put it in lease

o Remedy when tenant with duty to operate Injunctive relief—force tenant to operate its store in compliance with lease

Two hurdles to getting injunctive reliefo Must prove remedy at law inadequate

Possible that legal remedy is inadequate bc too hard to ascertain damages from loss of anchor tenant

o Administration difficult Hard to get injunctive relief because hard to

administer the relief—no way of knowing whether store is making good faith effort to operate

why should taxpayers be enforcing ten more years of lease?

Counterargument is that administration/supervision not so necessary because anchor tenant doesn’t want to ruin brand name by operating poorly even if only in one store—if force to operate has incentive to operate well

Cases mixed on whether get injunction to compel express duty to operate

Injunctive relief may be more efficient from court’s perspective bc if D really doesn’t want to comply he can buy out the P even though P in power position

o Injunction thus gets liquidated to money amt as opposed to having two week trial for damages

o Injunction gets liquidated faster than damages trial might even though seems counterintuitive bc damages seen as most liquid

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o Probably NOT efficient from economic standpoint bc might unreasonably favor P, but is efficiency from court’s perspective

Legal remedy—terminate lease and force tenant out and sue for damageso Legal remedy may be inadequate (thus triggering injunctive

relief) bc even if could ascertain lost rentals from defendant hard to determine lost rentals from other tenants when anchor tenant no longer bringing in foot traffic

o Mercury v. Woolworth—Woolworth is major tenant in shopping center and Mercury claims WW was anchor tenant. Generally when these tenants come in its on their form, take it or leave it since they are anchor tenants. WW wrote the lease in this case which had rent and percentage of revenue but did not specifically say WW had to make certain revenues to maintain lease.

Question is whether tenant has duty to operate premises and give percentage rent in addition to fixed rent or whether is only liable for fixed rent i.e. does lease have an implied covenant to operate?

What would make us read in an implied covenant to operate?o Nominal fixed rent combined with percentage rent triggered a

low revenue threshold What would make us not read in duty to operate?

o Explicit language that says there is no duty to operateo Parties contemplate idea that tenant shuts down and don’t say

terminates leaseo Rare in big shopping center for anchor tenant to agree to duty

to operate esp when lease is on their form though are common in outlet malls

In this case court does not find duty to operate bco fixed rent high and percentage rent never triggered for life of

lease so not a low triggero Parties contemplate idea that WW shuts down and does not

say that lease terminates—instead agreed on fixed rent plus one third of rent for prior years—that is price tenant has to pay to turn lights off

Implied duty to make premises suitable for intended purpose/implied warrantee of habitabilityo Commercial—generally in commercial real estate NO covenant to make premises

suitable for intended purpose Must be some sort of fraud to create implied duty (Service Oil) Service Oil v. White—White leases land to Service Oil knowing is planning to

use for gas station but city ordinance says there must be 10 ft between street and gas pump. Pumps used to be 15 ft from street BUT White had conveyed 10 ft in front of service station to city and now pumps are within 5 ft of street.

Is there implied covenant that premises suitable for their intended purpose in comm prop?

o As a general rule no covenant to make premises suitable for intended purpose in commercial leases

o But in this case in particular there is implied covenant bc there is fraud involved

landlord concealed fact that had conveyed 10 ft to city (which still is not considered fraud unless…)

AND not capable of being discovered by other party during due diligence which in this case it was not

o Do we impose same standard of due diligence for leases as purchases though?

Normal lessee doesn’t examine lessor’s title way would if purchasing

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Lease is still effective so what are damages?o Lessee can get lessor to move the pumps and there may be

punitives as wello Residential—generally there is implied warrantee of habitability to make premises

suitable for living First showed up in Housing code, then courts started finding implied warrantee

of habitability Courts finding the implied warrantees created another body of people

to enforce the housing codes because without judicially imposed warrantees only inspectors can enforce it and often not successful

Courts use housing codes by analogy but use own terminology like fit for habitation, etc.

Implied warrantee not violated just because of aesthetics—question is whether fixtures, structures, etc. work.

Implied warrantees are NOT waivable (at least in apartments)—if they were a lot of people would be living in substandard positions for cheaper rent

Few states do allow waivers for situations where tenant plans on fixing the place up

There are pervasive violations of housing codes but is that necessarily bad if lower rents? Difficult questions……

Duty to pay rent is DEPENDENT on LL providing implied warrantee of habitability meaning don’t have to pay rent if LL doesn’t meet his duty

Implied warrantee of habitability can be affirmative defense (Jack Spring) Jack Spring v. Little— Ds denied Ps allegations that had violated

covenants to repair and D also wanted to bring affirmative defense breach of imp warrantee of habitability.

o Court says P should be able to add affirmative defense of implied warrantee of habitability

can bring implied warrantee of habitability action as affirmative defense in summary proceedings which is very important because most low income tenants wouldn’t bring suit on their own

tenant’s obligation to pay rent is dependent on landlord’s implied warrantee of habitability

Damages if breach of implied warrantee of habitability Damage rules when warrantee breached

o 1) Difference between contract rent and actual value of premises if tenant still living there

o 2) Difference between value of premises if had been as warranted and the actual value of premises

o Bonus value—difference between contract rent and what would have been worth if had been as warranteed

o PLUS pain and suffering and maybe punitives (Hilda) If tenant vacates during lease

o If court finds no breach of habitability, then liable under terms of lease

o If court finds was breach pre-vacation—court looks to damages rule above and

chooses one of them post-vacation—court can only award bonus value bc

no longer paying rent—difference between value premises would have been worth if as warranted and contract rent

if tenant does not vacate during lease but stops paying rent

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o LL brings unlawful detainer action and in summary proc. tenant can bring affirmative defense of breach of habitability

o Past—trigger one of two damages rules above but if damages less than rent then tenant has reasonable time to pay difference

o Future—court might say tenant doesn’t have to pay until LL fixes damages

which puts pressure on LL but may be problem if has no money to make repairs

rent should be paid to court (though reduced rent bc damages) and put in escrow until repaired but then get back rent

receivership statute—if court doesn’t think the above will work then court appoints third party to take over building and rent still paid into escrow who uses that to repair the building—works well in middle class buildings but not so well in lower income ones bc receiver often can’t get loans, tenants won’t pay rent to receiver and owner might just abandon it

Hilder v. St. Peter—nothing works when she moves in. Toilet doesn’t flush, vermin, broken glass, plaster, etc. very bad situation, essentially unlivable.

o This could have been breach of covenant of quiet enjoyment but because she didn’t actually leave she can’t bring cause of action under constructive eviction and this was clearly not actual or partial actual eviction

o Instead she brings suit arguing there should be an implied warrantee of habitability

o This is easy case bc she paid rent entire time and place clearly uninhabitable—usually more complicated

o Ct even grants her punitives in add’n to all the rent she paid which is very rare

Implied duty to make general repairs o Commercial (assumes lease is silent re: repairs)

Generally landlord has no duty to repair if it is not laid out in lease Tenant also has no duty to repair

BUT must protect against waste and keep property wind and water tight—fix roof, windows, etc

Acts of God—tenant usually no duty to restore building but still responsible for lease and must continue to make monthly rental payments even if building is gone—lease still effective bc was created in time when buildings incidental and would say “dirt still there”

But parties can contract and have tenant duty to repair in commercial setting Still notion that whatever the parties agree to will be enforced—much

less likelihood in commercial setting to nullify contract though must be specific if really want tenant to be responsible for

everything o i.e. after Hadian clear that must specifically mention

earthquake retroffiting if want tenant to be responsible examples:

o Triple net lease—landlord has no obligations except right to collect rent—tenant is obligated to make all repairs, pay all real estate taxes, insure property for benefit of landlord, etc. (regular net is just repairs, double is repair plus tax, etc.)

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Not unfair in commercial setting because parties agree to it thus is product of market because rent is much lower

Law is free in allowing commercial net leases but in contrast would not allow this in residential setting

o Ground lease—person leases raw land and builds on it but technically when lease ends improvements belong to landlord (but most of these leases are 90 years or so) bc he has reversion on land and improvements

i.e. Marina Del Ray city leased lands to developers and if own a building on a ground lease then must make sure tenant developer pays rent otherwise landlord may end up owning building early (before the 90 year lease ends)

when developer gets loan lender takes mortgage not on fee simple absolute but on 90 year ground lease unless landlord signs mortgage which usually don’t

mortgage thus applies only to leasehold interest and are very careful to be sure that rent is paid

o more common where land is very expensive Six factors help us determine whether lease intended repair to be tenant’s or

LL’s responsibility (Hadian factors) Cost of repair v. total value of lease (if disproportionate, probably not

tenant’s responsibility) Term of lease Relationship of benefit of repairs to lessee to that of reversioner Structural v. non structural repairs Degree to which tenant’s enjoyment of premises affected by repairs Likelihood that parties considered the application of repair involved

What else affects who is responsible? the more the repair is tied to tenant’s use the more likely tenant will be

responsible (i.e. installing elevator for disabled vs. earthquake retroffiting)

landlords may want to put every single repair in the lease as tenant’s responsibility and as result tenant might demand reduction in rent, deductible, etc.—this add’l info enables negotiation and forces parties to consider every possibility and negotiate accordingly

if LL has insurance does that mean he should be responsible over tenant? Not necessarily bc may discourage purchasing insurance

Hadian v. Schwartz—H leases building to S for bar. Lease is net lease, three years renewable for five more for 650/month. Lease specifically says lessee responsible for all repairs (structural and non structure and regardless of whether repair result of tenant’s use or elements), tax increases and being in line with ordinances but landlord pays casualty insurance and base taxes (so not triple net lease bc LL pays for insurance and taxes) Inspectors come out and say building must be repaired for earthquake at 34k. LL fixes it sues tenant for cost of repair.

Is there implied duty on landlord to make general repairs in this single net lease?

o Lease is specific in that tenant is responsible for all repairs regardless of whether damage is result of tenant’s use

o BUT lease does not specifically say tenant responsible for earthquake damage thus court finds it is not a net lease

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o Even if was net lease tenant still not responsible for earthquake retrofitting bc

Amt of damages disproportionate to rent (34k v. 650/mo)

short lease tenant not likely to seriously benefit from repairs in

comparison to LL structural repairs (but in lease said tenant

liable for structural repairs so not relevant here since explicit in this case)

tenant’s enjoyment probably interfered with while repairs occurring

did parties contemplate application of law or order involved? Didn’t explicitly say earthquake in lease but did say most repairs covered

General repair clauses—usually specified in the lease and says tenant will return premises in same condition took it in, reasonable wear and tear excepted

If lease not silent but has this clause tenant may be liable to rebuild when property destroyed as result of Acts of God

Chambers v. North River Line—general repair clause in lease and property destroyed and court says tenant obligated to rebuild property

o Residential Generally landlord has duty to repair Tenant generally has no duty to repair

Acts of God—allowed to terminate lease if building destroyed

i. Security Deposits Security deposits

o How much can LL demand? o Does security deposit trump claims of other creditors?

Come before IRS, mortgage, other creditorso What if LL sells building during term of lease

Is cause of action against original or new LL or are both liableo Interest on security deposits? Not usually but sometimeso CA statute

a) only with residential real estate b) Security deposit used for damages beyond ordinary wear and tear—right to

impose ordinary wear and tear on premises Can be used for cleaning of premises ONLY if tenant doesn’t return in

as clean condition as when got it—must be less clean then when went into possession

c) Security deposit cannot be more than value of two months rent This does not prohibit advance of payment of 6 months if lease is 6

months or longero Could mean have right to pay 6 mo in advanceo Could mean have right to pay security deposit of up to 6 mo in

advance not moreo Maybe means sec deposit not limit to paying rent in advance if

get lower rent that way d) security deposit gets paid back before general creditors (but this probably

does NOT mean comes before mortgage or IRS bc of govt supremacy clause) e) no interest on security deposit (though in some states there are)

if view it as LL holding trust for tenant then tenant deserves interest on trust but most litigation like this failed and held not a trust

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f) within three weeks after tenant has vacated premises LL must send tenant an itemized list of damages and if fail to do so can argue bad faith thus can get statutory damages up to two times security deposit plus actual statute but CANNOT get attorney’s fees

in NM if fail to send this letter no recovery of damages at all (Garcia) and tenant can recover damages plus attorney’s fees

Garcia v. Thong—LL Garcia enters into lease with Thong who ruins premises. He left $200 security deposit but she sues him for $1,700 for damages to apt. but does NOT provide Thong with an itemized list of damages for keeping her security deposit.

o ct says since she didn’t comply with statute by providing him an itemized list of damages to keep his security deposit, she cannot sue for damages and must pay his attorney’s fees

Garcia argued that didn’t have to send letter bc damages were more than value of security deposit

Court disagrees, says counterintuitive that have to send letter if lower damages but not higher ones

o If in CA LL would have had to do it within three weeks and if failed to do so then may be called bad faith effort and tenant can recover up to twice amount of security deposit plus actual damages (security deposit itself) BUT no atty’s fees

i) nothing above precludes LL from recovering from tenant compensatory damages in excess of security deposit received though in NM failure to send notice took that right away from LL

even if this wasn’t in statute have law of wasteo If LL sells building can either

return deposit to tenant or give it to new LL if LL fails to do this then both predecessor and new LL are jointly and severally

liable for the security deposit—tenant can recover from whoever he wants/easier

c. Transfer by Landlord or Tenant—Assignees and Sublessees

Two relationships between tenant and landlord when in lease relationshipo Privity of contracto Privity of estate—both share interest in state, present and future

Tenant can transfer in two wayso Assignment—tenant essentially transfers all the tenant has—no reversion

Assignee makes payments to LL but may pay tenant if lease has bonus value Could also be negative bonus value and original tenant loses money

Assignee is in privity of estate with LL Liable on all of lease and gets benefit of and is burdened by vast

majority of provisions of lease (95%) Tenant is now only in privity of contract

Still liable on all promises of lease thus is jointly and severally liable with assignee so LL has two pockets to look for unless LL specifically grants tenant freedom from lease

Retains right of entry even though not a reversion because he is still personally liable on that lease

o Though some states (CA) say right of entry makes it a sublet, not assignment—means assignee or LL may not be able to sue

Tension btwn looking at formalistic approach—if reversion then automatically assignment—and intent approach which looks at other factors (ACS)

o Could be bad for either party depending on who wants to sue o Sublet—tenant reserves reversion

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Sublessee not in privity of contract or in privity of estate with LL L can’t sue sublessee for anything and sublessee can’t sue LL either

o Exception is that LL can sue S for waste and in residential contracts S may be able to sue for breach of warrantee of habitability

o Also, may lose possession S pays rent to tenant and expects tenant to pay LL

and if LL isn’t getting check then LL may clear out the place so though S not liable on rent

Maybe bc sublessee and LL together do not represent total interest in estate but still doesn’t fully explain why not in privity in estate

Tenant remains in privity of estate and in contract with LL L can sue T for anything and T can sue LL

Many sublessees in supermarkets now—banks, coffee shops, etc. Many tenants thus want to be able to sublease part of the large property

for other services How to determine whether sublease or assignement

o Formalistic Tenant reserves reversion Tenant has right to enter alone is enough in CA

o Intent—usually this is in favor of alienation for tenant though in ACS goes other way with formalistic in its favor and intent not

o Problem with evaluating on intent is that difficult for court to get involvedo American Community Stores v. Newman—Long term grocery store lease btwn LL and

tenant ACS. ACS goes out of business and assigns lease to Nash Finch then ask for consent from LL. LL does not consent. ACS then changes agmt with NF to sublet instead since that is allowed in contract that does not require consent. There was provision in lease that gave tenant 20 days to cure default so ACS and NF fix default with those 20 days. NF then turns around and assigns its sublessee’s interest to new operator.

LL says tenant just changed name from assignment to sublease Court says sublease

Tenant has both reversion for two days at end and right of entry at any point which together make it a sublease, not an assignment

Intent—could argue that intent is for assignment, not sublease because started out as sublease and reversion only two days

o In this case formalistic approach supports alienation instead of intent but usually intent supports alienation which is why include

Public policy favors clarity and a reversion is a reversion regardless of how long it is or what the intent is

LL right to consent to sublessee or assigneeo Majority rule is that if there is a provision that can’t sublet without LL consent then the

court does not care whether LL’s denial of consent is reasonable or not Clause absolutely forbidding transfer is enforced and clause requiring consent

will be enforced even if withholding consent seems arbitrary BUT the lease will still be construed very narrowly and ambiguity resolved in

favor or alienability If say can’t sublet without permission, doesn’t cover assignments, and

if say can’t assign without permission, doesn’t cover sublets If lease contains no clause restricting alienation cts will generally not

read one in bc don’t want to go against alienability And must comply with positive law and not violate civil rights

o Minority rule reads unreasonableness into clause so denials of consent are only enforceable if reasonable

Reasonable reasons to deny consent

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T2 financially insolvent Suitability of T2’s use of property Legality of use of property by T2 Need for alteration of premises for T2’s use Nature of occupancy obj to use of property like environmental LL and T1 transfers to mining

co. MAY be reasonable but not specified in the above so uncertain Unreasonable reasons to deny consent

LL wants to protect increases in rental value Doesn’t want tenant to collect on bonus value when LL considers it his

property Kendel v. Pestana—Lease says LL has right to consent to any sublessee.

Purlich who subleases to Bixler who subleases to Pestana. Bixler wants to assign sublease to Kendel bc rent now more than it is under sublease so wants to capture bonus value that Purlich would otherwise capture as original tenant

Court is in minority state where reads “reasonable” into the consent clause meaning consent must be reasonable to be enforceable

o Says wanting to capture bonus value is NOT reasonable because if the lease had gone down in value Bixler would be responsible so he should benefit from bonus value, not Purlich

Wellencamp v. B of A—bank wanted to forceclosure of mortgage bc wants benefit of higher int rate and court found NOT reasonable—basically says mortgagor benefits from low int mortgage bc gets higher price

o After Kendall CA legislature codified the rule that any reasonableness will be read in if no standard given for restriction on tenant’s right to transfer

This resulted in much more specific leases by LL’s in terms of transfer provisions

LL can prohibit all transfers or prohibit transfers with bonus value or give bonus value only to LL so long as is explicit in contract—this doesn’t necessarily prohibit transfers but puts LL in bargaining position

Acquisitions—LL must also specify for acquisitions bc otherwise lessee can sell company to new owner and though essentially this is a transfer if nothing specific in lease court will resolve in favor of transferability and tenant gets bonus value

o Hypo—30 year lease to corporation with 100% shares to Green. Lease has bonus value and Nelson wants to take it over. LL doesn’t consent bc wants increase rent. Green can sell shares to Nelson. Same LL, same lessee, but Green is able to take over bonus value. Can say there has been no transfer so allowed. Court will interpret this in favor of alienability even though this is in substance a transfer

Involuntary transfers—LL must also specify what happens involuntary transfer as result of death of insolvency bc otherwise court will interpret lease to allow transfer bc favors alienation unless specified

o Hypo—30 year lease to Nelson. Nelson dies. He leaves to his kids. LL tells him to give lease back bc wants bonus value. Clearly there’s been a transfer even if involuntary but ct will allow it unless specified

This tells us that for pro-LL k must be explicit otherwise reasonableness read in For pro-tenant put “which consent may not be reasonably unheld” bc

that means can’t deny consent to capture bonus value and hard for other side to say want to be unreasonable—psych tactic

Advantage to tenant here is that at least it has to be explicit and tenant knows what is getting into

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If this had never been codified may have deterred long term leases or long leases with indexed rent bc LL would have been too afraid that reasonableness might be read in by courts—so at least keep rent fixed now even if can’t capture bonus value—prob better for tenants that was codified

The new rule also made due on sale clause enforceable even if not reasonable so long as specific

Though LL right to consent to sublessee or assignee is a forfeiture or promissory restraint on alienation it is NOT considered unreasonable restraint on alienation as it would be if this were a fee simple instead of a lease

o If fee simple: O conveys to A and heirs but if A transfers title without O’s permission O has right to reenter—unreasonable forfeiture restraint on alienation

o If lease: tenant shall not assign or sublet without LL’s permission or LL can terminate the lease—forfeiture restraint but not considered unreasonable restraint on alienation in majority rule

On the other hand, if lease said that transfer was void bc of lack of consent that would be a disabling restraint on alienation thus unreasonable and unenforceable—most transfers still valid even if without consent and breach of k

If tenant assigns without getting consent that assignment is valid and only if LL has termination clause can he terminate the lease

Anchor tenants usu don’t require any right of consent to transfer which makes their leases valuableo Kmart bankruptcy—went bankrupt, old stockholders lost all equity. Reorganized,

reopened at 10/share but now close to 100/share. But they aren’t even making money. when Kmart went into bankruptcy wasn’t really bankrupt bc owns incredibly valuable leases. When bankruptcy pending Lambert went to bondholders, bought them all up until had stake in company. He and other new bondholders got to convert to stock in new company. Kmart had hundreds of long term leases executed when it was anchor tenant. No transfer clause probably said NOTHING so tenant can transfer freely based on alienability. Why didn’t shareholders or lawyers realize this?

d. Covenants Between LL and Tenant

LL sueso Tenant subleases or assigns

No assumptions—T2 generally has benefits and burdens that touch or concern property but not those that are separate from the property (i.e. rent does pass but giving LL a bath does not)

Assumptions—if T2 assumes the lease then he is liable on EVERY burden on lease not just those that concern and touch the land bc puts T2 in privity of contract as well as privity of estate

Often LL will consent to assignment only if T2 assumes the lease bc now A has all liabilities that T had so sometimes forced to assume

o Landlord sells Tenant now has duty on covenants that touch and concern lease to LL2 but not

on other covenants i.e. no duty to bathe LL2 if that was in lease bc different person but T

still has duty to bathe LL bc privity of ko LL sells and tenant subleases or assigns

If assumed the lease, T2 has burden of everything in lease to L2 If didn’t, just burdens that touch and concern land

Tenant sueso Tenant subleases or assigns

LL had duty to repair to tenant and duty to bathe him he now has duty to repair but not duty to bathe bc doesn’t touch and concern land

o LL sells LL2 has duty to repair bc covenant to repair runs with the land

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o LL sells and tenant subleases or assigns Benefit runs to T2 and burden runs to L2 so L2 has duty to repair to T2

Obligations of T and T2 when assignment to T3o Obligations of T2

If T2 has signed assumption then liable to LL even after assigns to T3 and even before he took on the assignment—both before and after his privity of estate (though may try L to agree no past obligations exist)

If same thing happens WITHOUT assumption (T leases to T2 who leases to T3) then T2 ONLY has privity of estate and once he assigns to T3 he has NO liability to L

Thus ONLY T is liable for T3’s default if T2 didn’t assume leaseo Obligations of original T

Original tenant is still liable if T3 defaults on rent even if T2 assumed lease so LL can go after either T or T2—joint and severally liable

Unless: if LL and T2 changed terms of lease in such a way that prejudiced the T

(made lease worse by raise rent, longer terms) original T not liableo If change made lease better then T still liable

Sometimes after assignment LL will let T off hook (i.e. if assignee has stronger balance sheet than original tenant) but short of that still liable

Gerber v. Pecht—5 year lease to Pecht. Pecht assigns with permission to Moscowitz. He in turn assigns to Christensens without consent. Christensen’s default on rent. Gerber sues Moscowitz.

Is Moscowitz liable for Christensen’s default?o Interprets lease from Pecht to Moscowitz as assumption even

though didn’t directly say that If there was no assumption on M’s part then would

not have been liableo Says that between Pecht and Moscowitz Pecht is surety and

Moscowitz is principle debter (Gerber is creditor) This labeling does not mean Gerber can only sue one

or other of them—labeling them this way has no impact on LL—he can pick and choose who is liable

Court says Gerber can go after either Pecht or assignee Moscowitz first—whatever he pleases—and both P and M liable

o Though f Gerber and M had changed terms of lease that made lease worse for tenant then P would not have been liable at all bc no longer same lease

o Relationship between T and T2 If T2 assumed then T and T2 both liable and T is surety on lease, T2 is principal but LL can go after either of them for default of T3

original tenant can only pass what he has, no moreo Neal v. Craig Brown—Brown Sr. leases for 15 years to 60 minutes who subleases to

Hutchinson who has right to two five year renewals. Hutchinson assigns to Neal. Brown dies, son takes over. 60 minutes then goes into bankruptcy. Bankruptcy court instructs Hutchinson and Neal to make rent payments directly to Brown now that 60 minutes gone—did so for 13 years. Then Neal says notified Brown in writing that is exercising an option to renew for five years and he puts 6k of work into the place. Brown says terminates what he calls a tenancy at will. Neal then sues saying there was a lease.

Neal says that lease terminated when 60 minutes bankrupt and that he paid rent for many years to Brown and was substitute lessee under terms of original lease

Court says no, bankruptcy does not destroy lease Neal also argues that he is in effect an assignee under the 60 minutes lease

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Ct disagrees because 60 minutes had only given Hutchinson a sublease (bc retained two months) and therefore what Hutchinson assigned to Neal was its own interest which was sublease, not assignment

Neal’s right to renew on the sublease have no effect on Brown because he has neither privity of k or privity of estate

Options in sublease don’t work because they are not binding on Brown only on Hutchinson—not assignee of 60 minutes bc 60min only sublet to Hutchinson

Case seems unfair Neal had paid rent for 13 years directly to Brown Made improvement on properties—intended to stay there

Argument that could have maybe worked for Neal? Neal could have argued hat with Brown Jr. that he was fixed tenant for

15 years Though oral lease violates statute of frauds he may still prove was fixed

tenant by part performance doctrine—give tenant chance to explain why he paid rent, made agreements—court still needs to be convinced that oral agreement existed and there is evidence of it part-perf takes down bar of statute of fraud and allows in evidence

Implied assignments—sometimes court may find an assignment even when it is not specifically written thus that a covenant applies to what was really just a sublesee

o Abbot v. Bob’s U Drive—lease on building for five years to Bob Thompson who owns both Bob’s U Drive and Continental. Bob assigns the lease to Bob’s U Drive but Continental is operating out of premises and some of the cars Bob’s U Drive rents are owned by Continental. LL thinks Bob avoiding a lot of rent by having cars in Continental’s name since rent is fixed plus number per car owned by Bob’s U Drive and Agreement to arbitrate was in lease. LL sues Bob’s U Drive and Continental over rent and says that arbitration clause should apply to both.

T argues that what Continental and LL have is at most a sublessee which means it is not in privity of k or estate and cannot be sued by L

LL argues that agreement with continental is an implied assignment thus they do have privity of k and estate and bound by covenants touch and concern lease

Court agrees with LL (even though doesn’t make much sense bc lease and assignments have to be in writing to survive statute of frauds)

o Court says Continental became coassignee with Bob’s U Drive before assignment

o Says when party is paying rent to LL there is presumption that he is an assignee i.e. implied assignee

o This is a big jump—could have been license of sublease especially considered oral agreement and court evades this argument

o Court is motivated by the fact Continental acting in bad faith Now we know assignee does arbitration touch and concern land?

o In this case easy answer since arbitration is ABOUT rent which does touch and concern land

o Also, agmts to arbitrate so common that reasonable transferee would think it does bind them which is the best test to examine

What perceived evil is court trying to avoid Says was trying to pierce corporate veil and keep Continental from

enjoying benefits but not being subject to burdens of lease But since Bob is liable for every covenant on the lease and he owns

both companies probably would have been held liable anywayo Only situation LL would have to worry about is if Bob going

through bankruptcy and transferred all assets to Continental

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but otherwise Bob is NOT off the hook even if Continental is so this opinion doesn’t make much sense

How do we know when promises touch and concern leaseo Promises that courts have held clearly touch and concern land

Duty to pay rent Duty to repair Use restrictions Services—heat water Agreement not to sublet Lease renewal Insurance most of the time (but not in Chesapeake) Arbitration agreements (Abbot) Security deposits

Promise to return security deposit to T does NOT touch and concern land when L transfers to L2 unless L specified that security deposit was transferred for repairs

Doesn’t usually run from T to T1 unless T specified soo Court has also laid out three tests

If promise made either tenant or LL’s interest more valuable then touches or concerns the lease

This is horrible test bc people wouldn’t litigate unless thought made them better or worse off

If promise intimately bound up with the land Again, not better than touch and concern except word intimately

If promise is such that reasonable assignee of tenant or LL’s interest would believe he or she was bound by the promise then it touches or concerns lease

Would reasonable businessperson believe bound by promise? Good bc takes into account current circumstances i.e. agmts to arbitrate so common that reasonable transferee would

think it does bind them which is the best test to examine LL enters into long term lease in warehouse building and T, corporation, assigns to Chesapeake—

a corporation. T agrees to maintain casualty insurance on building with L as named insured. o Does promise to insure building touch and concern land?

Most of us today would say yes bc very common in triple net leases Court said it did NOT touch and concern lease because benefited ONLY LL—

once got insurance money LL had no obligation to rebuild the property so fact that benefit was one sided led court to find no obligation

This analysis makes sense but belies general rules today

e. Termination of Lease

Evictiono Notice of termination (for PERIODIC tenancies only) must be effect to terminate and

give an effective date that is at least 30 days after the notice is received—disagreement among states and no maj opinion

One opinion if notice not within 30 days must send new notice with 30 days before

eviction otherwise notice is invalid and tenant never officially evicted thus not considered unlawful detainer and only liable for rent didn’t pay during holdover

Davidson v. Kenny—Davidsons have one year lease with Kenny who holds over so now month to month. Davidson’s want to terminate lease even though he pays the rent. Draft letter saying leave premises by September 30 but letter doesn’t get into tenant’s hand until September 6 so not 30 days notice. Kenny doesn’t leave until December 9.

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Davidons bring this action for the rent not paid for October, November, half of December

o since not sufficient and in minority state, Kenny effectively never evicted so just liable for single rent he never paid, not considered unlawful detainer

other opinion and restatement agrees with this one if notice not within 30 days eviction period is effective for next rental

period so tenant liable for the unlawful detainer damages starting that pt Usually unlawful detainer is worth double the rent from day of eviction

until action leaveso When is notice required?

Notice is required in periodic leases but not in fixed tenancy leases because there is a specific end date which automatically terminates the lease

o Proceedings/self help When tenants holds over LL has three options as learned before and one of

them is to treat tenant as trespasser LL used to be able to use self help to evict trespassing holdover tenants but now

we have FED or unlawful detainer statutes which allow for summary proceedings

Summary proceedings are usually quick way to get rid of tenant and were created to disincentivize LL use of self help

o Lindsey v. Normet said summary judgment statutes NOT unconstitutional even though can’t bring every counterclaim because they were created to limit self help and be efficient so not unreasonable that limited defenses can be brought

In CA o 48 days until judgment of evictiono tenants used to not be allowed to bring counterclaims but now

tenants may bring the important implied warrantee of habilitability and the covenant of quiet enjoyment

o judgment is limited to 25k even in comm settings so comm LL usually go to superior court

o there is right to jury trial but usually waivedo tenant usually loseso marshall then goes to get rid of tenant so from beg to end takes

90-108 days appeal—usually tenant can’t stay even if appeal unless post bond to

guarantee LL that if loses money will pay rent pending appealo court said 2x rent bond is unconstitutional but not 1x rent

court has held that these summary judgment proceedings do NOT violate due process even though can’t bring every counterclaim

pro self help tenant always loses (95%) and save money in judges, marshals etc. let tenant sue if LL wrong allow in repossession of chattels (cars) why not apts? other tenants end up paying for rent that holdover tenant doesn’t pay happens even in states where not allowed (this could go other side too)

Con self help possibility of violence? Yes, but LL could deal with that—wait till

tenant leaves to change locks homelessness may be part of the reason legislatures are unwilling to

allow self help—want to give people 3 mo free rent even though this doesn’t sound good politically

without self help LL need to screen more carefully and fewer people will be able to get housing

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UCLA article found that even if more efficient self help too traumatic Majority opinion

no self help, summary judicial proceeding for eviction (CA) Minority opinion

some self if peaceful Abandonment: tenant moves out of premises and law says that tenant is surrendering rights to

premiseso If LL accepts surrender lease ends and both parties out of contracto If LL doesn’t accept surrender then

LL may get judgment against tenant and doesn’t mitigate waits certain amt of time and don’t go into premises so lease still in

effect then sue for all the rent accruedo Risky bc may have duty to mitigate and/or T may be insolvent

In some leases there are acceleration clauses saying all rent under lease presently due and payable by NPV rent so LL doesn’t have to wait and can try to get all the money immediately

o if acc clause not accepted may still get anticipatory repudiation which says that tenant is signaling to world that will never perform and is still liable for NPV of rent

o also same risk of duty to mitigate and tenant broke If get this judgment premises still belong to tenant even with

acceleration clause LL gets judgment against tenant and mitigates

fears will never collect—want cash flow even if have right to force tenant to pay rent

When put another tenant in lease is terminated BUT still have right to damages for amt of k rent less amt rented for NPV for rest of lease—if k rent less than current then no damages besides costs of reletting

Is there is a DUTY to mitigate Majority rule says LL does have duty to mitigate

o Sommer v. Kridell—D entered into lease with LL then backed out bc engagement off. LL did not mitigate even though several people asked to rent it.

court takes this case as opportunity to review whether LL has duty to mitigate and takes on majority rule that LL has duty to mitigate

Reasons againsto From property point of view no duty to mitigate bc tenant has

land for certain amt of time and LL does not interfere with it Reasons for

o From k point of view have to mitigate damageso Also, don’t like valuable property sitting there empty

Damages for mitigationo Majority—Diff btwn reasonable value of mitigation and doing

nothing Even if market price higher than k price still sue for

cost of reletting o Minority—if don’t mitigate then no recovery from tenant o Usually wrongdoer has burden of proof on whether non

breaching party failed to mitigate but here burden is on LL to prove reasonably tried to mitigate

Easier for LL to prove that he did try (agent, ad) than tenant to prove he didn’t try

Tenant often tries to find replacement so not liable on lease

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Reasonable mitigationo For less or more rent so long as reasonable price depending on

marketo Must treat apt empty because of breach exactly same as treat

normal inventory Lease terminates without abandonment

o Who gets the improvements/detriments on property once lease ends? Want to tear down premises bc losing money

Tenant has duty to leave as found it, reasonable wear and tear excepted Want to build to make more money and LL in favor of the building

Default rule says on silent lease LL gets improvements once lease ends; if lease authorizes improvements then LL definitely gets them

Exception is trade fixtures—bolted down counters, chairs, built in refrigeration, etc in restaurant, partitions in office building, not furnace, air conditioner—tenant can remove them so long as doesn’t damages structure or pays for damages caused by removing them

o Condemnation before lease ends Default rule says that lease is terminated as soon as the property is condemned If bonus value in lease (lease for 20k, worth 24k) then get NPV of 4k year for

rest of lease

7. Easementsa. Nature, Types, Creations

Easement—non-possessory (in corporeal) interest in land o Unlike license cannot be revocable by will of owner and is not transferableo Can be very valuable asset even if non-possessory such as pipeline across company

Types of easementso Appurtenants—easement tied to land—are conveyed with dominant estate whether or not

specifically in real estate Dominant estate need not abut servient estate, just need be close by and need the

easement to reach road, lake, etc. though usually are contiguous o Gross—easement not tied to land—most valuable easements bc for benefit of owner

i.e. oil pipelines not tied to land, railroads, but could still argue that certain pieces of real estate being benefited from easement (refineries) so could say appurtenant but generally call easement in gross

behind every easement is eminent domain bc otherwise there would be holdouts every few miles by one landowner who refuses to sell—govt forces these landowners to sell easements otherwise huge efficiency problems with public utilities, etc. even with eminent domain hard to create long easement in gross

conveyance will only mention servient not dominant estate o Profit—easement plus—gives right to go on land like easement AND take profit from

land (oil, timber, gravel, etc.) Usually profits are in gross because once take from land can usually take it

wherever please (though could argue have profits in appurtenant if had lumber mill and owner of lumber co. uses land for timber for his co. on other land)

Duration of possessory and non possessory interestso Forever: non-possessory—perpetual, possessory—fee simple absoluteo For life: non-possessory—easement for life, possessory—life estateo For fixed period: non-possessory—easement for years, possessory—leasehold for yearso Revocable at any time: non-possessory—license, possessory—tenancy at will (though we

talked about how holdover tenants could have been considered licensees but court instead chose to call them tenants at will)

Factors indicating easement, not licenseo Easements need to be in writing by SOF whereas licenses can be oral

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o For specific period of time (licenses usually not specific time)o For designated areao Substantial consideration paido Appurtenant—linked to other land that is fee simple or possessoryo Right of easement holder to make improvements o Milbrook Hunt v. Smith—large tract of rural land. In 80s owner conveys something to

Milbrook Hunt. One piece is conveyed as lease—75 years (maybe clubhouse, storage facility, etc.). Problem is with rest of area where get easement (argues P) or license (argues D) to hunt foxes for 75 years. Owner sells to Smith who wants land as nature preserve and is against hunting.

P argues that it is an easement, thus owner can’t revocable D argues it’s only an license thus he can revoke it when he wants Court finds there is an easement

Specific length of time—says 75 year length indicates easement and licenses usually don’t use specific time periods

Particular area—P’s right is not in one particular area which weighs against easement (esp given D has right to develop land)—but court says that alone doesn’t mean not easement

Appurtenant—Though court doesn’t mention it fact that was attached to admitted lease may have weighed in favor of easement

Right was for benefit of hunt This is clearly a close case but court says there is an easement

Creation of easementso Creation by grant or reservation MUST be in writing bc governed by SOF unlike licenses

99% of time easements created by deed (only lease not created by deed) Grant

owner of servient land (lot 1) grants easement to owner of dominant land (lot 2) to use driveway, sewage system, etc.

owner of entire parcel grants dominant part of parcel to new owner (lot 2) and agrees to grant land “together with easement for roadway purpose” over his servient parcel (lot 1)

title examiner looking at either parcel will recognize easement reservation

owner of entire parcel sells servient part of parcel (lot 1) to new owner but “reserving, however an easement for roadway purposes” through that lot 1 for himself who owns dominant parcel (lot 2)

o easements by part performance if just oral agreement take out of statute of frauds and makes valid easement from oral or defective

deedo created by implication (implied easement)

may happen when easements oral or defective conveyanceo created by prescription

Easements v. licenses or fee simples o License v. lease

Hotel guests/lodgers/boarders are treated as licensees, not leaseholders But if change them just a little could have been leaseholds

Normal tickets licenses but season tickets might be easements (Cubs case) Kiosks in malls are licenses but could be leases

o Easements v. license License is revocable, not lease Not transferable—see lease section for more License dies with need for its use, easement goes on forever

o Easement v. fee simple absolute Whether something is easement depends on language when it was created and

how specific that language was

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Much easement litigation on rails to trials area Many RR have conveyed land to state for hiking trails, and if RR

originally had fee simple absolute then conveyed interest to govt agency then govt agency owns fee simple in the RR and can create RR hiking trails, BUT if was originally an easement then still easement

Sample easemento No ambiguity about what is being created

Clearly not lease bc says easement in several places Refers to easement or right of way

o Specifies location of servient land and easement Describes future servient tenant

o Makes clear easement is appurtenant rather than gross Says whereas grantee is seized in fee simple of another parcel of land near

grantor’s land Dominant estate need not abut servient estate, just be close

o Specifies location of dominant land Again, says dominant land nearby

o Describes scope of easement Says it is a driveway through much verbiage

o States duration of easement Says it is perpetual though not explicitly (would be better if were explicit)

Mentions heirs and assigns Presumption statute is that if have ambiguous conveyance of estate in

land it is fee simple and even though not estate here same applies—if don’t say length of time assume perpetual

o Makes easement nonexclusive Says with others having like right—probably several lots share driveway

b. Easement by Contract

99% of easements created by contract—in this section we deal with contracts that were oral in nature or otherwise do not meet statute of frauds and court must decide whether or not the k valid

o In contrast if was just a license can be oral bc do not have to meet SOF Easements by k are governed by statute of frauds bc usually longer than 1 year which means must

be in writing and have certain key elementso part performance doctrine—bar of Statute of frauds lifts if easement holder makes

payments, possession or improvements on lando estoppel reliance—don’t need to prove discrete acts of part performance pointing towards

existence of k—just need to document reliance such that would be unjust not to have easement

Ricenbow v. Krause—classic implied easement case but court treats as easement by k—Hannah asked Knutsen in 1901 if could have easement across his land for water. He said said. Oral conversations turns into irrevocable easement between two new owners in 1950.

Knutsen intended to grant oral easement but doesn’t meet statute of frauds

o Part performance? Could argue Hannah installing drain is part performance but at best this allows evidence into court, still doesn’t prove k

o Estoppel reliance? Court says this theory applies and that Hannah’s reliance upon oral license makes it an easement bc otherwise would be unjust

This case could be viewed instead as estoppel to revoke license, not actual irrevocable easement—unsure of which is really is

o Result would be the same even though license EXCEPT

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If gov’t condemned land licensee would get nothing whereas holder of easement would get something

Duration—revocable license only lasts as long as drain is there whereas easement would continue regardless of use

the way the court views the relationship has significant affect years later bc everything really points to this not being an easement

o ct seems very influenced by long use but court instead could have viewed it as Hannah taking advantage of Knutsen (easement lowers his value of land)

Floating easements—easement that isn’t in particular place (like power line where just say goes above some part of land)

o can render title unmarketable and lets buyer out when discover it bc can ruin plans for building

o most floating easements not huge problems bc once prior floating easement is physically located easement holder must release claim from land then landholder has clean title

o Berg v. Ting—Cahill, Hansen and Young want to subdivide property. Berg’s are against it but agree if they get an easement. Cahill then sells to Tings. Tings don’t get any documents about easement on their land, probably bc title insurance company made a mistake.

Bergs lose, court says no easement Though it could be a floating easement court rejects this bc says it isn’t

sufficiently described but this is incorrect bc the easement recording had attached a description of the Ting’s property so it was discernable where it was

o It really was a classic floater and court was wrong Easement violates statute of frauds because the recording doesn’t

accurately describe where the easement iso Part perf also fails bc no improvements, or possession

Bergs argue that they have payments in form of consideration—allowing subdivision to go through

Court says this isn’t enough, even though it agrees that improvements or possession aren’t possible in easements bc easements are not possessory

o Estoppel reliance fails as well bc didn’t rely on it yet This case is odd bc there is clearly a complete easement and good description of

property yet court finds no easement If Tings had never bought property and action Berg v. Cahill court

probably would have found for Bergs—court seemed swayed by fact that Tings bought property unknowing of easement

Court instead could (should) have allowed easement and forced title ins co which made mistake to pay the Tings for their loss

If no title mistake at all Tings have more applealing suit but still could have had someone look at it

c. Easement by Implication

Easement by implication—easement created in connection with written conveyance even though no express language to that effect—normally written document is conveyance of fee simple interest and easement is implied from

o Prior use—once owned by one owner and easement implied by use of property just not put in actual conveyance in writing

o Necessity (way of necessity)o Plat

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i. Easement by implication from prior use/quasi easements

Easement implied from quasi-easement or prior use Two types of implied easements

o Grant—C owns lots 1 and 2 and 1 has driveway for house on 2. sells 2 to Rebecca and does not say that she grants an easement with it

Law usually allows implied grants because seems like parties intended it to be included

o Reservation—C sells lot 1 and doesn’t say “reserve easement” though should have Law more divided and courts more suspicious in these cases bc C is attacking

her own deed whereas in implied grants other party attacking the deed Some states don’t allow implied easements in cases of reservations Some states that do usually apply reasonable necessity or strict

necessity standard in order to find implied reservation Other states don’t distinguish between reservations and grants and

apply reasonable necessity to botho Otero probably in this group bc court grants easement even

though was implied reservation and BFP Sewer there when Pacheco owned two houses and

when conveyed lot 4 should have reserved easement for sewer over 4

o Campbell v. Aerie—unsure whether implied grant or reservation bc don’t know whether c/o conveyed motel or restaurant first—if conveyed out restaurant first then implied grant of septic tank on other property, whereas if conveyed out motel first then c/o should have reserved the easement

Four elements must be met to establish implied easement o 1) Land at one point in common ownership—implied easement cannot exist where

neither party or their predecessors owned one parcel of lando 2) Quasi easement must have existed prior to split (not actual easement because only one

parcel)o 3) Reasonably necessary for enjoyment (strict necessity in some states that allow implied

reservations)o 4) Apparent before split—if not apparent before split no implied easement

TWO ISSUES HERE Apparency at time of split

Goes to intent—if easement in place at time of split off then probably intended to convey it

Apparency at time of later purchase Even if apparent at time of split element may still not be met if BFP

(bona fide purchaser) doctrine comes into play—recording acts issue If new owner takes land without notice of outstanding easement interest

and pays fair price then he is a BFP and easement should not be recognized

This only comes into play if there is no actual or constructive notice bc if so, then not BFP

o Constructive notice satisfied if easement recorded in title easement reasonably apparent from inspection

o BOTH of these two issues actually dealt with recording act, not apparency at time of splito Otero v. Pachero—c/o, Pacheco, owns lots 4 and 5. Public road between them. House

on lot 4 and 5 both dump sewage into road over lot 4. Pacheco conveys lot 4 to intervening grantee who later sells to Otero. sewer begins to back up into Otero’s house. Otero discovers other house. Otero sues Pacheco for injunction to stop dumping sewage

Apparency is the main issue

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Ct doesn’t discuss apparency at time of split though they should have bc if not apparent at time of split then no implied easement can come into being at all—basically assume apparent at time of split

Court says that reasonable inspection would have disclosed this fact thus Otero is not a BFP bc was on notice thus he is burdened with this easement and Pacheco can keep dumping sewage into Otero’s line

Though drain doesn’t seem like enough to be constructive notice, and esspecially given this was by reservation, surprising holding here

o Campbell v. Aerie—one original owner of a parcel with motel on one parcel and restaurant on other parcel. Motel and restaurant both hooked up to septic tank. In 1950 c/o conveys out motel and rest parcel to different parties. There are intervening owners before the current ones. Campbell who bought motel realizes that septic tank on his land is servicing the restaurant. He seeks to stop this.

Again apparency is the issue Though the easement was apparent at time of split, it was cut off later Campbell asserts BFP doctrine—he argues that was on notice that there

was septic tank but not that Aerie was using it even after reasonable inspection

Court says that since Campbell not put on notice of the easement by reasonable inspection or recording of deed there is no easement by implication

Aerie could have tried to argue easement by prescription (AP) but it was not open and notorious bc not apparent

ii. Easement implied by strict necessity

Related to quasi easement but nevertheless distinct o Similarities esp between easement implied from quasi easement by reservation and

easement by necessity In some implied reservation cases strict necessity is required Similarly easements implied by necessity require strict necessity

o But different easement by necessity does not have apparency requirement easements implied by quasi easement becomes permanent whereas easement by

necessity is ephemeral So though easement by implication easier to prove bc don’t need to

prove apparency, still may prefer easement by implication necessity usually applies only to roadways and sometimes utility easements When cts find strict necessity tries to interfere least disruptively in servient land

Requirementso Common ownership at one pointo Dominant estate severed from servient tracto Strict necessity existed created by the conveyance

Though in Hurlocher ct says doesn’t have to be at the exact time when lands first split off, only that created when lands split from common owner

Hurlocker v. Medina—Initially both parcels owned by SDC but then SDC conveys east land to ASA. ASA conveys that land to Bartons at same time SDC conveys their land to Bartons. at that point bc public road along north later closed. So when lots initially split off, there was no strict necessity. Later, Bartons convey their two lots to bank. Bank then conveys east lot to Medina in 84 and keeps the north lot. 8 years later conveys that one to Hurlocker for half price bc of easement problem. Hurlocker has no access to road.

Medina argues necessity not created by the original splitoff bc there was another road at that point

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But there was necessity when the lots when the lots were continguous and owned by the same person (bank)

Court says it doesn’t matter whether necessity created when owned by same party or whether created when the original owner owned the land

Public policy v. intent approach o PP used to be approach of whether to determine easement by necessity

based on fact that landlocked land not good bc land will be unused so long as easement necessary to use land ct will find easement under

PP doctrine But in age of environmentalism may not want to use all land

o Some courts (Hurlocker) take intent approach instead At least doing it for the right reason but less clear More litigation Less predictable Not so necessary to use all land in environmental age then taking issue usually must ask whether easement is taking land and deserves

compensation whereas intent approach makes it just a bargain between parties Hurlocker

Bank told Hurlocker there was problem with access and he bought it dirt cheap because of it—didn’t pay FMV—this suggests bank did not intend to create easement

This isn’t greatest of intent but suggests no easement intendedo Half states now allow party who needs easement to condemn an easement through

servient estate Means dominant estate owner only has to pay FMV, servient owner can’t extort Gives power of govt to private individual FMV is diff between value of lot with and without easement so difference is

condemnation award but still must be placed in way that doesn’t interfere with servient

Example: c/o owns one tract of land with public road next to it and on other side no road at all. If c/o conveys the landlocked portion to another party then because that land is landlocked and bc conveyance creates landlocked condition that party gains easement by necessity

o If c/o retains the landlocked parcel there is easement by reservation bc of strict necessity instead of by grant so can come into being with either grant or necessity

o Not a quasi easement bc no easement there before the split

c. Easement by Prescription/Adverse Use

Easement by prescriptiono Literally means pre-writingo 99% of time think about it as adverse use—like AP o 1% of time think of lost grant theory—assumes that long time ago there was a written

easement that has been lost but it was there at some point Theory is that if used land long enough that belonged to someone else must be

bc it did belong to them at some point this theory is pretty much dead but once in a while reference to fiction of lost

grant is still made only still affects act of protest by underlying owner

protest strengthens AP claim bc makes more adverse to true owner protest in prescription claim has opposite effect—stops continuity and

prevents easement by prescription bc suggests that there is no lost grant even in absence of lost grant theory public policy suggests that protest

should stop adverse use or possession bc may result in fewer lawsuits if protest is enough to stop clock—puts burden on wrongdoer (AP or

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user) to keep the clock going instead of owner to stop the clock by initiating a lawsuit

o prescription can cause birth AND death AND change in scope of easement if servient owner blocks easement for length of statute of limitations and

dominant owner allows it then may be death of easement by prescription Can also expand easements by prescription, meaning adverse use which would

otherwise be surcharge but met all elements of prescription that would become expansion by prescription

Glenn v. Poole—used road for years, widened it, and ct said increased scope by prescription

Requires same elements as adverse possession of lando Intent

Don’t often consider intent as deeply as in adverse possession Instead nonpermissive use is enough

o Open and notorious Doesn’t require actual notice anymore than in AP, just constructive

o Continuity Also required here but not as much continuity as in AP Can be as little as using a road once a day, week, month bc what is created by

prescription is an easement geared towards use So if use once month during period of statute then get easement for

once a month Under AP

the following interrupted continuityo Tacking between nonprivity ownerso permissiono filing suit

but protest by true owner strengthens AP case under easement by prescription

the following interrupt continuityo protest by true owner (only under LGT, not AP theory) o blocking easement o tacking under gross easements

the following do not interrupt continuityo tacking not a problem with appurtenant easements bc when

dominant estate is sold the easement goes with it to new ownero Exclusivity

Usually not required in adverse use because no reason 5-6 people individually can get easement by prescription at same time true owner uses land

o Color of title and payment of taxes Relevant in AP

Constructive AP—may give constructive AP of whole even though possess only part

Some states had shorter statute of limitations when AP operating under color of title

In some states like CA can ONLY acquire AP if pay taxes Not as relevant for adverse use in easements

Often people who have no taxes or color of title may try to achieve easement by prescription if can’t get AP

Whereas don’t lose title by AP by abandonment can lose easement by prescription by abandonment

bc don’t actually own title to land then if something happened like found gold underneath land adverse user wouldn’t get it but AP would

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depending on nature of land, there may be certain assumptions about whether use is adverse or not (just like in AP) BUT all of the elements still need to be met and question is whether permissive or hostile

o Hester v. Sawyer—Sawyer is landlocked. No easement by implication or necessity bc no c/o. Hester’s land fenced in by three sides. Sawyer uses one road for many years. In 1922 golf club on side of Hester’s parcel puts fence up so Hester’s parcel fenced in four sides. Sawyer allows fence but tells golf club he needs easement and makes a new, slightly different route which he uses for more than ten years (AP statute in NM)

Court says easement by prescription exists on later road (though not earlier one bc presumption is if land not fenced in then use permissive)

The elements aren’t really discussed Court focuses on presumption, says if land IS fully fenced there is a

presumption of adverse possession So later road which was created within fully fenced area was

prescription and used for longer that SOL means easement by prescription

Court doesn’t address whether it mattered that third party, not true owner fenced in property

o Shanks v. Floom—two houses next to each other. Original owners Shieltz and Floom. They agree to make a common driveway and share the cost. Shieltz sells to Shanks and Floom gives to his son, Floom Jr. These parties don’t get along.

Issue is whether Shanks’s use of Flooms’ half of driveway is an easement by prescription

Like Hester, this case is decided by presumptions Majority says there is a presumption of adverse use

o Benefits to presuming adverse use is predictability and certainty

Dissent says presumption of permissive useo But even with this presumption there still could have been an

easement bc could argue reliance on oral k like in Ricenbau which makes an irrevocable license bc parties relied upon it (though like in that case, would it be easement or estoppel from revoking license?)

o But could have specifically said in writing that license is revocable regardless of reliance

o Licenses by definition revocable but once relied to detriment made irrecovable by reliance

Easements in gross by prescription (i.e. for public) o Hard to prove prescription in easement in gross bc

Continuity/Tacking May not have identifiable people using the lake. If different people then not in privity Courts have held that it is not many trespassers but instead the

government who is the adverse users but then how would private owner keep from easement in gross by prescription

occurring? Maybe by granting permission so not adverse use would think this might limit taxes property owner has to pay bc land worth less

since can’t build on easement area (value of land might go down 90%)o some states (NJ) deal with public beach property by public trust doctrine—govt owns wet

sand area up to mean high tide land for public use ct said unless there was access to it ownership useless so held that public has

right of reasonable access to the area public has right of easement to wet sand as well reasonable recognition

on dry sand which is pushing the envelope

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Purchase prices in NJ reduced accordingly but problem is when the rule first comes into law and owners of beach land paid more for it

Why not condemn land and force govt to pay for it and split cost among taxpayers? That is the other side of the argument

Other issue is whose property gets the easement Ct said chose not to use implied dedication or prescription bc didn’t have to

o CA used implied dedication theory Gion CA case—privately owned land on beach—public used it as a beach for as

long as people could remember. Court said not prescriptive easement but implied dedication by owner

because he did nothing to keep the public off the beach so essentially estopped from keeping people off the property

Angered people bc didn’t even prove elements of prescriptiono Owner who did nothing gave easement to the government

Result of this was soaring sales of chain link fences, guard services, and Dobermans to bar public—so was this good public policy? No, people kept from beach

Legislature eventually enacted statutes to keep this from happening (at least in case where govt had taken no action)

o said to reverse prescription all have to do is go to county recorders office and give public permission to use the beach which makes more sense from a public policy standpoint bc public can use beach but owner retains property

rejected implied dedication when govt has taken no action to make area available for public

BUT did allow implied dedication where govt has expended substantial funds to make area avail for public (like reliance estoppel)

o impact of easement on beach is much more substantial on landowner than road easement bc is over entire beach area

d. Scope of Easement and Interpretation

Surcharge—impermissible use of the easement that violates underlying landowner’s rights Appurtenant easement

o Usually two issues Violation of purpose—Some actions are per se violations of purpose

Adding land to an easement is a per se surchargeo Brown v. Voss—browns have easement across Voss’ land for

their use of Lot B. They purchase lot C as well as B and want to use easement for both of the parcels. Voss say this is surcharge on easement.

Court says adding property to easement is a per se surcharge irregardless of rule of reason

BUT court denies injunction to Voss bc of estoppel reliance—Vosses waited and allowed Browns to spend 11k

In effect court says no injunction, $1 in damages is all the Vosses get and that includes future use

If location of easement is specifically laid out or was floating easement and then fixed to a location then changing location of easement is per se surcharge on the easement

o Dominant owner can NEVER move it:

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Reduces value of servient land bc unsure of where easement is

o Servient owner may move bc choosing to depreciate own land o Courts allow modifications of easements and often limit

height of roadway easements for landowners based on reasonable use

o Generally only way can change location is if one party agrees to it and gets paid what it wants for it

o Minority rule says that if easement is not initially defined and grant does not preclude moving it, it can be moved so long as passes balancing test: party pays for it themselves and does not frustrate burden and does not lessen utility of right of way after taking into consideration prior use of grant

Lewis v. Young—B family conveys part to J and part to K. J and K connect to this road on B’s property. B conveys to the Young’s who get perm from J and K to move rd. Youngs tear down old house and move road. Mr. Y, delays, L and K sue Mrs. Y for an injunction to compel her to move the easement back where it was which would force her to tear down the tennis court.

Court says easement can be movedo Extortion?

Y’s relied on promise that could move the road

o If Y’s hadn’t torn down house the court may have applied the traditional rule and said moving easement was surcharge

Court creates a new test in New York –says balancing test is appropriate for undefined easement

Balancing test is based on the impairment to the parties using the easement v. work done

Though seems this case more about money already spent then whether allowed

Subdivision of property reasonable foreseeable, not per se Change in use of dominant easement foreseeable, not per se Reasonable evolutionary change not per se easement

o i.e. Technological changes reasonable, not per se OR Overuse

Even if purpose not violated overuse can still be a surchargeo i.e. even if no per se violation, if subdivision causes overuse

could still be surchargeo i.e. if trucks go from 2 to 50 no change in purpose but

probably surcharge from overuseo Reasonable evolutionary change

change in use of dominant estate and in technology is allowed and not considered a surcharge

Cameron v. Barton—express appurtenant easement saying right of passway originally used for horsedrawn carts, now trucks, originally slaughterhouse, now highway garage.

o Court says no surcharge because certain amount of tech change is foreseeable as is change in use of dominant tenement

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o if easement had specifically said only used for slaughterhouse or horse drawn carriages then would be surcharge but not the case

Other case—farm with easement divided into 12 lots—now instead of tractors and trucks going over road have cars, etc. of 12 parcels.

o Generally this is considered evolutionary instead of revolutionary

o But if burden on servient tenement becomes much more substantial may be surcharge in use

Courts will often find an evolutionary change when the environment changes in a way society favors and a revolutionary change where the environment has changed for the worse based on societal notions

Fristoe v. Drapeau—Dominant side is lemon grove. For years easement over servient tenement used to harvest lemon grove. Dominant side wants to buy a house and servient owner says surcharge on easement. His objection is not to what easement says but that change in use to dominant estate results in surcharge of easement

o Why wouldn’t servient owner want house on dominant estate? Nature of lemon business is probably seasonal so

weeks and weeks without single truck whereas with house the easement will be used daily

o Presumption that society favors single family dwellings so court says evolution not revolution

o On the other hand, what if change was from lemon grove to cattle feed lot?

Court would probably find that was a surcharge even though seems evolutionary because still agricultural bc environmentally/offensive

o Easement litigation used to control other things like what neighbor is doing

o Baseline is the language of the easement itself They can be drafted as narrowly or broadly as can imagine

Can specifically say five car trips a day But most easements not drafted specifically i.e. easement for ingress or

egresso Scope of easement can be expanded by prescription (Glenn) if expansion of use meets

element of adverse use Glenn v. Poole—Glenn trying to get a determination that there is no easement or

if there is to narrow it. Poole family have used road for 80 years, first in lumber business, then gravel pit business, now repair garage. They have also widened the easement. Court says of course there is a prescriptive easement.

Court says no surchargeo Pooles had widened easement but court says that is allowed

because it was for safety reasonso Court says that even under a prescriptive easement some

change in the use of the easement is permitted Court says that cannot only create easements by prescription but can

also expand easements by prescription Gross easement—much more complicated surcharge issues in gross easements

o Exclusivity If exclusive, only easement holder can make (assign) further grants in same area If not exclusive easement, landowner can make further grants

BUT landowner cannot grant easement that interferes with original easement holder’s use—original easement holder has preference

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Pasadena v. CA Water Co.— Pasadena doesn’t want competition for water service. Five foot pipeline easement granted to city of Pasadena to lay water pipes. Later on, landowner makes second grant. Grants similar easement on same space to CA water co, competitor of city of Pasadena. City tries to enjoin water co. to lay pipes in easement.

o This case rides on exclusivity. If it is an exclusive easement then only city of

Pasadena can make further conveyances of the easement.

o Court says it is not an exclusive easement thus landowner had right to grant easement to CA water co and easement holder cannot stop the grant of easement

o Divisibility—we know easements assignable from above but divisible? If exclusive (most are), easement holder can divide, otherwise not bc landowner

has right of division But still must ask whether purpose and quantity of use is a surcharge

If not exclusive further division but only by landownero Current case on gross easements

RR companies has sold right to lay fiberoptic cable on the railroad right of way and not paid landowners. Many class action suits by landowners but problem is no real damages—also lawyers end up making most money bc no real damages

Many appurtenant easement cases courts have allowed road easements to grant to public utilities even though purpose seems different—courts have said public utilities are not inconsistent with roadways—again basically saying no surcharge just because no additional burden—so court may cite these appurtenant easements cases in order to say the fiberoptic cable grants are not surcharges

Assume they find against RR is this good PP? Not necessarily bc problem that fiberoptic cable will not happen Is society better off with fiberoptic cable considering it is a minimal

imposition on landowners? Probably

e. Extinguishment of Easement

Ways to extinguish easemento Release the easement—most common way to extinguish

dominant owner releases servient owner in deed form used to convey estate may be oral release but then statute of fraud applies so need part performance or

reliance o Quitclaim deed—dominant owner releases servient owner in quitclaim deed IF only one

easement and it is the only interest then can issue quitclaim deed for servient tenemento Merger—dominant and servient tenements merge into one ownership—if servient

tenement later sold to new party probably at most quasi-easement and back to implied easement

o Easement simply ends Easement for years comes to term Easement by necessity no longer necessary

o Foreclosure on servient tenement Mortgage foreclosure—if bank forecloses on mortgage on servient tenement and

a new purchaser buys it, then the easement evaporates even if still there When acquire easement ask bank if will subordinate its mortgage to the

easement but bank won’t have much incentive to do that—nothing in it for them since that will decrease value of servient tenement

Tax foreclosure on servient tenement Generally new buyer owns in fee simple absolute with no easement

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o Means owner of dominant tenement is concerned with whether servient owner is paying taxes

Though in some states taxes on the dominant tenement include the easement (taxes with appurtenant properties) meaning owner of dominant tenement may have been paying taxes on easement thus shouldn’t be foreclosure on it because taxes paid on that portion

o Condemnation—wipes slate clean on servient tenement so no easement Dominant owner usually gets part of condemnation award because he has lost

some value Two Possible Measures

o Diminution value of dominant owner’s property value—difference between value of dominant land with and without easement—more cases follow this even though state doesn’t like to value property that it is not taking

o Diminution value of servient owner’s property value—difference between value of servient land with or without easement

o Abandonment—can’t abandon fee simple absolute but can abandon easement Mere nonuse with oral statement of intent alone are not abandonment—need

evidence that did not intend to use the easement acts by DOMINANT owner i.e. if used often for years then stopped that doesn’t mean abandonment

on its face but if blocked the easement that physical act on top of nonuse (and oral statements) demonstrates intent to abandon

o so nonuse and oral statement can support intent combined with other acts that demonstrate abandonment

Hickerson v. Bender—Fagan develops subdivision and conveys out lot 20 to Benders and reserves easement in favor of all other lots over the E 15 ft for ingress and egress to gull lake. Hickersons buy one of those lots. Benders built tree, house, etc., into the easement. Encroached on easement significantly. Now Hickersons want to use it.

o Why does the court find abandonment? no clear intent to abandon at all

no physical act on part of easement holder no oral statements

some evidence this person’s predecessors DID use easement

o Adverse possession plays role here Benders had taken back easement by prescription so

ct probably didn’t want to destroy finding of trial ct when would reach the same result given that there was destruction of easement by prescription anyway

Esp bc normally easement holder abandonso estoppel to assert easement—vaguer than abandonment—may only be good for certain

period of time and ct may be more likely to find it when it is for a short term bc otherwise closer to abandonment

acts by SERVIENT owner and dominant owner allows creating detrimental reliance on part of servient owner—matters what servient owner thinks, not dominant owner

i.e. if dominant owner sees servient owner block the easement and allows it (maybe even supplies lumber for it) then that may be estopped to assert an easement (may also be abandonment but if not enough for that then probably estoppel)

in this case may only be esopped for life of building or some sort of time limit

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if building there for statute of limitations then servient owner may take back easement by prescription—death of easement by prescription

i.e. dominant owner sees servient owner plant crop in easement and allows it then may be estoppel

but probably only estopped to assert easement for the life of the crop—short life of estoppel may lead court to find estoppel because not as hard to find short time as long term estoppel bc becomes closer to abandonment

o Abandonment in Rails to Trails area Railroads had both fee simple absolute and easements

Hard for railroads to acquire fee simples in some states (MO) so if not successful in acquiring fee simple title, stuck with easement

But some conveyances for right of ways for railroads are viewed as fee simples, not easements “a RR right of way”

If abandoned, easement is owned by individual la ndowners so RR tries to say not abandoning it bc still using for RR purpose

still used for transportationo but some courts have said this is remotely connected to RR

purpose railbanking—save for later RR use

o but some courts have said too nebulous, not really being used for that

Courts have said not RR purpose thus abandonment and then taking for trails Landowners losing one of their bundle of rights—to exclude others But did the landowners really have right to exclude others when RR in

control of the easement? Not really because if RR had exclusive easements then they had the right to divide the easement, not the landowner and we don’t know whether the easement is exclusive or not

Glossameyer v. US—RR gave easement to state govt by Rails to Trails act. Underlying owners of land sue, say easement was abandoned thus belongs to them, not state.

o Landowners argue easement not used for original purpose Trials not same as RR but state says

still used for transportation o but different form than before

railbanking—may be used later for RRo but court says too nebulous a

concept—just a hypotheticalo if no RR purpose in hiking and biking trail, court says this

federal statute works a taking and the landowners must be compensated

o thus RR still own easement in this case, not landowners or local gov’t

But the Rails to Trails has survived in other states

8. Sale and Financing of Real Estatea. Contract of Sale and Escrow

Earnest money contract one to three months of escrowclosing Escrow—contract is pending—used a lot in Southern CA

o A week after sign EMC sign escrow agmt with escrow companyo Escrow company handles all payments, draft deeds, deliver deedso Split between buyer and seller

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o When buyer examines title and finds something they don’t like, they send the objection letter to the escrow company who then in turn relays to seller

o Escrow companies generally allow buyers and sellers to do what they want so long as both parties agree

o Charge 0.5% of purchase priceo In other states realtor or title insurance company handles this which makes sense bc

realtor and title insurance companies have incentive to make sure deal goes through Much cheaper than escrow companies and title insurance not any more

expensive so not paying more in other areas, just custom to charge less o If seller dies in interim still valid deed under escrow but not otherwise

Escrow arrangement allows deed to be valid bc party signed while aliveo One benefit is that escrow companies supposedly neutral third party

b. Marketable Title

Buyer wants to ensure clean titleo Old system: monopoly of lawyers

Real estate lawyer go down to courthouse, examines title, and sends opinion to buyer

Used to be suspicious of that system but by and large cheaper than title insurance system

o New system: title insurance—has become dominant Obtain prelim title report which lists encumbrances on the title which are not

covered by insurance Easements Mortgages (though may be satisfied by sale) Leases

Buyer then comes back and may say title is unmarketable unless can get rid of one of encumbrances

most important thing buyer does is react to prelim title report but often they don’t

Title company may say that will insure that item with additional premium from seller who pays for buyer’s title insurance

Title insurance company then sends new title to buyer with the problem areas gone BUT this just makes the title insured, not necessarily marketable

o Abtract system—some states don’t use title ins in average house sale Abstract title is history of piece of land Examined by lawyer who says whether title marketable or not Solvency of law firm stands behind it if they screw up

o Torrens system State issues certificate of title to new buyer but will still have exceptions to fee

simple title Even in that system crucial for buyer to realize state is just going to issue title

subject to encumbrances Marketability principle—primary protection for buyer pre-closing

o Usually explicit but marketability can be implied majority approach—even if not expressly in k usually implied covenant of

marketability unless expressly negated (which is allowed) even if say that will only give quitclaim deed at time of closing that

will NOT negate the promise of marketability whether express OR implied

ONLY express rejection of it will negate it

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minority approach—merely providing for quitclaim deed is an implicit rejection of implied covenant of mtkability bc seller only promising to give what own, nothing else

bad public policy bc buyer is forced to close even if finds out unmarketable

o Buyer may choose to waive marketability requirement but must be explicito Doesn’t mean perfect title, just free from reasonable doubto Merger—once transaction closes the title merges into the deed so can no longer argue

that title not marketable after closing Buyer may sue for any number of reasons (damages, specific performance, even

just remorse) Marketability problems

o break in chain of title may mean seller doesn’t own title—most serious objection

example: say A conveys to B conveys to C then separate deed from N to S who plans to sell to L—can’t find anywhere that C conveys to anyone else so break in title between C and N

o at worst this may mean C still owns property and S trying to sell

o at best (99% chance) S really owns land and person who C sold to just forgot to record the deed

o also may be that S owns title through AP if S and N in privity with each other and 15 years together

o but AP renders title unmarketable anyway in majority opinion so this doesn’t solve the problem

why? lawsuit about marketability of title btwn S and L can’t decide whether AP is present or not bc C is a party to the lawsuit and is missing from this action—civil procedure

C can’t be bound by judgment not a party to so unless she is party to lawsuit AP does not cure unmktability

Though odds are S owns doesn’t make it marketable if AP is the reason S owns the title

Longer back the break in the chain, more likely to ignore ito encumbrances

more common objection than break in chain—encumbrances render title unmarketable unless type that buyer has agreed to take subject to

any claim by third party again the real estate mortgages

o buyer may want to take over mortgage so not unmarketableo most of time when mortgage on property does not render

unmarketable bc will be paid off with proceeds of house sale o but mortgage by third party does render it unmarketable

easements judgment liens

o when debtor gets judgment entered against her, that judgment becomes lien on any land debtor has on ANY land in county where recorded—even may be in entire state

restrictive covenants—CC and Rs o ability of third parties to limit how an owner uses his or her

real estate—like negative easement—easement right to use someone’s real estate, covenant right to restrict use

o like with zoning ordinances, current violations of CC and Rs render title unmarketable regardless of whether buyer takes subject to certain CC and Rs

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o Buyers usually buy property subject to all restrictive covenenants so long as don’t materially interfere with use of property as a residence

so if do materially interfere that also renders title unmarketable in this case

Defeasible fee o Generally renders unmarketable

Unpaid real estate taxes zoning ordinances

o traditionally have not been enough to render title unmarketable even though technically claim by govt against real estate

ONLY renders unmarketable if at time of sale property violates zoning ordinances

Leases o Traditionally don’t render unmarketable as leases may be what

is driving the sale Laba v. Carrey—classic buyer’s remorse case. Objection to title is

outrageous. Buyer just doesn’t want the building but no real objection to mktability.

o General promise in this k is not marketability but insurability but ct later uses marketability standard even though not in k

o But one certain thing said marketability o Buyer agrees to take subject to covenants, restrictions,

easements of records now enforced providing they are not now violated

o Encumbrance: All of the sidewalks in the neighborhood violate

restrictive covenants—they are one foot below what they are supposed to be

Court allowed S to build sidewalk against covenant and provided waiver to it

Title company said this was not a violation given situation and agreed to insure that sidewalk does not now violate restrictive covenant

Doesn’t mean 20 years from now may have to change, but now doesn’t violate any restrictive covenant

o Court says that if this sidewalk makes title unmarketable then every sidewalk in NY is unmarketable so can’t get out of this on grounds of mktability or insurability

o Miscellaneous Encroachments—if neighbor encroaching on land renders title unmarketable but

must discover before the closing Marketability v. insurability

o Most k’s require marketability, not insurability but if only insurability then buyer can’t get out so long as insurer will cover it even if not mtkable bc agreeing to less sound title

Some unmarketable titles may be insurable bc insurability lower standard than marketability

insurers do actuarial analysis of risk and charge more for riskier title more likely to take risk than lawyers bc can calculate real risk and

company is on the line, not individual lawyer Buyers should be more averse when extremely valuable commercial real estate

because even if can get insurance on it (for extra $) have to worry about whether insurance co could really pay it off if litigation occurred

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o possible to have unmarketable title that is good, thus insurable AP example—lawyers more risk adverse than insurers Mortgage on land which may or may not be valid—insurers will cover this but it

does make the title unmarketableo also possible to have marketable title which is actually bad (probably insurable though bc

ins co probably made same mistake) deed from B to C is forged and N doesn’t know when C conveys to N may have situation where title marketable even though bad bc no way N could

have known about it buyer’s remedy options before closing

o restitution money paid for transaction—earnest money, payments for title insurance,

realtor, etc. will seek this if no benefit of bargain i.e. land worth less than contract price bc

doesn’t want to be in the deal if use English rule this may be only option if seller made a good faith breach bc

in that case can’t get damages—but this is dying out rule o damages

loss of benefit of bargain—bought for 200k but FMV 250k buyer gets 50k easy remedy if third party has already bought the land so know exactly what loss

of bargain was o specific performance

just have to show that had k, seller in breach, he performed, and no other damages equitable

usually not hard to prove normal damages not sufficient bc land is unique and deserve land

if FMV more than contract price then this is best remedy for buyer this may not be possible if third party BPF bought land

but then damages might be easy bc can show what they bought it for and exactly what loss of bargain was

seller’s remedies before closing o sues for earnest money as liquidated damages

but if liquidated damages clause considered penalty then can’t be enforced sometimes buyer will make EMC more like option bc says only get earnest

money if the deal falls through o damages

seller has to prove that FMV less than k but then seller is making himself look bad to the jury so not a great

remedy for seller—prefer specific performance bc no jury and price not relevant at all

o specific performance force buyer to pay the contract price

even in seller cases not hard to prove other damages insufficient even though just talking about money, not unique land

best remedy for seller if buyer has money

c. Financing

Point—one percent of loan amount—fee for processing loan o Usually either slightly higher interest rate plus point or lower interest rate plus point

if going to stay longer then choose point if shorter may choose higher int rate

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History of mortgageso Equal payments over 30 years and pay more interest in the beginning, less at endo Balloon loans

made monthly payments of mostly interest for five years then have to convince lender to give another balloon mortgage or find another

lender to pay off that mortgage through new balloon loan this worked in 20s and 30s because property rising in value Great Depression—bottom fell out and lenders no longer wanted to loan Even employed people lost home ownership bc they had no available financing

o Subsidization of mortgages 1935 congress set up FHA who came up with idea of 30 year mortgage

created FHA insurance so that if lender willing to lend up to 95% of purchase price for 30 years at fixed rate, evenly amortized then govt will insure the loan

FHA insurance paid by borrower by tacking on extra pt to interest rates WWII

GI bill enabled young men to go to college and gave them VA mortgage insurance which allowed zero down loans again insured by govt

o Private lenders realized default rate so low didn’t even need insurance Began making 30 yr fixed rate loans on their own but usually required 20%

down without insurance From 40s through early 60s boomtime in American housing At the same time govt regulated savings and loans interest rates and savings and

loans would tack an extra 2% on for mortgageso Inflation problems

Mid 60s drove up inflation rate and people began to put money in govt bonds instead of savings and loans for more interest

Congress then deregulated savings and loans rates which increased their savings rates in order to compete with the govt bonds rates

Savings and loans assets were mortgages which were fixed rate with no due on sale clauses yielding only 4-5% so they were earning 4-5% and paying 10-15%

Many S&Ls shut down and govt paid off savers bc the accts were insured

o After that S&Ls did three things to protect themselves created due on sale clauses and congress made them enforceable in 1982 so

sellers couldn’t pass on low interest mortgages to buyers invented ARMs—adjustable rate mortgages tied to market rate so protected

from inflation started prepayment penalties—didn’t have affect at time bc rates still going up

if pay off early pay percentage penalty to discourage prepayment when interest rates drop—economic reverse of due on sale clause

for some reason back in 80s Fannie and Freddie decided they would not buy loans from lenders who charge prepayment penalties

o may be that wanted to appear reasonable to consumers and didn’t think ahead to dramatic drops in rates

o congress then said S&Ls could act like banks and lend for any reason bank could loan—take restrictions off them to help them

some of them did fine but a lot of them shut down again because of incompetence and fraud

didn’t have reservoir of cash like banks did so made bad loans Govt came in in late 80s and created RTC resolution trust corporation to sell off

the assets of the thrifts, many at low priceso Secondary market became very important in 90s—made mortgage mkt liquid

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Banks or thrifts lend to homeowners Take the money and keep the safest loans (ARMs) and sell the others to

the secondary market Fannie, Freddie and Ginnie Mae Fannie Mae, Freddie Mac used to be govt owned corporations and in

70s privatized and are now two of largest corporations in world (though still fed connection bc govt appts board, lower lending rates)

o Those orgs then sell to investors across the worldo There is big push to regulate them or private them completely

and create new corporations Mortgage bankers lend to homeowners but

They don’t hold any of the loans in their portfolios Sell them to secondary market within 60 days

Purchase/Financing Exampleo cash transaction buyer will deliver check for asking price less deposit to seller

conventional financing buyer will get mortgage (80% LTV) so buyer gives another 60k down to seller and note worth 240k to the seller for 300k purchase

lender may then sell loan on secondary market they don’t get enough money from savers to hold all of the loans so sell to

Fannie or Freddie and then have enough cash to loan moneyo They borrow at low rate bc quasi govt and buy mortgages from other

banks o they either save money or sell them piecemeal to the public all over

world who are essentially financing our home mkto public buys them bc think secure money BUT those companies are no

longer govt and not certain that govt would bail out unconventional loans are insured by the govt (FHA, VA) and allow almost no down

payment borrower pays premium for insurance through add’l interest (bc usually don’t

have cash) private lenders also allowing zero down payment loans now

o some use private mort insuranace—PMIso others don’t even use it—risky loan

Ginnie Mae (govt entity) buys FHA and VA loans and sells them to public just like Fannie Mae did—investors especially like these bc underlying loan insured by FHA and then GM—govt—insures again

If interest rates drop dramatically homeowners may prepay w/o penalty and then investors take $ back when don’t want it yet—want to stay invested

Seller financing—common during times of high interest rates Lot of buyers can’t qualify for loans when interest rates are very high In order to sell homes sellers would take back mortgage themselves bc otherwise

too hard to sell their home—prefer to get 300k at their own financing than 280k at a regular mortgage

o If mkt rate 17% gives loan to buyer at 14%o Usually short term mortgage with balloon so lump sum due after time

(would be crazy to do 30yr—need to get cashed out at some pt) o buyer hopes lower interest rate so then refinances and has enough cash

to pay off the lump sumo Elderly people liked it bc got down payment plus income every month

in form of mortgage payment But when seller does own financing not getting stated purchase price bc if she

was cashed out could have put the money in govt bonds and made more than on mortgage, instead has to wait till balloon payment to get cashed out and loses on money could have made at higher interest rate

Buyer gets two mortgages Second mortgage more risky bc wiped out if first mort forecloses

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Sellers sometimes takes on second mortgages bc riskier, higher interest rate than first so

Parents as well do this bc if just give money there might be divorce and parent doesn’t want money split

Buyer takes over loan When interest rates rise buyer wants to take over lower priced loan and may

even be willing to pay higher priceo don’t have to be veteran to take over VA or FHA loan

Due on sale clause may disallow this on some mortgages

d. Foreclosures

History of mortgage foreclosureso In CL England had landowner/grantor who would borrow money from lender who could

would take possession of land for five years and if landowner did not pay back on a certain day (law day) then he would not get his land back

This is like fee simple subject to condition subsequent—if grantor pays on law day then he has a right to re-enter

Lender couldn’t charge interest (considered usurious) so instead took possession of land and collected rents and profits on the land during that time

o This was very harsh system bc if two days late with payment lost land Resulted in creation of court of equity bc after turned down by court of law

would go to king’s chancellor (equity) to explain why late with payment and then might get land back if fair and equitable

Equity courts realized wasn’t really fee simple subject to condition subsequent—was a mortgage (security for debt) and shouldn’t pass real title

Borrower still has equitable title and lender only has legal title Equitable title trumps legal title Equity of redemption—right to pay late so long as reasonable

o word equity now used in many ways today and synonymous with real ownership

With less predictability (hard to predict what is unreasonably late) lenders less likely to lend so equity courts created remedy for lenders—foreclosure

Strict Foreclosure—lender would go into equity court seeking writ of foreclosure and equity court would enter order saying if debtor comes up with full amount in certain day then debtor gets his land back, otherwise lender get it

Lenders could now collect interest but could no longer take over possession because that was just in absence of interest option

Current state of foreclosureo What causes foreclosures

Divorce, unemployment, illness Anti deficiency rule in CA may encourage foreclosures bc no personal liability

If have 200k house and 300k mortgage then may just want to leave and stop making payments

o This happened a lot after the earthquake where people who did not have earthquake insurance lost much value on house and still have big mortgage on it

BUT credit system pushes in the other direction—once have bad credit hard to get any other mortgage

Sometimes may be worth the risk if have a lot of cash and don’t need new mortgage

o Foreclosure sales routinely yield less than FMV Can’t inspect property same way normally could

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Homeowner could allow inspection bc might increase price but usually upset that being foreclosed so don’t

Similarly if rational could have tried to sell house selves but don’t Have to be sold in one day no matter what

Won’t yield same as in normal transaction Statutory redemption Up front costs of title research bc seller not promising marketable title

o Mortgage starts with signing promissory note plus debt Cannot have valid mortgage without promissory note and debt

can have promissory note without a mortgage—just an unsecured debt Some states are still “title states” and thus give lender legal title with mortgage

which comes from the old notion of lender taking possession Most are lien theory where lender only takes title once foreclosure

happenso Default occurs

Acceleration clause—mortgagee can demand balloon payment for full amt once mortgagor defaults but NOT before due to statutory redemption

Statutory redemption o Normal statutory redemption

Until valid foreclosure sale debtor has equity of redemption—right to pay late and any agreements waiving or limiting right to foreclose at a public sale are illegal and “clog equity or redemption”

o Post statutory redemption after foreclosure sale that is end of story in 60% of

states in other states have post sale redemption—3 months

to a year to pay the purchaser for what ever they paid at foreclosure sale—NOT just mortgage owed

foreclosure buyer will bid less bc essentially only get fee simple defeasible since mortgagee has right to re-enter

but could argue they might try to bid more bc then less chance mortgagee might be able to take it back

this is slowly going away—the time period is getting less and less

Once lender has validly accelerated debtor must pay full amt in order to create equity of redemption

o Once acceleration occurs, have public sale in 48 out of 50 states (2 still have strict foreclosure)

Theory is that public sales better for debtors because forces price up more than strict foreclosure

Some states have public foreclosure sales and others have judicial public foreclosures

60% have power of sale/non judicial foreclosure (at least in add’n to judicial foreclosure)

o less time consuming and costly—lender sends notices to parties and publishes one in newspaper that foreclosure sale will take place on certain date and the sale wipes out equity of redemption—still takes at least 5-6 months, usu 7-8

o but even in states that have non judicial foreclosure sometimes still use judicial foreclosures because

it is the only way to get a deficiency judgment (even in CA if not in 1-4 family dwellings)

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if don’t have power of sale clause in mortgage then have to use judicial foreclosure

if don’t know mortgage priorities can’t use power of sale, must have court determine priorities

o power of sale can be in lender, sheriff, or other deed of trust with power of sale in trustee

don’t know why call trustee bc doesn’t have trust function with fiduciary duty

deed of trust to trust what panda is to bear 40% states have judicial public foreclosure which is like regular

judicial proceeding and time consuming costly to lenderso lenders don’t like it bc each month mr in possession lender

loses income from that propertyo NY and FL have only judicial foreclosures but most allow this

or power of sale o These do have slightly higher interest rates but also lenders

don’t lend as ofteno At foreclosure mortgagee gets paid off and jr mortgages and mortgagor take surplus

If no surplus jr mortgages becomes unsecured and in most states lender will get deficiency judgment that mortgagor still owes the balance

Debtor is personally liable on debt in addition to land being liable CA has anti-deficiency statute which says that if you are debtor in purchase

money mortgage on 1-4 family house (mortgage used to buy real estate—not second mortgages, etc.) on residential real estate and it is occupied by mortgagor debtor has no personal liability on debt—no deficiency judgments

o Law of priorities When have more than one mortgage, priorities come into play Second or third mortgage it is not as good as the first mortgage—greater risk to

lender bc if first mortgage forecloses only have right to surplus Second mortgage will be paid off by surplus after senior mortgage paid

from foreclosure price if there is any—second mortgage gets paid before the mortgagor does

Essentially mortgagor assigns right to post senior surplus he would have had to second mortgage when takes it out

But mortgagor takes surplus from all of the combined mortgages if any Purchaser at foreclosure sale should put himself into shoes of original owner of

house at the instant before the mortgage in question signed (assuming all tax liens paid bc those are senior to first mortgage)

Lender is at an advantage at the sale bc they get their mortgage back as a credit so don’t have to put up nearly as much cash

If lender is owed 100k and bids 100k gets 100k credit and pays nothing Uniform non judicial foreclosure act—if different mortgagees agree then money

from sale will be used to satisfy all mortgages on property and there need not be any real foreclosure sale, just a private sale. If any of parties does not agree have auction sale away to try to get highest possible price.

Example: first mortgage in favor of Wamu for 100k second mortgage from BofA for 60k

o BofA should check value of house and determine whether there is equity beyond mortgage

o Want to make sure FMV of real estate will equal or exceed sum of two debts—160k—bc come in behind first if default

Mort 1 defaultso Price—the most purchaser should pay is FMV because Wamu

will be paid off by proceeds and BofA debt will be wiped out

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o Say sale price=175k—pay off mort 1 and 2 and mr gets 15k o Say sale price=140k—pay off mort 1 and 40k to mort 2 and

nothing to mr Mort 2 has right to deficiency judgment against mr

and try to go after his other assetso Say sale price=75k—pay 75k to mort 1 who will then get

deficiency judgment against mr (if NOT in CA) for 25k, mort 2 will get deficiency judgment against mr for 60k as well (he can get deficiency judgment bc not purchase money mortgage—second mortgage)—even if in public sale where usually can’t get deficiency judgment mort 2 can still get judgment on note

Mort 2 defaults (may default first bc drop in property value will affect mort 2 first)

o Price—most should pay is FMV LESS value of mort 1 because that will be paid off first even though mort 2 forecloses first

In shoes of original mortgagee bc when take out second mortgage already have first mortgage

New purchaser will take over mort 1 or pay it off o Say FMV=175k, then shouldn’t pay more than 75ko Say FMV=140, then shouldn’t pay more than 40k—that 40k

will go to mort 2 who will have deficiency judgment against mortgagee for 20k

o Say FMV=110k, then should pay no more than 10k and mort 2 will get deficiency judgment for 50k

o Say FMV=90k, then should pay NOTHING bc net worth less than zero—though possible mort 2 will buy it back and make payments on mort 1

d. Deeds and Title Covenants

Land contracts must satisfy SOF o Violation of SOF: either

Oral so no written k But need only be some sort of writing—if oral k but there is letter,

writing on napkin, series of letters, anything in writing dealing with k that will satisfy SOF

If contract violates SOF does not make k void, just means neither party can enforce the k by specific performance or damages

o k may have validity for other purposeso if have oral earnest money k, then close the deal the

transaction is valid once closed—fact that earlier oral agmt does not matter

o even if never closed and no valid k, there still may be tort action bc of interference with k even if oral k—valid for that purpose

o part performance doctrine—some oral k’s get enforced if can satisfy PP and take out of SOF

Or written but no missing any of the requirements below identification of land

o though again, not enough in Berg v. Ting even though knew plot of land and gen area of easement

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o generally street address or “my farm” (if only have one farm) is enough though some courts require legal description of land

by reference to US survey by reference to official subdivision metes and bounds—simply calling distances—these

can be frustrating bc sometimes never close—just three sides of rectangle

priceo if seller financing then terms of mortgage must also be

reasonably complete don’t need date of closing

o court will read in reasonable time for closing signed

o normally SOF says signed by party to be charged meaning the party against whom seeking enforcement (defendant)

o some statutes say it has to be signed by vendor/seller but problem is that vendor seeking enforcement can sign it any time before lawsuit so makes no sense

leg probably assumed buyer usually sued seller but not necessarily

o initialing may be enough for signature bc courts generally very liberal

o but now we have esignatures and those can be enough can just typing ok really be enough? May be

o part performance—lifts statute of frauds and allows in evidence of oral agmt to come into court

evidentiary theory requires payment, possession, improvements this theory argues these are unequivocal evidence that a sale of land

took place and thus should weigh all evidence equally o this doesn’t make much sense—could be evidence just of lease

under this theory the evidence can be used by EITHER party so if seller wants to prove PP by buyers actions this theory is preferable (Pierson)

Roundy v. Waner—parents convey by deed house to their daughter and son in law. Classic example of why if we didn’t have distinction between equitable and legal title would be easy case. Everyone concedes daughter and son in law have legal title but not equitable bc parents still live in the house and plan to redeed to parents later. Only deeded to younger couple in order to get second mortgage bc they couldn’t get it themselves. So Waners don’t have full title but they do have limited ability to pass title to other people if new people were BFP. Falling out, Roundys say they want their title back. Daughter counterclaims that court should recognize that they have the real title because in oral agmt the Roundys agreed to deliver real title to Waners if they paid off the mortgage and repaired the house.

o Waners thus have payments and improvements but no possession

Waners argue not only paid off mortgage but paid mother otherwise

Repaired house—improvements Sold house to move closer to parents—clear reliance

o Court says they relied upon them thus they get land Burns v. McCormack—Burns live in Boston area and have oral deal

with elderly man wherein they agree to care for him and he will give

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them house when he dies. They sold their house and business and moved in with him. When dies, other relatives say house is theirs.

o Court uses equivocal evidence theory Says moving and providing service is not

unequivocal evidence of land k Not even possession bc lived there with man, not

alone So Burns never get to say what oral agmt was Court probably thinking since man can’t tell his story

not fair for the Burns to tell their story Pierson v. Garner—owner of commercial building who enters into oral

k to sell building to dentist. Dentist moves into building and pays 10k down. Dentist modifies building. Dentist moves out. Seller brings motion for specific performance, wants price of land, not just damages bc that remedy inadequate. Wants to force dentist to pay for building.

o This case is different bc usu buyer uses PP to prove k existed but here seller

Evidentiary theory would be easier to use here bc not as dependent on who did the actions as reliance theory—can say dentist’s actions would be enough in combination with his allowing those actions to prove k existed

estoppel reliance theory requires payment, possession, improvements under this theory these requirements are actual evidence of reliance this theory can only be used by the party claiming part performance—

o Pierson—seller can still argue his case in a reliance state but must argue that by allowing buyer to do certain acts he relied

Giving up other purchasers Bought another building Moved to another city Allowing dentist to modify the building

o Burns—if had used reliance theory probably enough to take out of SOF

sometimes part performance not enough to make it a k (Berg v. Ting) even when everything in writing except one thing

so would assume that easier to take something out of SOF if only one thing not in writing but everything else is but not necessarily true

Essential elements of deedo Usually formal document but doesn’t have to be

Can literally write a deed on a napkino Must be in writing to satisfy SOF unless lease for less than one yearo Mostly same requirements as EMC except don’t need price: requires:

Identification of parties Land described though street address or my home (if only one home) may be

enough Evidence of intent to convey Notarized because in order to be recorded must be notarized Delivered to grantee

Death escrow situation—problematic—normally must do by will Consideration

Deeds usually say nominal consideration because that has been done historically but don’t even need that

o No, because consideration is in connection with EMCo Thus gifts are valid deeds even without consideration

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Chase Federal v. Schrieber—Ross elderly woman befriended by gigolo, Conoyer. Deed says $10 and other consideration and for love and affection. Conoyer sells to Perez. Perez get financing from Chase Federal. Ross’s estate (Schrieber) sues to set aside the transfer and get the land back. He argues that deed to Conoyer invalid because no consideration and Conoyer not relative.

o Ross’s estate argues that Perez’s not BFP’s because had constructive notice bc deed was recorded and said consideration was love and affection

Ross can’t argue fraud so relies on consideration bc would have to prove not only fraud but that Perez and Chase knew of it

Ross has already gotten money from sale against Conoyer but wants the land maybe bc Conoyer broke

o SC FL rejects idea that deeds need consideration even when given to non relative

Don’t even have to say anything about consideration buyer’s remedies after closing

o Can no longer sue for unmarketable title even if turns out nonmarketable merger—after closing can still try to get earnest money back if title

unmarketableo can sue title insurance co, maybe lawyero can sue seller for breach of warranty

but warranty deed only good as solvency of seller limited warranty deed only guarantees that the seller didn’t hurt the title, doesn’t

guarantee anything from before Regular warranty deed will protect from all previous owners so more protection quitclaim deed which make no assertions of marketable title

Three kinds of deeds 1) Warranty deed

o Covenants to protect buyers after closing o Includes PRESENT and FUTURE covenants

In many states carefully spell out five or six covenants But some states (WA) say can have warrantee deed without saying much

Warranty deeds may just say “conveys and warrants” for warranty deedo Full warranty deeds make sellers very liable so understandable why sellers don’t want to

convey full warranty deeds 2) Limited warranty deed

o Only protects buyer with respect to things grantor did to title, not anything that previous owners might have done to title—don’t go all the way back

o Again may be specific or may just be in language like “bargain and sale deed” or “grant deed”

In CA—limited warranty deed is custom, called grant deed not mandated, just custom, but bc everyone gives it then almost everyone does

o can only sue with defects the grantor created, not earlier defectso contains ONLY present covenants in CA so can’t sue any earlier grantors

3) Quitclaim deedo Only conveys that the buyer has in the land but doesn’t promise has anythingo Makes no warranties whatsoever—buyer beware, rely on title insurance or examination,

not seller o “release, remise and quitclaim”

Present covenants o 1) Seisin—seller saying “I own the title and there is no break in chain”

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o 2) Right to convey—almost irrelevant bc if own have right to convey but aimed at times when seller is using agent to convey

o 3) Covenant against encumbrances—tracks marketability encumbranceso Third party claims against land

Easements, mortgages, liens, leases, restrictive covenants, zoning law if there is a present violation but NOT building codes bc nothing to do with title

To find easement by reservation is literally to attack one’s warranty deed bc then coming back and saying warranty didn’t mean what it said

o Statute of limitations on present covenants start to run on day deed is delivered and usually runs about six years

o Who may be sued Only P’s immediate grantor Covenants don’t run with land Examples

o A conveys WD to B with a floating easement then B conveys WD to C C can’t sue A for damages in reduction of value on present

covenant bc can only sue Bo A conveys WD to B with floating easement then B conveys QC to C

Now even worse bc can’t sue B bc no liabilityo But VERY small number of cases allow C to sue A (assuming SOL

hasn’t run) regardless of whether B conveys WD or QC to C Theory is that when B QC to C he assigns his right to sue A

What constitutes a breach? Failure of title or existence of an encumbrance when deed is delivered

Future covenants—unlike present covenant they DO run with the land so can sue earlier party if the breach of warranty first happened with that party conveyed

o Covenant of warranty and quiet enjoyment used to be separate but now treated as one Track three present covenants

o Further assurances Only one of five/six warranties that can be enforced by anything other than

money/specific performance Aimed at if there is problem with title and grantor can cure it court will compel

grantor to execute document to make title good if it is within his powero Court order for specific performance for further assurances

o Who can be sued Any predecessor in title of plaintiff who gave a future covenant (usually by

WD) so long as problem w/title existed before that predecessor conveyed Examples:

o A conveys WD to B who conveys QC to C who conveys WD to D Suppose D is evicted by AP—who can he sue?

Obviously C bc SOL just begins to run after eviction Cannot sue B bc only conveyed QC—can’t be held

liable by immediate OR remote grantees to QC deed o Unless in that same minority of states where

the QC is said to assign all rights D can sue A IF AP had taken place before that point

—can’t hold anyone responsible before problem existed

Brown v. Lober assuming different scenario:o Suppose coal company bought land and didn’t realize the third party

ownership Could sue Brown on violation of covenant of warranty of

quiet enjoyment if evicted Could also sue Lober bc future covenants run with the land

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o What constitutes a breach? an eviction—original owner takes back property or constructive eviction

o threat by paramount title holdero grantee buys from, surrenders to or settles with paramount title holder

must be sure that person really has valid claim otherwise no cause of action against grantor

o these are all the same with easements Example: Suppose grantor gives full warranty deed to grantee and didn’t catch

valid mortgageo If don’t sue within six years then can’t sue on present covenantso Unless that party comes and tries to get the property the future

covenant is not triggered so can’t sue o Actual eviction—if they are actually evicted then new statute of

limitations starts and have six years from then to sue o Constructive eviction—if pay off mortgage to stay on property then

that is constructive eviction so long as was valid mortgage Brown v. Lober—lober conveys all minerals to Brown. Later Brown decides to

sell them to Coal Co. who discovers during invest that third party has rights to minerals and Browns only own one third of coal rights. Brown sues on warranty deed against Lober

o SOL expired on present covenants so can’t sue on covenant of seisin which would have been valid cause of action

o Brown tries to sue on future covenant (violation of warranty of quiet enjoyment) because no eviction

No actual OR constructive eviction Original owner never came back nor did Brown pay off that

owner Limits on recovery

o How much grantor received for land No built in inflation rider or value for improvements on land

o Actual loss—if not damages by encumbrances, no damageso But can look to more than one deep pocket to get damages (150k from A, 50k from B)

Estoppel by deedo If grantor convey defective warranty deed purporting to give all interests then later

acquires that interest then he is estopped from denying that title transferred o Does not apply to QC deed bc making no representation of now or the future o Mortgages—A gets mortgage from B then turns out she has no interest in land—if later

gets it then mortgage effective o Example: Assume after Brown conveys to Lober one of his relatives dies and he gets the

rest of the title that he didn’t have before now must give to Lober

e. Recording Acts

Encourage alienability of lands bc easy to check title o Recording not required for valid conveyance but done anyway

What are CL rules—what rules would be followed if we had no recording actso First taker gets title because grantor had nothing to give to second taker, regardless of

what either party paid o Examples:

O to A (1st taker), then to B (2nd taker) A owns it bc after O conveyed to A he had nothing to give to B

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Issue under recording acts is when subsequent taker can prevail as against a prior unrecorded conveyance where he would never prevail under the common law

o One rule always prevails—1st taker has title if records prior to 2nd taker taking delivery o If 1st taker (A) doesn’t record before then what happens depends on which state one is in

and what the court considers notice and value o Recording acts apply to ALL interests in land except for short term leases

Four types of recording actso Race statutes—doesn’t matter whether know 1st taker or not

pure race—LA—whoever records first gets the title doesn’t matter who paid value, etc.—clean system bc first one to get it

on the registry has the title this is also UCC law as regards chattels only exception might be if criminal act is involved to keep someone

from registering modified race—DE—only few states—B prevails if records first and pays value

but can be on notice and still get the property doesn’t protect donees bc need to have paid value to fall under this

category need not prove not on notice though—can fully know of other party’s

interest o notice statutes—almost all states—B must be BFP

pure notice (half of notice states)—B must only be BFP B doesn’t EVER have to record B takes notice even if A records before him so long as is AFTER his

purchase and once he takes delivery of deed Though B still wants to record to protect against later purchasers

notice-race (half of notice states)—CA—B must be BFP and record first if A records first B loses

What parties can assert recording acts against prior purchasers who did not record (assuming notice state where subsequent purchaser must be BFP)

o Subsequent purchaser who pay value (not donees except in LA) i.e. buy land second but so long as paid and didn’t know of earlier unrecordee

purchase then can get the land either automatically (n) or if record first (n-r) o Subsequent lessees who pays value (again must be for value except in LA)

i.e. competing lessees—lease property for money and don’t know of earlier lessee then can get property either automactically (notice) or if record first (n-r)

problem with this is if new lessee on property i.e. in possession then on constructive notice and don’t get property

i.e. new owner—lease property for money and don’t know that LL sold building and no longer had right to lease

problem with this is in this case new owner probably recorded sale so hard to prove

o Easement grantee who pays value o Mortgagees (must pay value but at most changes priority)o Option holders

BFP has two requirements 1) have paid value

o does NOT require fair market value, just paying significant amounto Doesn’t matter whether A paid value, only B o Even if just get promissory note, just actual paid value yet, still value so long as pays

ANY money down but if don’t pay any money doesn’t may not be value depending on type of note

Long as B gives some down payment it is value even if gives note for most of it But if non negotiable not and no down payment may not be value--must be

negotiable and meet UCC recordings

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This really shouldn’t matter--still promissory note o With creditors must have paid present value from lease, not earlier value

if second mortgage, fine, bc new loan but if lien that later added mortgage as security only considered value if gave

some consideration like longer term or more money and if JL only considered mortgage in some states where cost of getting

judgment is considered value but still may get priority in other states if BFP buys at execution sale and not aware of E1

2) and not have notice of any other interest in the property o actual notice

actually knows about other party o constructive notice as per recording acts

public records parties in possession bc considered equivalent of recording

if LL and tenant have cheap lease and going to buy building—since on constructive notice about cheap lease if tenant in possession should pay less than FMV

o in MO no constructive notice as far as possession so should never look at building if thinking about buying!

o Encourages carelessness bc don’t want to be on notice Some interests CANNOT be recorded (AP, prescriptive easements) which puts

purchasers in especially bad position bc still considered on notice if the party is in possession:

Adverse possessors—AP’s don’t have anything could record but one is still assumed to be on notice of possession by an AP

o If AP is open and notorious assumption is it will put third parties on notice as well as the true owner

o But is the possession really constructive notice? Some AP is only seasonal so might no be in

possession for the whole year And if AP takes title then leaves for a time that is still

considered possession though impossible for buyer to know about it

o Nevertheless, law says if AP is satisfying rules of AP for that piece of land the third parties ARE on notice

Easements by prescription—same principle—deemed to be on constructive notice even though no writing capable of being recording

o Again open and notorious requirement should put third party on notice as well as true owner just like in AP

o Incentive for lawyer to say “title subject to parties using the land” or have to go out and check himself

Easements by implication by quasi easements—again no writing capable of being recorded

o One of requirements was apparency at the time of split for easement to come into being AND must be apparent to third parties later on

Split here—Otero says underground sewer is enough apparency but other cases say not apparent thus might not be constructive notice

Also interests may be recorded after the fact (mech liens) which also creates a problem bc buyer has no way of knowing when buys the house that a lien will later be recorded except by inquiring into liens and trying to cover via title ins.

Mechanics lien--anyone whose goods or services used to permanently enhance a piece of real estate are called mechanics (includes architect,

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landscapers, etc) and can get lien on real estate and become secured rather than unsecured creditors (strong lobby reason for this)

o Get lien on date of first improvement, mechanic records lien soon after that and lien good for 6-12 months, then it dies if mechanic never filed an action to foreclose (may died bc paid or just bc mechanic let it go)

o Mechanic can actually foreclose on house but even if don’t makes it very difficult to sell bc of lien

o When buy house in interim before mechanics lien is recorded but after work is done (happens a lot bc people often fix up houses before sell and even if buy new house bc whole house could be lien!) considered to be on constructive notice of this even if not recorded yet

Thus should require title insurance that covers mechanics liens--often title insurance will give this and won’t charge the seller more for it but might charge them, unclear

o In some states homeowner may just be liable to the general contractor, not to all the subcontractors and everyone else so subs can’t file lien claims so long as generals paid, but this is not how it works in most states including CA so if pay contractor for whole price the subs can still file liens

Example—MO woman has lien filed on house bc paid for gen contractor but he never paid supplier of air conditioner and committed suicide bc law was against her and she couldn’t afford to pay both

Legislature of MO changed rule so that payment to general=payment to sub but kept it same for all other dwellings

Best way to deal with this is get lien waivers from subs but hard to know whether have them all

o Priority on mechanics liens? Most states treat them all alike and start them all at

date of first improvement regardless of whether that mechanic started work on that date or not

Also tax liens, assessment liens for sewers, etc. judgment liens condemnations create problems bc recorded in areas other than county recorders office

Mortgage priorities under recording actso When recording acts defeat prior unrecorded mortgage does NOT make mortgage invalid

just results in loss of prioritieso Then question is when E2 can defeat an unrecorded E1(putting LA aside bc pure race)

Notice states E2 always pay value—they give money for a loan E2 may also not be on notice (actual or constructive) E2 gets priority automatically in states where don’t need to record first

Notice race states All of the above plus records first—gets priority at time of recording But so long as E1 records first then E1 always gets the priority

E2 is then forever senior to E1 from the pt of recording (nr) or automatically (n) So if E2 forecloses purchasers at sale wipe out E1 even if the purchaser

knew about E1—priority frozen at time of recording And doesn’t matter whether E1 records 20 times before foreclosure so

long as E2 has already gotten priority o What about antecedent E2’s?

i.e. E2 is unsecured creditor who later gets mortgage on land

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if E1 hasn’t recorded E2 may be able to get priority over E1 but only if pay present value

if add extension of years to pay on debt or promise not to foreclose for a few years then that may be considered value on antecedent mortgage

but if E2 doesn’t change the loan at all at that point then no present value and E2 can’t use recording acts to his advantage

o what about unsecured creditors if creditor obtains judgment against debtor it becomes a lien on any real estate in

the entire county suppose treat judgment lien just like subsequent mortgage lien judgment lien might not get benefit of being able to assert recording acts under

prior unrecorded interests depending on whether value said to be paid group of states say judgment creditor is deemed to pay value for

judgment thus can use recording acts to advantageo argue that JL pays value bc has to have trial in order to get the

lien on the property o so if JL has no notice of E1 as of date of judgment and

deemed to pay value then it has a perfected lien that defeats prior unrecorded conveyance

o forever engraved in stone as senior to E1 even if E1 then records before the foreclosure

but other states say “pity the plight” of the judgment creditor and that he didn’t pay present value—judgment based on debt from 5 years ago so even if no notice no value so no benefit of recording acts

o only if purchaser at execution sale is BFP (doesn’t know about E1 and pays value) then and only then will P wipe out E1 and so JL will get his credit satisfied first but otherwise still jr to unrecorded mortgage

o and if at any time prior to the sale E1 records, JL has no prioirity

o circularity problem—suppose in this type of jurisdiction and mr borrows further money via mortgage from E3 at this point

then so long as JL had recorded first he is priority so JL junior to E1, E3 junior to JL and E3 trumps E1

under the recording acts

f. Torrens system

8 or 9 states still under torrens system o Comes from England—Canada and Australia is torrens systemo In large measure state has role in real estate title much like its role in auto titleo How does a state become torrens? Individual landowners must bring their land under

torrens system Had it in a lot of suburban areas bc after WW2 with rush to suburbs developers

discovered cheaper to have torrens than other systems Benefits of torrens system

Instead of bringing ct into to determine disputes bring torrens registration dispute where judges know everything about property law

Literally title is one piece of paper If any third party in world wants to know who owns lot can just go to

torrens office and find in 30 seconds state of title bc torrens office issues certificate of title just like with cars

o Don’t have to hire title co or do work selves Protection to owners bc no one can buy land without

o Deed from sellers

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o Possession of owner’s duplicate certificate of titleo Much harder to screw up a title bc can execute any deeds to

anyone without owning it at all whereas in torrens system would ask “who is the seller or buyer”

Fund to compensate people who bought title that didn’t existo But very small fund

No AP of torrens real estate Drawbacks of torrens system

Long delays so problem if buy and sell several times per year When buyer of house gets new mortgage and loans sold on secondary

market that mkt demands title insurance even though torrens real estate which is insurance in itself—so not much incentive to bring land under torrens system

Hard to find torrens examiners in small towns Rest of states role limited to having recording system, paying judges and courthouses

g. Title Insurance

Title insurance popular in Canada now bc torrens offices got slower and slower at issuing titleo Outsourcing benefiting us bc deals done in US without even looking at records

Title insurance now pervasive in US o Prior to closing

EMC Executory period

Escrow system Preliminary title report

o Buyer usually has 5-10 days to examine the report otherwise waive all objections to title

Says who owns property, encumbrances that title ins co found against property

Must request documents about particulars like encumbrances in order to read them

o If buyer does nothing and close then week after closing title insurance property will send agreement to new owner and these same pages will appear as exceptions to coverage

Closing Tile insurance used to be very pro title insurance company

o Didn’t protect against some of the most important risks such as Encroachments Location Boundary and area Public or private easements unless disclosed of record Rights or claims of person in possession not recorded (AP—under constructive

notice of those under recording acts) Mechanics liens—under constructive notice of them and not protected from

them unless workers have always recorded their liens o And also has exceptions for actual defects that title report foundo But if buyer demands it ins co will provide coverage with usu not that much more

premium to seller (seller pays for buyer’s title ins in CA bc is custom but diff in other states)

New title insurance gives very good coverageo Covers the following if recorded

Leases Contracts Options

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Forgeries—very common esp if forged release of mortgage—someone else claims right from forgery

Easement (any kind) Except for those already in the title report incorporated by reference

Lien Unrecorded mechanics lien incurred before or after policy date Forced divisions of property Forced moving of structures bc encroaches on other property (though deductible

amt here if involves fence but full coverage if house) Forced moving of structures bc encroach on easement or setback line even if

they are in the exceptions section Existing improvements or modification made to them are damaged bc of

extraction of minerals or waters from land even if rights to that mineral or water are in the exceptions section

In CA land usu subject to mineral land of someone else This protects against oil company damaging property by taking oil

o Title insurance company will require survey for this type of coverage though Buyer/seller must pay for the survey and some title ins companies are giving these policies even w/o surveys They can do this bc risk of payout is very low (4.5% gross rev paid to claims)

compared to other insurance companies Big part of this 4.5% is probably atty’s fees

They are in possession to assess risk that buyers can’t bear o Covered up to purchase price of property if problem occurs

either owner sued and title ins co pays for atty’s fees or title ins pays to have the defect removed by paying off third party

i.e. if find encumbrance they missed like mortgage they’ll pay it off so long as doesn’t exceed value of coverage

some with easemento even some coverage after sale (though mostly for during ownership

If insured conveys RE through WD then held liable for it may look to title insurance company for protection

Also ensures not only that the title is in fact good but also that it is marketable when try to sell it later

But title insurance co’s will obviously not protect against anything that the insured creates

Lenders also have title insurance up to value of the mortgage itself o If lender wants to sell loan on 2nd mkt must contain mortgagees title insurance policy

Insurance goes with the loan so moves to 2nd market Usu buyer pays for the premium on title insurance so if lenders get lower prices

bc of volume business usually pass that on to sellers o Lenders policy gives better protection than buyer’s bc ensures lien priority as well as

everything that the buyer’s policy protects againsto Title insurance on mortgage passes if new buyer bc stays so long as loan still outstanding o Junior lenders often don’t require title insurance bc don’t sell on secondary mkt

Plus they know that there will be title ins for senior lender and even though that doesn’t protect them gives them good idea of where there title fits in with the property

Sometimes junior lenders get prelim title report for purpose of finding out where there lien is on the property but then don’t get the actual insurance

9. Restrictive Covenants

Three ways of dealing with use of land by neighbors/externalities

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o Law of nuisance in common lawo Restrictive covenants which have been around 300-400 years

Amalgam of k and property lawo Law of zoning

Restrictions can be simple or complex—sort of like negative easements o Buyer must analyze them after seeing them on prelim title report and get copy from

recorders officeo Usually say things like can only use for single fam dwelling, can only use for residential

purposes, how close to street can build (setback line) and how close to side can buildo What these restrictions make clear is that everyone who purchases a lot and their

successors in interest are both bound by covenants and benefit from themo Remedy usually injunction bc too hard to determine damages

Everyone in the subdivision has had their rights violated and too hard to add up the damages

Relationship btwn restrictive covenants and zoning lawo The more restrictive of the two governs—must comply with both

Unless for some o Houston only has restrictive covenants, no zoning

i. Formal Restrictive Covenants Formal restrictive covenants—99% of litigation over covenants is in this area

o In CA called CC&Rso Regular subdivisions

Usually city council approves plat, then developer records set of restrictions Every lot conveyed on constructive notice of restrictive covenants under

recording acts bc they were recorded before purchase Each lot sold subject to restrictive covenants which bind and benefit

each subsequent purchaser Externalities are something that one neighbor does that affects another

and restrictive covenants usually enacted to deal with externalities Sometimes there also an independent owner’s assn like in condo but usually not Sometimes architectural committee of owners after subdivision created which

has final approval if someone wants to build a story on house, etc These are usually allowed so long as acting in good faith Usually less important after committee owners no longer around

o Condos Condominium is a vertical subdivision Like regular subdivision and before any unit is sold set of bylaws is recorded

which is similar to restrictive covenants in reg subdivision ALSO creates owners assn

Owners assn basically like mini city councils because make rules and regulation (chosen by developer)

Assn has right to levy monthly assessment for maintenance and assessment for capital improvements

o Essentially have power to tax bc have to maintain the common areas

o If don’ t pay fees then owners assn has right to asses lien and foreclose on the house

o Is this any different than not paying property taxes and city foreclosing on house?

o Yes bc foreclosure on house takes years whereas months in condo bc nonjudicial foreclosure

State legislatures around country are stretching out time period for foreclosures to give owners more

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time but dilemma is that have broad base of people sharing time to foreclosure from state taxes but only a few bearing it in condo assn and may be really affected by it

o Also, tax liens have priority above everything whereas condo liens are junior to mortgages or to anything recorded before they levied their lien

Assn also has right to amend bylaws which doesn’t happen with reg restrictive covenants

Usually reasonableness test applies to regulations by owner’s assn No cats rule—CA SC upheld this, said reasonable

Externalities more intrusive in condos than in regular subdivisions bc very close to each other

Ambiguity main reason for litigation o Public policy argument against restrictions (majority rule)

Ambiguity usually resolved in favor of free and unfettered use of land—always use this argument if against the enforcement

Groninger—court follows the unfettered rule o Public policy argument for restrictions

Careful private planning is a good thing and is beneficial to society so should interpret restrictions in favor of planning

o Build v. use restrictions Building restriction—can only build residential structures

some covenants say one story onlyo this may reduce FMV though probably there to keep views o could argue ambiguous and build 40 ft high one story house o some court will even say so ambiguous they won’t enforce it o should specify how tall a story is

Groninger v. Aumiller—developer of subdivision keeps model home for himself until sold and it is used as the base for the contracting out of homes in the division. Deed says “structures used for residential purposes”

o Question is whether this is a building or use restriction Word purpose may go to how you use or how you

build o Court resolves in favor of free and unfettered use of land

Says purpose goes to build but once build can use structure however please

Use restriction—can only use property for residential purposes The way use restriction is drafted is crucial

o For example Metzner “shall only be used for residential purposes” is too broad

bc may mean more than single family: could allow leasing, group homes, day care centers (esp if just own grandchildren) and other things so not a very concrete restriction (though the building restriction in that particular case hurts this argument)

but in that case court said day care center not residential but minority decision and seems ct could have read it more broadly—the building restriction probably suggested meant to be more restrictive

o But if say “cannot use for any commercial purpose” as opposed to “only use for residential use” then different problem

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a lot of people work from home and can argue reduces pollution, fuels, promotes conservation

thus people working from home may appear less commercial than those going to work every day

o may want to distinguish btwn those that have externalities (people coming to home, etc.) than those that don’t

o some covenants say single family dwelling only for those related by blood or marriage—clear covenant so not void for ambiguity

crystal clear covenants but end up being helpful for immigrants bc may have huge family but all related

but same sex or heterosexual couples are not included If the formal covenant is not ambiguous ct may still find it unenforceable

o constitution Shelly v. Kramer (specific performance of covenant) Barrows v. Jackson (same

thing but damages) Shelly limited in its application bc of the state action doctrine

Says judicial enforcement of discriminatory covenant is state action but can’t apply this in situations where no judicial enforcement

Most race issues dealt with by ordinances or federal statutes which require equal protection

o State and local ordinances Could be state open housing statute that makes discrimination (either race,

creed, color, origin, disability, maybe marital status—only in CA) unlawful o Federal statutes

FHA—prohibits availability of land for disabled buyer or renter but can have restrictions on density of use

What times of group homes not covered by FHA? Sex offenders and other recovering felons are not handicapped by

definition so not forced to take them Drug addicts and alcoholics are handicaps under FHA and many

externalities like drug dealers in the neighborhood o Public policy o Example: covenant only allowing single family dwellings by those related by blood or

marriage—clear covenant so not void for ambiguity, must try other paths Constitution

Could argue violates right of privacy but state action problem State and local ordinances

In CA covenant unlawful bc discriminates based on marital statuso Example: group homes (most litigation in this area)—restrictive covenant says no group

homes State statutes

Some permit group homes by calling them residential if limited number Federal statute

FHA—prohibits discrimination against disabilities So even if carefully drafted provision violates FHA

Public policy Who bears the burden on society by having low income housing, group homes, etc.?

o Homeowners in poor areas bc land too expensive in rich areas Putting aside the power issue of having the $ to litigate and keep the group home

or low income housing out of the neighborhoodo Nelson argues that should condemn one lot of land in every subdivision and have the

burden shared

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ii. Informal restrictive covenants Informal restrictive covenants

o Piecemeal restrictive covenants—situations where four or five lines in some deeds but not in all of the deeds in the subdivision—no owners assn’s or anything formal like that

Sometimes deeds are sold separately and some are sold free of restrictions then other ones with restrictions sue for injunction to enforce same restriction upon the other parties who don’t have restrictions in their deeds

Some cts say no one has right to enforce restrictions against other owners

But most say can bring the litigation and if seems like subdivision meant to be one common plan then bound by common plan

o Argument is that physical configuration of subdivision puts him on constructive notice of RC on other deeds and make him abide by it as well even though he may have paid more for his lot bc no restrictions

o Conveyance informal restrictive covenants A owns lots 1 and 2, sells 2 to B with restrictive covenant on it

o No conveyance informal restrictive covenants (horizontal privity issue) A owns lot 1, B owns lot 2 and no conveyance at all and A and B get together

and execute bilateral agreement where both agree to limit use to single family dwellings then record the document which says binds and benefits A and B

Courts often didn’t enforce these bc said no privity btwn A and B and some jurisdictions still like this

o Restrictions not created incidents to conveyance of real estateo No money damages

Equity courts say can get injunctive relief so long as other party is on notice—don’t care about horizontal privity

o So this only comes up if someone selling for money damages but not in equity for injunctive relief

o Generally bound so long as have notice

iii. End of Restrictive Covenants

How do covenants die?o covenants usually expired and require certain % to be renewed

sometimes don’t get renewed at all but frequently they do bc some people are aware that covenant will expire if don’t renew may amend with certain percentage

amendments usually have uniformity requirement bc otherwise some people may vote to change a covenant that will help them but hurt others

o similar to spot zoning where only affects some peopleo merger—two lots with restrictive covenants end up being owned by same person—then

no more restrictive covenants this will virtually never happen in large subdivisions

o eminent domain—if govt condemns corner lots then the govt can do whatever it wants to those lots bc the restrictions are no longer in affect

but does it affect the rest of the lots? May change char of neigh so no more covenants

and who gets paid? How are the compensations paid out? Restrictive covenants are negative easements and thus most courts say every person in the subdivision is entitled to compensation as result of condemnation (though those closer to condemnation have largest damages)—huge mess

o tax foreclosure—new owner buys at the sale and usually say buyer gets title free and clear of all mortgages and restrictions

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but is it fair for him to do whatever he wants even though rest of subdivision subject to restrictive covenants

many states say when buy at tax sale the covenants remain though others still say the restrictive covenants remain which may result in some

lots without restrictions and some with it and that may also result in destruction of regular character of neighborhood then no more res restrictions at all

o prescription—can one destroy restrictive covenant by prescription just like easement? i.e. if house is in sideyard restrictive covenant for many years can argue the

restriction dies after a certain time? No cases on this but once damages statute expired essentially destruction of prescription

kind of like laches bc P is at least barred from bringing equitable action but can still damages BUT once even damages action gone almost like prescription bc can’t bring any actions

some judicial defenses to restrictive covenants also destroy the restriction (but not all) o these do NOT destroy restriction, just keep one person from bringing suit or defend D

unclean hands—if P has violated same or similar covenant cannot seek equitable relief against another person from violating that covenant bc must come to equitable court with clean hands

court may find that the P’s violation is not the same bc it is more minor or not similar qualitatively or quantitatively

o Pietrowski v. Dufrane—large subdivision, single family, residential. Defendant accused of building detached garage when already had attached garage. Restrictions in essence say only get one garage. Next door neighbor (Pietrowski) put D on notice from day 1 that they were violating restrictive covenants.

Court said no unclean hands even though P had also violated covenant bc she also had built in her backyard but hers was tool shed, not same as add’l two car garage

Waiver or acquiescence—if allow neighbors to consistently violate similar covenant then either waived right to enforce of acquiesced right to enforce and prohibited from bringing an action

Sort of like EP concept of selective enforcemento Pietrowski—again court says other neighbors violating the

covenant in a much more minor magnitude than the Dufranes Laches—used to be called equitable statute of limitations—about unreasonable

delay Laches can bar a P from bringing an equitable restrictive covenants

action must faster than statute of limitations If statute of limitations on restrictive covenants (for bringing only

damages action) is 6 years then laches restriction (for equitable action) may be much less

o Even two years may be considered unreasonable delay bc allowed person to build, spend money, etc.

Estoppel—involves P doing something affirmatively to mislead defendant i.e. P in Pietrowski says what a beautiful garage, then brings action bc

led person to rely on their words sometimes distinction between estoppel and laches is minor bc saying

nothing may be either laches or estoppel Pietrowski doesn’t meet laches or estoppel bc asserted her rights from

day 1 Often laches and estoppel results in people going to court to avoid

having that defense brought up so ends up incentivizing litigation when a letter would do

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innocence as defense—if D subjectively knowingly (not constructively) violate the restriction then court may automatically order injunction for P but if instead D was innocent then court applies balancing approach as to which party has been hurt more and may or may not issue injunction

only applies to sideyard restrictive covenants? Often D will just slice the violation off from the building to avoid

having to pay damages to whole neighborhoodo Once he slices it off no one else has cause of action but if pays

damages then owes it to everyoneo Much easier to pay off P as a result of encroachment than

violation of restrictive covenant like in this case bc have everyon suing

o But some do destroy the covenants Changed circumstances

To prove changed circumstances must eithero Prove that that the residential character of the neighborhood

no longer exists Destroys the major restriction in the covenant which

is single family use, residential purposes onlyo Have wholesale changes to surrounding area or to the

subdivision itself If surrounding area becomes commercial then that

may destroy residential restrictions in subdivisiono Pietrowski—court says fact that everyone has sheds on yard

does not destroy res nature of neighborhood thus does not destroy all residential covenants (though uses word abandonment really talking about changed circumstances)

o i.e. if many people in neighborhood are running business out of their homes then could say change in residential character of neighborhood

abandonment To prove abandonment only need prove that

o Result is only that the single covenant is void, not all of the covenants related to residential use

o Pietrowski—even arguing the garage restriction abandoned would probably fail bc other people’s sheds not same as garages

o i.e. a lot of covenants used to say no TV antennas on roofs but one could argue that wholesale disregard as to that (if assume satellite dishes same as TV antennas) then ct may find that particular covenant abandoned by wholesale violation but does NOT change residential character of neighborhood

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